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Subject:  Re: Purchasing Bonds Date:  5/29/2002  12:36 AM
Author:  foobar73 Number:  3780 of 36388

I'm talking with a broker at Washington Mutual Financial (recommended by our accountant) about creating a five to seven year bond ladder with over $400 K of my 89-year old mother's money. I'd feel more comfortable buying Vanguard's Total Bond Market Index (VBMFX), Short-Term Bond Index (VBISX), or Intermediate-Term Bond Index (VBIIX), but I'm concerned about buying at a near peak NAV, given the unusually low interest rates.

This is the advantage of buying individual bonds, or ladder of bonds, instead of bond funds. Buying the bonds yourself will ensure that you will not incur losses, regardless of the movement of interest rates, as long as you hold the bonds until maturity (and assuming the bonds do not default). With a bond fund, you lose much of the control, and may take losses when you sell.

Her portfolio, after removing the IRA I inherited, is about $850 K. My thinking has been 40% in Vanguard's Total Stock Market Index (VTSMX), 10% in Vanguard's REIT index (VGSIX), and the remainder in fixed income investments. Our accountant and the broker question the wisdom of 50% in equities for an 89-year old women. Mom has brothers 102 and 96, as well as a sister 97.

A 50% equities portfolio for an 89-year old is certainly outside the common wisdom for portfolio management, even with evidence of longevity. The amount involved would seem sufficient to sustain her for the rest of her life, if invested conservatively. There is no real need for her to take excessive risk, and it would be in her best interest to avoid risk as much as possible.
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