My father recently retired at 65. Good job Dad. However, he is wanting help from me to invest his $450k and this has me a bit stressed. I dislike the idea of having him in mutual funds but worry about keeping all his money in stocks. He does not need the money to live on at this time. his monthly expenses and fun money are covered.I have built him an index portfolio of VT 50%, BND 20%, VXUS 20%, VNQ 5%, Cash 5%. Low fees and a good mix. Can i get some feedback and ideas? I would like to build him a portfolio with not funds with some help from Fool.Thanks,
Investing in stocks, as I see it, is almost like playing the lottery. Today hedge funds worry if they are located closer to the exchanges than the competition -- closer means faster transmission over the internet for trading. Myself I just don't have the latest information and living in Atlanta I am certainly seconds if not minutes from making trades. Add to that any company can have a shot in the night and risks or loss are not trivial. So I have decided it is mutual funds or ETFs.I want something simple. After a lot of looking and reading the Morningstar Premium analysis, I have put the majority of our retirement into VWENX. It is a record that is hard to beat. You might check the 3, 5 and 10 year returns of your mix and compare that to VWENX.VWENX returns have been 12.26%, 8.42% and 8.81% for 3, 5 & 10 years. Note - be very careful with your 5 year comparison. 5 years ago was 2008 and the market moved a lot. If you are off even 4 or 5 days with data, you can get seriously distorted 5 year returns.GordonAtlanta
I'm close to your Dad's age and fully retired. I certainly would not want a portfolio of individual stocks. A good index equity fund and a good index bond fund would be much better all around. I use Vanguard, but Fidelity is fine too. I've got a 50/50 portfolio, with the equity half divided between SP500 and Total Market, and with the fixed half in intermediate term investment grade (with a little short and high yield, but not too much). Good luck.
By the way, Gordon's suggestion is also a fine way to go. It's not really far off from what I'm doing, only he does it with a single fund. I'm a tad more diversified and a tad less expense, but he has a more simple and just as effective overall portfolio, which requires less attention from the investor's standpoint. Not much difference either way, though.
A proper investment strategy should recognize that there is a time to be invested and a time not to be invested. There is no way a static portfolio of any kind will do consistently well. You need a good charting and analysis program to help you make good selections. Individual stocks are fine so long as you monitor your positions regularly. Mutual funds are OK also, but need to be monitored as well.
You need to begin with his principal objectives. That is, what does he want these savings to ultimately do? The answer to this will determine what his investment allocation should look like.From your comments, it sounds like he wants to preserve his capital right now. You mention he doesn't need the income now....will he need it in the future? Is he currently the beneficiary of an income trust or deferred comp that is delaying his need to drawdown his savings?Which leads to my second point....his investments need to be looked at net of all forms of retirement income, including Social Security. Professional FP software, such as Money Tree or NaviPlan, do this. Its a cash flow analysis that is not as easy as it seems.BruceM
I assume the investments are in a tax deferred account. I'd do as others have suggested, but I'd start converting it over to a Roth IRA prior to age 70.5, when RMDs start. That will give him the option to manage income, reducing future RMD income and supplementing with Roth funds as needed. Obviously, he should utilize the rest of his current tax bracket and he should look at his bracket with the RMDs. For example, I'm thinking RMDs will push us into the 25% tax bracket at some point. I'll be looking at converting to a Roth and maybe paying the 25% tax earlier, in order to avoid paying it over multiple years after age 70.5.
Thanks for the info. I definately want to make it simple for him and need to remind myself of the same.
good information and it definately helps to simplify things.Thanks,
Good advice from Bruce there about starting with defining his goals.Beyond that, would he be comfortable with DGI (Dividend Growth Investing) strategy? Realize I might be preaching to the choir but bears repeating and promoting Dave Fish's terrific resource at "The DRiP Investing Resource Center"http://dripinvesting.org/Tools/Tools.aspHe updates his Dividend Champion spreadsheet monthly and posts it there free. To my thinking, it's pure gold to have a list of "U.S.Companies with 25+ Straight Years Higher Dividends" to ponder and pick from.The DCA calculator there might interest you as well. Apropos of the original topic of this thread.Beyond that, ya'll are invited to stop by and participate at the Fool's Dividend Growth Investing board.http://boards.fool.com/updated-dividend-champions-30850711.a...
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |