70 year old ----all in cash nowTHinking of the 3 etf portfolio for simplicity. total marketinternationaltotal bondAny advice or comments?
The 3 funds are a fine start, but you need to decide how to allocate among them. If you used the 110-age notion, that would leave only 40% to divide among the equity funds. I'm 77 and use a 60/40 allocation, but I plan the funds more as a legacy for scholarships and open space than living expenses.db
How much risk do you need to accept to accomplish your goals?PF
Based on your post (currently all cash & thinking about diversifying) - I sense you have some serious risk fear. The bad news about your plan is the market has doubled since March 2009 and it is not going to double again unless you are looking at time frames well over 10 years. At this point, a important question set is:#1 How long do you expect to live? Male expectancy at 70 is about 14 years and female expectancy is about 17 years. Keep in mind half the 70 year old males will live longer than the expectancy. If you dig on the net you can get 90 percentile data which is worth thinking about if you are in good health and come form a family with some longevity. #2 Do you need funds from your portfolio for expenses?If you don't need funds, then you can sort do what you want, but if you do life expectancy is a key issue. In theory if you have a diversified portfolio 10 or 20 years ago people whole say you can withdraw 4% in the first year and increase each year for inflation (not your inflation, but the CPI which is what Social Security uses.) Today a lot of things have changed and I seriously doubt any thing beyond 3.5% is safe. (Others will have different views.) To the extent you need funds for expenses, it is unfortunate you have been in cash for the last 3 or 4 years. Today the risk of market decline is greater than the risk of market inclines. If you can't stomach a decline, do not invest as you are thinking. One will certainly go broke with the practice of buying high and selling low. That said, if you want a good well managed investment so you won't be second guessing yourself, look at something like Vanguard's Wellington Fund. If you are needing income and willing to accept a higher level of market risk but can expect high certainty of income look at funds that invest in high dividend paying, large cap stocks. AT&T for example pays over 4%. P&G pays 2.6% and the list goes on. It is generally risky to look for just high dividend payouts - but in a mutual fund with a decent record you get a great deal of safety. P&G for example goes up and down - in fact is lost over 50% of its value a few years back. But they have never missed a dividend and raise their dividend regularly. An example of such a fund in Vanguard's High Dividend Index Fundhttps://personal.vanguard.com/us/funds/snapshot?FundId=0623&...http://quotes.morningstar.com/fund/VHDYX/f?t=VHDYX If you are investing in something paying dividends, I think you would be better off with a mutual fund than with an ETF. The Vanguard index fund is available either as an ETF or mutual fund. Which is best for you will be influenced by tax issues - will be be spending the dividends? will you reinvest dividends for the long term? (years, not months).GordonAtlanta
I personally can't bring myself to invest in bond funds at this time. When rates go up in a couple of years, most bond funds will be hard hit and drop in value. The only caveat to this is I've been going on this for the past 3 years, except the time frame was only a year out instead of the 2-3 years now. In it's place, I've gone to dividend index funds, providing 2-4%. The theory is they are made up of big companies that won't lose much value in a market downturn. You will have to hold a higher level of cash to meet your short term needs which reduces your overall return.
personally can't bring myself to invest in bond funds at this time. When rates go up in a couple of years, most bond funds will be hard hit and drop in value. The only caveat to this is I've been going on this for the past 3 years, except the time frame was only a year out instead of the 2-3 years now. In it's place, I've gone to dividend index funds, providing 2-4 dittoexcept I've bought several individual stocks for dividends instead of fundtakes a bit more work,but I've been very lucky-- getting 5-8% So Far
dittoexcept I've bought several individual stocks for dividends instead of fundtakes a bit more work,but I've been very lucky-- getting 5-8% So Far Same here, but in the 3-7% range. I don't think the OP was looking into individual stocks, so I didn't mention going that route.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |