And also congrats on your sale!
Which would be fine as long as you aren't at all concerned about the very real possibly of hyperinflation. Be sure to pick your currency wisely.
http://www.videonewslive.com/view/288549/peter_schiff_on_200...
For instance, the SPY index fund currently trades at $80. Suppose you want inflation protection for it going above $100 by December 2010, and you want to protect $250k of your money.
You could buy SPY calls at a strike price of $100 expiring in December 2010. The cost of those call options would be about $8 per share. To hedge $250k, you'd need 3100 options, which would cost $25k. If the price rises into the $100-$108 range, you'd start recovering that cost. If the price exceeds $108, you'd start turning a profit. If the price popped to $175 due to hyperinflation, your profit would be ($175-$100-$8)*3100 = $208k. (BTW, options are sold in contracts of 100, so for 3100 shares you'd buy 31 contracts.)
Honestly, though, I don't see this as a good idea right at the moment. The market has been volatile lately, which drives up the price of options. IMHO, inflation is not likely to pick up in North America for at least 1.5 years, so you would need to buy 2011 options, which raises the price even more. If I were going to hedge inflation, I would wait until the current stage of the collapse had reached a lower plateau, some time had elapsed for volatility to decrease and option prices to go down, then buy before inflation expectations build and drive up the cost of call options.
Whatever you do, never use the various "ultralong" funds for buy-and-hold hedging. They are strictly for short-term trading. (Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)
Warning: I am not a professional options trader. This is not investment advice.
That is, for his ($175-$100-$8) * 3100 equation, you are only leaving 8 * 3100 on the table, as opposed to 100 * 3100 if you were to buy and hold.
"(Well, you can do buy-and-hold, but you have to wait for the price to bottom out, and pray that the fund manager doesn't burn up all the money with failed trading strategies.)"
With index investing at least you won't have to rely on a fund manager too much.
FWIW, if you know where you want to live for the next ten years or so, buy a place outright for cash. Worst case scenario, if house prices continue falling you've still got a roof over your head mortgage free.
It's probably worth putting some of your money in gold too as a hedge.
I'd certainly agree with the 'play' money idea as long as your family circumstances allow.
you'll need it to pay the IRS + state their 50% (if for example, you are a california resident). oddly enough lots of people forget about this simple fact. depending on how the deal is structured, there is a good chance that your tax bill is $1 million. oh by the way they then adjust your next year's taxes upwards and want quarterlies...so leave some money for those (you will get most of it back since your gain is non-recurring)
but still, you're a millionaire.
edit: whoops! i see you say you are in canada. well i suppose the tax situation is likely comparable....
BTW, contrats. Nice job!