In what is pretty much a set and forget portfolio 10 funds would not be to much - IF there is such a thing as set and forget. So to Watty's point a fee only advisor who can really determine her utility - risk tolerance is a good investment. From the quote "She was worried when all her portfolios went down in the last year." Are you ready for her to be upset with you if they all go down this year?????Right now - ETF's vs. Bonds vs. CD'sAs P pointed out, there is expectation of rising interest rates and being in bond etf's does not appear to be the best as rates rise the value of the etf will go down, and since the fund is large enough that there are always bonds rolling over, sure the yield and value will come up but it does not quite make up for the loss in value because the duration doesn't ever really decrease. The bond fund never "matures" so you won't get all the principal back. So, I might shy away from ETF.Bonds - are good and can be easily purchased direct (treasury direct) but again if/as the rates rise the bonds will suffer a decrease in their "current value" which as the mature will appear to come back. It was really just a "paper" loss. But if you are in the bonds when the there is a significant rise, you can't sell the bond without a chunk taken out as loss and so the opportunity of gathering higher rates would be passing by. With a CD, you can usually break the CD and if the bank charges, it usually is a smaller realtive cost - 1-3 months interest and then you can get the higher yielding CD or at that time a bond.So - you might consider 10K in 1 / 2 / 3 / 4 yr CD. which is about half what you were looking into for Fixed Income. Past that, I agree on diversifying and foreign bonds can provide some better returns. A little harder to purchase directly so unless you can put some CD's in a foreign bank an ETF here might be a good choice. Then finish of the fixed income end with some inflation protection securities. But would try to buy direct..The 1% in Commodities and Real Estate... The point that was made amount the small amount is this - think about the cost of buying the ETF- Say it is 100 bucks (yes this is high but makes the point clearer) So if you buy $1000, you spent 10% of your money to get in and will spend a large chunk to get out relative to the value of the asset. Now if you buy $10,000, you are only spending 1% of the money to get in.. So think in terms of percent. and try to keep it below a reasonable value, say target .1%. So buy $10,000 and see if you can get a discount broker that costs 9.99 per trade.Also 1% is not really diversification - you are probably already 1% into RE and Commodities just by owning Large Cap.. Factories are on land, timber companies own land, housing developers own land, oil companies own reserves, gold producers own gold.... so you can either consider that your diversification or as JLC put out - go with 10% in some ETF'sIn fact JLC's suggested portfolio allocation is pretty good - and if you are looking for diversification that has it. You saw it as 70% stocks.. But look at the four "asset classes" 40% "Stocks"20% Real Estate10% Commodities30% Fixed IncomeAnd then factor in how the bank has the rest..Looks more like about 52% in stocks.. These aren't specific allocation suggestions you are getting here - only ideas to ponder - without full disclosure on your friends situation, and it is more than age and how pretty she is!!! And knowing how the "bank" has the funds allocated it would not be prudentAnother big point is: You say this is 19% of the money she is living off of: Does that mean she has a defined pension, social security, mana from heaven.. which also factors in. IF she is living off $40,000 a year and is only taking out $7,600 great googly moogly <1% withdrawal rate, she should be set...At $800,000 a rumor, which some call a theory, is that you can take out 4% per year and the portfolio will last 30 years for sure.. So lets use 3.0% and be conservative:$800,000 * 0.03 = $24,000 before tax man. $17-18 after tax. IF she is living on more than $92,000 a year I might be a little more nervous about her situation.......
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