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Hello, I was left with 700,000 and totally disabled from a accident, I'm 43 years old with a family to provide for. I need help and suggestion in determining appropriate investments. I spent a few months listening to planners , A G Edwards , cpa's, etc.. Then I found fool.com. I'm accustom to living on 46,000 a year. Right now the money is sitting in a money market earning 5%,while I investigate all avenues,that's why I'm here at Fool's school. I'm leaning towards Vanguards Index funds,some American Funds(load). I already own 6K in AGTHX (IRA with decent returns).I like Vanguard's VFINX. I don't know enough to dive into single stocks, so I was going to test the waters with 35,000 in blue chips, until I became familiar. How would I recieve steady income on a monthly basis and have it shifted into a account for living expenses from my investments? I don't mean to ramble,any suggestions on determining appropriate investments,and any other light shed on my situation would be appreciated. cuda2...........P.S. I don't like annunities,bonds or so called managed load funds or the returns in Money Market funds
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Hi, Cuda2:

Hoo, boy, you sure do make life interesting!!! Let's see now, to get that 46k a year, you're going to have to invest for a yield of 6%+. If the 46K is what you made before the accident, you won't need that much now, except for medical payments, maybe. To get that 6%, you can forget the Blue Chips. You're going to need utilities, REIT's and High-Yield Bonds ("Junk" Bonds). No-load Utility Mutual Funds, No-load REIT Mutual Funds and No-load High-yield Bond Funds would do the trick. Try talking to a Vanguard Representative and a Charles Schwab Representative. Remember, you don't want to pay any fees or commissions at this point. These investments will get you onto a conservative, income-oriented path (but with little growth). Later, when you determine what you will NEED for a comfortable income, you can determine where to invest for GROWTH, which you will need to overcome inflation. I'd lean towards Charles Schwab, 'cause they sell "hundreds" of no-load funds at no charge unless you sell them within 6 months. (They get paid by the Funds for doing the paperwork.)

Good Luck,

Ray

P.S. With 700K in ultimately investable cash, Schwab will really put themselves out for you, so be up front with them. Give them all the facts, as well as what you are trying to accomplish. (No, I don't work for Schwab, but MY account is with them, so I'm familiar with their services.)
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cuda2times,

A safe burn rate is between 4 and 5%. That means you'll need extra income if you want to hit that $46k per year. To get even 4 or 5 % I would recommend eqities plus a 5 year bond ladder. The bond ladder is not just to provide income, but rather cash flow. As the bonds mature you get their redemption value, and you don't replace them until the market is hitting new highs.

That gives you protection against an extended bear market, and it typically requires only about 15% invested in bonds. You get the rest of your cash flow from stock dividends and bond cupons. Avoid bond funds like the plauge. You need bonds that mature on particular dates.

VFINX is a great place to invest your equities money. You might eventually venture into other investments, but take your time. This money has to last you.

While you're thinking about it consider some treasury notes. You can probably beat the MMF rate.

With your situation, you might want to think about an even longer ladder, perhaps 7 to 10 years. It is your choice, but having everything riding on equities could lead to some sleepless nights. If you've never calculated the cash flow requirements for a bond ladder befor, you'll be surprised at the low percentage required to be invested in bonds. Remember, you get cash flow from stock dividends, bond cupons and bond maturities. Play with it a bit and ask if you need help.

cheers,
GW

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Hello, I was left with 700,000 and totally disabled from a accident, I'm 43 years old with a family to provide for. I need
help and suggestion in determining appropriate investments. I spent a few months listening to planners , A G Edwards ,
cpa's, etc.. Then I found fool.com. I'm accustom to living on 46,000 a year. Right now the money is sitting in a money
market earning 5%,while I investigate all avenues,that's why I'm here at Fool's school. I'm leaning towards Vanguards
Index funds,some American Funds(load). I already own 6K in AGTHX (IRA with decent returns).I like Vanguard's
VFINX. I don't know enough to dive into single stocks, so I was going to test the waters with 35,000 in blue chips,
until I became familiar. How would I recieve steady income on a monthly basis and have it shifted into a account for
living expenses from my investments? I don't mean to ramble,any suggestions on determining appropriate
investments,and any other light shed on my situation would be appreciated. cuda2...........P.S. I don't like
annunities,bonds or so called managed load funds or the returns in Money Market funds


Read the Retire Early Home Page board (here at the Fool. Look for discussions on balancing your investments and withdrawl rates.

You want several years of "cash" to cover your living expenses. I would say 3 to 5 years but since you need a high withdrawl rate I would look towards 3 years for now. The "cash" can be money market, CD's Treasury or bonds that mature in a year or two. Do not get a bond fund as you can lose principal. Then each year (if the market is up) sell equities for another years living expense. If the market remains strong you will be able to increase you standard of living after a few years.

By the way $700,000 in not very much money in terms of your needs.

The index funds sound good to me. I would start putting some money into them. Also look at QQQ, SPY MID etc. These can be purchased or sold with limit orders and this could be better for you. Go to NADASQ's site to reseaarch.
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I believe you should seek professional advice through a broker, e.g. you mentioned A. G. Edwards, until you are comfortable with making your own investment decisions. For over many years, I invested only in mutual funds as I learned how to invest in individual stocks. Once I was confident in my knowledge, I used a discount broker to make trades. In certain areas, I stayed with mutual funds, i.e. bond funds, international funds, IPO and emerging stock funds. These were areas I never was comfortable enough to go on my own, so I used mutual funds. Now that I am in early retirement, I am going to a broker who can help me with fixed income investments as I move money from a stock-dominated portfolio to a better balanced income and growth portfolio. I believe a broker at this stage is helpful unless you want to spend time investigating stocks and fixed income alternatives. However, never, NEVER, give anyone the ability to make these decisions without your approval.
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>>>>You're going to need utilities, REIT's and High-Yield
Bonds ("Junk" Bonds). No-load Utility Mutual Funds, No-load REIT Mutual Funds and No-load High-yield Bond Funds
would do the trick. <<<<

I'd also add to the list, "Emerging Markets Bond Funds"- these have even higher yields than some junk bond funds, BUT they also bear more risk of loosing their value if the coutries default. Good luck.
Eddie
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Hello cuda,
I just became a new fool and read your message and request for help. Several years ago I started investing as a greenhorn relying on my CPA and other financial advisors. They turned out to be wolfs in sheepskin. The best investment that I made was to spend the time and money learning how to manage my own financial assets. I've done well. I've retired at age 57 living off of my balanced investment portfolio consting of equity mutual funds and treasuries. My first advise to you is to become your own money manager, do the research on mutual funds, put together a portfolio according to your risk tolerance. Until you fully understand what you are getting into stay clear of brokers,loaded funds, annuities, partnerships, hedge funds, and any other shark infested investment. Do not jump into the market now, dollar-cost-average into it into a diversified portfolio. I do like the Vanguard funds that you mentioned. You don't like the money market yields. The yield should be at least 5%. If not, go to a bank that can give you that kind of return FDIC insured. Keep in mind that FDIC insurance covers only 100K per account. It would be better for you to park your 700K in laddered treasury bills and notes through Treasury Direct. A 6-month T-Bill yields close to 6%, a 2-year T-Note yields over 6% right now. The interest on treasuries is exempt from income tax in most States. Check out www.publicdebt.treas.gov. For better MM yields you could check out www.bankrate.com. Also visit www.bobbrinker.com. He hosts a two hour financial talk show every Saturday and Sunday afternoon over most of the nationwide AM ratio stations. Excellent informative and educational program. Having read the situation that you are in I can understand your concerns of being "screwed" by your "financial advisors." I went through the school of hard knocks and I know how it feels to be "taken"
Good Luck to you. If you like to chat one-on-one you may contact me directly.
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Cuda:

Avoid brokers and financial advisors like the plague. I have never dealt with even one of them who had any interest in doing anything but collecting his/her fee or commission. Period. Their best interests are exactly the opposite of yours, and the really scary part is that they truly believe they are helping you, so the sincerity they exude can be quite high.

Take the time to learn how to invest your own money. One thing I haven't seen in the advice so far is the fact that it is perfectly reasonable to substitute periodic withdrawals from a rising capital amount for dividend or interest payments. In other words if you get 2% dividends and 12% capital gain, you can sell off 4% of your capital to get to 6% income and still be ahead of the game.

In fact there is a double benefit, because the capital gain can be long-term capital gain taxed at a lower rate.

I would seriously consider heading over to the mechanical investing area and thinking about investing a small percentage of your capital fairly agressively. If you put 20% of your capital in a strategy like Keystone and just let it ride for a few years your standard of living will ultimately increase.

I would get a bond ladder going and then look at SPY, QQQ, and something like XLK instead of any mutual funds, even Vanguard index ones.



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