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I am retired and run my own securities portfolio. Here are my thoughts on the subject.

DO NOT MAKE ANY CHANGES IN HASTE. Take your time evaluating the portfolio your parents have.

Start with the poorest performing items. Look for new investments which provide income as well as safety. Diversify the portfolio. Look for some ration between stocks and bonds. I favor a higher ratio of quality stocks. Also diversify the industry groups. I would suggest that you do your own research. What you learn can be used in helping yourself as well as your parents. DO NOT allow the stock broker to take care of the portfolio. You can leave the securities in street name at the brokerage house, use the broker to execute the trades, use the broker to get opinions, but the final decision is yours and the broker does nothing unless you give him instructions.

As an example, I am retired and run my own securities portfolio. My stock portfolio has over 30 stocks, all paying a dividend and covering a broad spectrum of industry groups. I prefer owning a small quantity of many stocks, opposed to a large quantity of a few stocks. All of the stocks, except some REITs, are a part of the S & P 500. My major groups are 1. major oil companies; 2. telephone companies; 3. drug companies; 4. regional banks. There are also other groups. I keep all of my securities in street name at a full service brokerage. Since may trades are few, I have to pay a full commission. But there are other benefits. I can view my account over the internet, I have check writing privileges with overdraft protection. Both of these services are not subject to any fees. I can get the brokerage house research reviews over the internet. All dividends are collected by the brokerage house and swept into a money market fund. I get a comprehensive year end account summary and when I do my taxes I only have one dividend entry instead of 30. These services, IMHO, outweigh the cost of the full commission.

The other portion of my portfolio is in Muni bonds. Here I have built a 12 year ladder, with a portion of the bonds maturing each year. I buy the bonds when they are issued and hold them until maturity. The ladder allows interest rate averaging. The income from the bonds is both federal and state exempt.

Also, since you are reviewing finances with your parents, it might be a good time to bring up other necessary items. Do they each have a last will and testament and are they up to date. Remember, if they have no will, the court will have a say as to the distribution of their estate. The court will appoint an executor, who most likely is a friend of the judge and looks for ways to drain the estate into his own pocket. No one likes to talk about or to prepare a will. But it is absolutely necessary if your parents want to have a say into the distribution of their estate.

Another item is to do an evaluation of their total net worth and see if they could be subject to estate taxes. If the value is approaching $600,000, their estate is getting close to being subject to this tax. One of the easiest things to do is to make sure of the actual legal ownership of their assets. Make sure each parent makes use of their individual exemption. This will give them a $1.2 million exemption from estate taxes. Remember, their house and the cash value of life insurance policies are included in the estate valuation.

"If you are looking for a helping hand, you will most likely find it at the end of your own arm."

I hope my thoughts are of some help to you.


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