No. of Recommendations: 1
MY wife and I are 72 years old ----no kids and no one that we will leave our money to so we can use it now while we are living.
Pension and social security covers our expenses.
We have $500,000 to invest.

What is a very simple investment and withdrawl idea.
I like ETF's but would not want many different ones nor switching.

One idea I have seen was to put 85% into SPY and 15% short term money market.

Withdraw 4% from SPY in good years and use some of the 15% MM in bad years.

I am familiar with the well known 4% idea.
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ww4321 writes,

We have $500,000 to invest.

One idea I have seen was to put 85% into SPY and 15% short term money market.

Withdraw 4% from SPY in good years and use some of the 15% MM in bad years.

</snip>


I'd put the 15% in a short-term bond fund or something that pays interest. Money Market funds pay essentially zero interest today.

intercst
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thanks do you like my idea?
------------------------------


ww4321 writes,

We have $500,000 to invest.

One idea I have seen was to put 85% into SPY and 15% short term money market.

Withdraw 4% from SPY in good years and use some of the 15% MM in bad years.

</snip>

I'd put the 15% in a short-term bond fund or something that pays interest. Money Market funds pay essentially zero interest today.

intercst
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Other than leave the money to me, I think you should do what lets you sleep at night :)

Do you have a particular hobby you find absolutely a thrill? Invest in a small business that allows you to withdraw your hobby. (but not take over your life)

Do you have something to pass on to the next generation? Invest/donate the money in teaching that skill and withdraw the pleasure of mentoring.

Do you have something left to do that you have always wanted to do. Invest in a parachute and jump!!!!!

AS far as the MM part of your idea. IF I were in your spot. I don't like that strategy! I believe in asset allocation and diversification based on in part on what you know today. You know the return on the MM and it is not good, so why put your money there? Let me guess - to smoothe out volatility, all the while sacrificing return. Other ways to do that!
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For safety and income consider Vanguard Short-Term Corporate Bond ETF (VCSH); SEC yield is 1.70%. Not ultra safe like a money market, but greater returns with minimal risk over a year.
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ww4321 writes,

We have $500,000 to invest.

One idea I have seen was to put 85% into SPY and 15% short term money market.

Withdraw 4% from SPY in good years and use some of the 15% MM in bad years.

-------------------------------------------------------------
How can I safely go into SPY with lump sum at one time?
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SPY is more appropriate for experienced investment professionals.

Recommend sticking with Vanguard as a safer option.
They offer mutual funds similar to SPY.
and also Certified Financial Planners, Professional advisors and Managed Payout funds for the do-it-youselfers:

https://personal.vanguard.com/us/whatweoffer/advice/selfguid...


The lowest cost option would be Managed Payouts:

https://personal.vanguard.com/us/funds/vanguard/ManagedPayou...
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How can I safely go into SPY with lump sum at one time?

Realize that the market will do whatever it will do, regardless of how you invest your money. Your choice will only determine how much of the SPY return (or loss) your portfolio will be exposed to.

You either do it:
1) the emotional way, which is to minimize the regret you'll feel if the market subsequently goes down, or
2) the statistically-proven most profitable way.

The method for #1 is DCA -- dollar cost average. Divide your lump-sum by 10, (e.g., $50,000) and put $50K into SPY every month for 10 months.

The method for #2 is lump sum. Go in all at once. Just log in to your brokerage account and place a buy order for $500,000 of SPY.

Since the market, on average, goes up, the sooner you get your money invested the more of that gain you will get. But the market sometimes goes down, and if it goes down right after you put your $500K in, you will feel regret.

The question you need to ask yourself is, "Do I want to feel good, or do I want to make money?"

Most people, and especially most new investors, go for "feel good", so they choose DCA, even though the facts show that they make less money.
People generally feel the pain of a loss 3 times more strongly than the pleasure of a profit, and that's why they try to minimise regret.

If you absolutely insist on doing DCA (as you most probably will), at least do is with an improved methodology, shown in this paper: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2008465 .

In this as with many investing questions, Google Is Your Friend. But the way most people research with google is wrong. What you want is to see both the pro & con sides, so google "problems dollar cost averaging".

People use the same term, DCA, for 2 different things. One is for periodic investing an amount of each paycheck, the other is how to invest a large lump sum. Don't confuse these two. Your question is about the lump sum.
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If you want to make money in the market, you need to study how to trade. Things like just investing a lump sum all at once, or DCA, etc., are just things people do when they do not have the intelligence or energy to trade intelligently. You need to know when to buy and when to sell.

So read some books. Alexander Elder's "Trading for a Living" is a good start, and you can also read O'Neil's stuff on CANSLIM. Just do a search on Amazon. In addition, there is the Mechanical Investing Board here. Those people have been reasonably successful. Get good charting software, and learn how to read charts. Achelis has a good book called "Technical Analysis from A to Z".

Just a simple algorithm such as trading IWM off the (8,55) EMA crossover gives you an almost 10% average annual return over the last 10 years, about 50% more than the buy and hold return, even though there are some trades that give you a small loss.

You can get a good list of stocks to consider by checking out the "overlaps", http://boards.fool.com/overlaps-316-29925129.aspx that appear regularly, thanks to nyua.

The bottom line is that you can educate yourself and develop your own way of making money in the market.
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AndrewXnn writes,

The lowest cost option would be Managed Payouts:

https://personal.vanguard.com/us/funds/vanguard/ManagedPayou......

</snip>


The Managed Payout funds have much higher fees than a simple mix of Vanguard Admiral index funds (the OP has $500,000)

intercst
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Thanks for the correction intercst.

I was thinking in terms of the 3 levels of Advice they offer.

Admiral Shares are the lowest cost funds offered by Vangaurd.
VFIAX, 0.06% expense ratio is equivalent to SPY.
VOO is an ETF also for the S&P500; expense ratio 0.06%.

SPY is offered by State Street Global Advisers; 0.09% expense ratio.
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Hi ww4321,

I strongly suggest you take a free 30 day trial to the Fool subscription service called Rule Your Retirement. It's cheap to join... a hundred for the year, I think. They have several model portfolios, great articles and opinion pieces, and their discussion boards are terrific and cover many topic. So many smart and experienced investors populate those boards and their life situations and experience cover the waterfront. I am not retired but have subscribed for the last 6 year as I begin to think about how I should position my retirement money. I can't urge you strongly enough to give it a try. You subscribe, and if after 30 days you find it isn't for you, you email customer service and they immediately refund your very small annual fee. Or you might also like the Stock Advisor newsletter. But I suggest you first check out Rule Your Retirement.

Best,

Vivienne
happy long time subscriber to Stock Advisor, Rule Breaker, and more recently, Rule Your Retirement
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A better way to do pretty much what you are doing would be to use one of the Vanguard LifeStragety funds to get a "Total (US) Stock market Index" and the "Total international stock market Index" and bonds for more diversification. There are several of them with different asset allocations. You might put 10% ($50,000) into a money market for your emergency funds and short term needs then put the rest in a LifeStragety fund which would pay some dividends.

https://personal.vanguard.com/us/funds/vanguard/LifeStrategy...

A more conventional but less aggressive approach would be to invest in something like the Vanguard Target Retirement Income Fund which has a mix of bonds, US stocks, International stocks, and TIPS.

https://personal.vanguard.com/us/funds/snapshot?FundId=0308&...

A major problem with just using SPY and money market funds is that you are missing a lot of asset classes so it will be excessively volatile. Not having any internatioal stocks is a major mistake in case the dollar or the US economy runs into long term trouble.
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...We have $500,000 to invest.

What is a very simple investment and withdrawal idea.
I like ETF's but would not want many different ones nor switching.

One idea I have seen was to put 85% into SPY and 15% short term money market.

Withdraw 4% from SPY in good years and use some of the 15% MM in bad years.

I am familiar with the well known 4% idea.



Hi ww4321!

If you investing goal is to generate extra money to spend ( implied from what you said ), why not invest it in A-AAA balance sheet, dividend payers/growers ( i.e. JNJ, for example )? Even at today's somewhat inflated prices ( IMHO ), you could generate 3-4% in dividends that would grow enough to offset inflation. A maximum of 5% in any one stock and maybe no more than 15% in any one sector....say 20-25 stocks total....to lower risk of any one company severely hurting your returns. If you don't want to go to the trouble of managing your portfolio, there are funds and ETF's that specialize in this area.

So long as the dividend stream is sufficient for your needs, then the vagaries of the market ( and individual stock prices ) fades into the background. If you aim to spend all the principal as well, simply add a conservative principal withdrawal amount on top of the dividend stream at the end of each year, dependent upon the results for the prior year.

Simplistic? Maybe....but unless you are into trying to "maximize your returns", it makes for low maintenance strategy to generate extra funds, without getting ravaged by inflation/interest rate increases, as one would in bonds.

Just my $.02

My own approach to retirement planning/investing ( different age; somewhat different goals ):

http://boards.fool.com/hi-mattyfatbags-here-is-a-copy-of-a-r...

Cheers!
Murph
Home Fool
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