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Author: EJSecco Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Investing for Cash Income Date: 3/26/2000 10:19 PM
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My parents are retired and have approximately $1.5 million in cash to invest. The have absolutely no debt and own their home free and clear. They need to make at least about $2,500/month or about $30,000 in cash income consistent with maximum growth on this capital. This is only a 2% return, so it souldn't be that difficult. Currently they have $500K invested in the Nasdaq 100 (QQQ) and are going to be receiving an additional $1 million this year available for investing. All the stocks I am familiar and comfortable with are in the tech sector and pay little or no dividends. They need to be able to count on this money to supplement their pension and social security benefits.

Do any Fools out there know of a good way of investing this money (preferably predominately in the tech sector) to achieve this type of return?

Thanks,

Ed Secco
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Author: rjm1 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20600 of 75340
Subject: Re: Investing for Cash Income Date: 3/26/2000 10:41 PM
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My parents are retired and have approximately $1.5 million in cash to invest. The have absolutely no debt and own their
home free and clear. They need to make at least about $2,500/month or about $30,000 in cash income consistent with
maximum growth on this capital. This is only a 2% return, so it souldn't be that difficult. Currently they have $500K
invested in the Nasdaq 100 (QQQ) and are going to be receiving an additional $1 million this year available for investing.
All the stocks I am familiar and comfortable with are in the tech sector and pay little or no dividends. They need to be
able to count on this money to supplement their pension and social security benefits.

Do any Fools out there know of a good way of investing this money (preferably predominately in the tech sector) to
achieve this type of return?

Thanks,



Put five years of living expenses in CD's, treasures etc. Have them mature 30,000 each year. Spend this money for living expenses. If your stocks are up sell some to replace the 30,000 being spent in the current year. Increase the 30,000 for inflation.

Note that I said sell stock to get the cash needed. Dividends do not amount to enough to live off of.

Remember, asset allocation is important. 500,000 in QQQ's is rather large at this stage. I would put the 1,000,000 in old line blue chips and some mid caps. Maybe a mutual fund for overseas.

Think about long term care insurance.

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Author: SactoFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20602 of 75340
Subject: Re: Investing for Cash Income Date: 3/26/2000 10:46 PM
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This is only a 2% return, so it souldn't be that difficult.

No it shouldn't. Also, at that rate of withdrawl, they're probably going to continue to build the portfolio no matter WHAT they do and have a rather sizeable estate so some thought should be given to estate planning.

The $500,000 they have in QQQ now could just about be counted on to provide the $30,000/year they're looking for. All they would need to do is sell an appropriate number of shares each year and move the money into a money market account.

Heck, even 30 year government bonds are returning 6% these days so they'd be able to provide the income they're looking for, with ZERO risk, free of Federal Income taxes!

Personally I'd be looking for a more agressive approach myself. But how risk tolerant are they? They could put half of the additional $1 million into each of SPY and DIA. That would diversify the QQQ somewhat, still virtually guarantee market average return (10-12% long term), and provide growth five times the rate of withdrawl they'll looking to achieve.

Sacto Fool

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20612 of 75340
Subject: Re: Investing for Cash Income Date: 3/27/2000 11:43 AM
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They might think of putting some money in REITS where you can get 8-10% dividends that are pretty safe. Washington Real Estate Investment Trust, for example, is paying 8% right now with a PE of 12 and has increased dividends for 28 years, i.e. right through the Nixon stock market. At some point these are going to soar.

Also there are closed end funds that aim to pay out 10%/yr like the Zweig Fund (ZF) and, perhaps better, the Gabelli Equity Trust (GAB). They are selling at big discounts which means, if they liquidate, you should make a profit on that alone.

IBM is a very solid tech company that pays a dividend and has been increasing it every year recently. It is also underpriced. Look at the IBM Board, expecially posts by Chapman208.

brucedoe

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Author: mphipps Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20638 of 75340
Subject: Re: Investing for Cash Income Date: 3/27/2000 10:04 PM
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They need to be able to count on this money to supplement their pension and social security benefits.

Why do you think qqq would be a good way to insure this? I would invest in tax free munipal bonds.
With that kind of money I would seek professional investment advise. I am not sure I would invest in qqq without watching it daily. Its not something you should invest in and good away for awhile.


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