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Subject:  Re: Dollar Cost Averaging Date:  8/31/1999  3:23 PM
Author:  TMFPixy Number:  13567 of 88809

Greetings, Texasfool2000, and welcome. You wrote:

<<My father-in-law recently died and unfortunately his pension stopped at his death. My mother-in-law (age 67) now has only her Social Security check and their savings to live on. My father-in-law was very conservative with his investments and had basically all of their money (about $300,000) in a money market account earning about 5%.

Since she will need income from her investment, and since she is still relatively young, I want to get my mother-in-law into some more agressive investments. My big fear though, is getting her into the stock market just prior to a huge correction, especially since she did not experience any of the big gains of the last six years or so.

My strategy to avoid taking a big hit is to keep the bulk of her money in the 5% money market account for now, but to begin monthly transfers into a couple of moderate risk, balanced mutual funds with the goal of getting her completely out of the money market fund over a six to eight year period. That way, if there are any big market corrections within the next few years, she would not be hurt as badly and would still have the opportunity to continue buying, at a lower price, following the correction.>>

How and in what you invest your MIL's stash I'll leave strictly up to you. I would agree she needs to have a substantial portion in equities if she wishes to maintain the purchasing power of her income. It's rather obvious she and her hubby prefer a conservative approach and appear to be rather risk-averse. Therefore, in her case you might wish to keep a substantial portion of the principal in short-to-mid-term corporate bonds and money market vehicles. As far as dollar-cost averaging into the investments you choose, that IMHO is a nice, gradual way to get her acclimated to the change in investment approach. The market may continue its upward climb or it may decline significantly. Regardless, you won't be risking the stash all at once.


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