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My parents, who are in their early 70s and in excellent health, have recently come into about $200K, and have asked me to help them invest those funds. They have very little financial savvy, and will need an approach that requires minimal participation on their part. They need a little income from the investment and are seeking to grow the principal fairly safely. Their main goal is to preserve this money as an inheritance for my brother and I, although my bro and I think this money should be used by our parents for a (more) comfortable retirement.

I am thinking about suggesting that they divide the money into thirds and invest it as follows: 1/3 in an income fund like Fidelity High-Income (I know, I know, but they really need ease of use), 1/3 in an S&P 500 fund, and 1/3 in the Foolish Four.

Any thoughts on this allocation would be greatly appreciated.

David
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Any thoughts on this allocation would be greatly appreciated.

1) Why don't you make all the investment decisions and just make sure your parents get all the income they need? I do this for my mother. She signs the papers, I do the investing, and she gets the money.
2) You didn't say how much income your parents need. A portfolio of stocks (e.g. FF) yielding 3% would provide $6k/year, with growth built in. The Fidelity High Income Fund's latest yield is 10.33%, yielding an income of 3k/year. Aside from yield, have you looked at it's total return? Here it is:

Average Annual Total Returns as of 7/31/1999
No Load
1 Year 3.44%
3 Year 11.79%
5 Year 12.57%
Life 15.38%

I assume you were going to leave the other portfolios alone.

Look at my post #13041 for an alternative way to provide income. Also, read "How to Retire Rich" by James P. O'Shaughnessy, and "The Dividend Investor" by Harvey Knowles & Damon Petty for using stocks to produce income.

Zev
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My parents, who are in their early 70s and in excellent health, have recently come into about
$200K,
and have asked me to help them invest those funds. They have very little financial savvy, and
will
need an approach that requires minimal participation on their part. They need a little income
from the
investment and are seeking to grow the principal fairly safely. Their main goal is to preserve
this
money as an inheritance for my brother and I, although my bro and I think this money should
be used
by our parents for a (more) comfortable retirement.

I am thinking about suggesting that they divide the money into thirds and invest it as follows:
1/3 in an
income fund like Fidelity High-Income (I know, I know, but they really need ease of use), 1/3
in an
S&P 500 fund, and 1/3 in the Foolish Four.

Any thoughts on this allocation would be greatly appreciated.

Sounds good to me. Since they do not want to be active get a power of attorney to make trades in the
account. Tell them what you want to do etc and if they say ok you can do the rest. I would think
Fidelity has a form for this.

You can also suggest from time to time to sell a little extra stock to take a vacation or by a new
washer/dryer. The point is you can help them spend the money on themselves if you are handling the
day to day paper work.

This could be a goodtime to see if they have general power of attornies (naming each other and if
they can not act someone else), living wills, and a will.Hi.
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Zev:

Thanks for the ideas, I hadn't thought of the FF vs. income fund yield issue before. A significant part of my own portfolio is in the FF, and I have foolishly tended to ingnore the dividend yield gains on that part of the portfolio. I appreciate your help.

David
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rjm1:

Thanks for your ideas. Yes, they are in the process of establishing living trusts with each other named as trustees and me and my brother as second and third standby trustees. The power of attorney idea is a great one -- thanks again.

David
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Fidelity High Income fund is a Junk Bond Fund. See the discussion of those on the Bond and Fixed Income Board under Investors Roundtable.

They are not recommended for the retired.
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