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Author: remster Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Fixed Income Investments Date: 4/2/1999 1:38 AM
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Trying to help my mother...
She has some inheritance - she needs fixed income off part of it and can invest part of it. I can do the investing for growth part. The income part?
Some questions:
Are bond funds bad like stock mutual funds?
Are bond UIT's any better (I'm sure it depends on the particulars of the UIT, but is there a general opinion)?
My current plan is to have her open an account with Charles Schwab and have their bond specialists help her out. They have some UIT's which sound reasonable - with option for monthly payments.
Any other suggestions - web sites, books, strategies...
Thanks, remster
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Author: zgriner Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9631 of 76237
Subject: Re: Fixed Income Investments Date: 4/2/1999 3:02 PM
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Trying to help my mother... She has some inheritance - she needs fixed income off part of it and can invest part of it.

Unfortunately, the public has been brainwashed by the Wise to think only of interest & dividends when it comes to 'fixed income', instead of total return. If your risk tolerance can stand it, a pure stock portfolio can be used for income and better long-term growth, in the following way:
1) Put 1 year's income into a money-market fund.
2) Put 2-4 years income into short-term instruments (CDs, bonds, T-notes). Stagger the due dates so that one year's income comes due each year. Why? Because this is the money that will be used for income when the market is down.
3) Put the rest of the money into the stocks (or stock funds) of your choice.
4) At the beginning of each year, look at your portfolio's return. If it's down from last year, put one year's short-term money into the money-market fund. If the portfolio is up, transfer enough dividends and capital gains into the money-market fund for one year's income. Replenish the short-term funds, if necessary.

The cash 'cushion' provides the steady income and allows the stock portfolio to be managed independently of income needs.

BTW, various studies have shown that you don't want to draw more than 5-7%/year of the total nest egg value, if you want it to last indefinitely, factoring in inflation.

Finally, look at these links for more info:
http://www.fool.com/Retirement/Retirement.htm, and http://www.fool.com/School.htm

Zev

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Author: remster Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 9843 of 76237
Subject: Re: Fixed Income Investments Date: 4/10/1999 6:11 PM
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Zev-

It's been awhile since you posted, but I wanted to say thanks for the advice. I really like the strategy with money markets and CD's. I appreciate your help!

-remster

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