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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Investing for safety Date: 10/19/2011 9:16 AM
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I know I will have to draw down principle, no way around it unless I get that 14%.

How long are you hoping for the $700/month money to last? Because the more principal you draw down, the higher the rate has to be to *not* draw down principal. If you truly want safety and are willing to draw down principal, the money will probably last around 8 years. Depending on how much longer you will want the money to last will dictate the risk you need to take.

There are preferred trust stocks and preferred stocks that are providing returns in the 7% - 9% range, but they are not 'safe'. www.quantumonline.com is a good starting point for research, and people on the Bond board here can also be helpful.

My current portfolio of these tyeps stocks provides me about $800/month on average, but has fluctuated in value between $115k and $128k over the last 3 months. If you are going to use something like this, I would suggest keeping $10k - $15k out of the market and in something truly 'safe' - like a 'high' (okay 1% or so) yield savings account, and investing the other $50k - $55k in the riskier assets, using the interest and dividends to replenish the 'safe' account, along with periodically selling some of the riskier assets. If you can get an 8% yield on $50k, you can get close to half of the $700/month to start with, and maybe make the money last 12 years or so. Beyond that, I hope she has a good 'plan B'.

AJ
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