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Okay so let me rephrase the question in slightly different terms ...
What would be the least risky way to achieve a yearly 5% gross return for a high net worth family?
Thanks.
Wait till the 30 year Treasury yield hits 5+ and buy that.
Another option is to do Peer to Peer lending. Can't remember any brokers off the top of my head but you can google for some.. you can lend money to borrowers with a credit score of 800+ for about 6%.. if you diversify properly and stick with high credit borrowers, you can probably make an effective return of over 5% a year (even if the occasional borrower defaults which is unlikely but not out of the question among the 800+ group.)
Institutional investors are in a quandary. They commonly target 5% real returns, or 7 to 8 percent nominal returns. Starting from today's prices of stocks and bonds, the likelihood of achieving those returns is quite low...
That is the opening of a paper titled "The 5 Percent Solution," in Institutional Investor Magazine, by Cliff Asness & Antti Ilmanen.
i-shares has some etf's that are target maturity bond funds. all the bonds mature at the same time and the fund sells off and returns your money when maturity is reached.
it is a nice easy way to ladder bonds and have the benefits of a bond fund with the stability of an individual bond.
i wouldn't do it with all my money but as a part of the fixed income section it is fine.
If I had $7,000,000 and a home and no debt, I would consider that "play money" and more than likely double it every 10 years but I think the Smiths consider that money "scared money" if they only want 5% annually...
As a previous poster suggested, if I were the Smiths, I'd stick it in Wellesley Fund and forget about it.....Vanguard will appoint a personal account representative to them that will keep them encouraged and informed when you periodically contact that person...
I'd stay away from an investment advisor who may want 2%...Vanguard or Fidelity advisors do just as good a job without a pile of expenses..Plus, they have so many other services that you will want to use....
N.B.....and I surley hope the Smith's don't leave the $7,000,000 principle to a pooch in 40 years....
If I had $7,000,000 and a home and no debt, I would consider that "play money" and more than likely double it every 10 years but I think the Smiths consider that money "scared money" if they only want 5% annually...
As a previous poster suggested, if I were the Smiths, I'd stick it in Wellesley Fund and forget about it.....Vanguard will appoint a personal account representative to them that will keep them encouraged and informed when you periodically contact that person...
I'd stay away from an investment advisor who may want 2%...Vanguard or Fidelity advisors do just as good a job without a pile of expenses..Plus, they have so many other services that you will want to use....
N.B.....and I surley hope the Smith's don't leave the $7,000,000 principle to a pooch in 40 years....
No one charges 2% on 7mm unless it's a hedge fund/managed futures
interesting enough vanguard would disagree with you:
vanguard , the people who brought you low cost do it yourself indexing released a study that for the typical investor with little investing knowledge an advisor can add as much as 3% in gains to that return since the typical fund investor lags the funds they were in by that much..
why?
because left to their own devices few folks stay the course, have a comprehensive plan and lack knowledge for good diversification. and so they get less than the fund to the tune of about 3%
vanguard quantified the results as an advisor :
"Being an effective behavioral coach. Helping clients maintain a long-term perspective and a disciplined approach is arguably one of the most important elements of financial advice. (Potential value add: up to 1.50%.)
Applying an asset location strategy. The allocation of assets between taxable and tax-advantaged accounts is one tool an advisor can employ that can add value each year. (Potential value add: from 0% to 0.75%.)
Employing cost-effective investments. This critical component of every advisor’s tool kit is based on simple math: Gross return less costs equals net return. (Potential value add: up to 0.45%.)
Maintaining the proper allocation through rebalancing. Over time, as its investments produce various returns, a portfolio will likely drift from its target allocation. An advisor can add value by ensuring the portfolio’s risk/return characteristics stay consistent with a client’s preferences. (Potential value add: up to 0.35%.)
Implementing a spending strategy. As the retiree population grows, an advisor can help clients make important decisions about how to spend from their portfolios. (Potential value add: up to 0.70%.)"
Last edited by mathjak107; 05-11-2014 at 06:21 PM..
No one charges 2% on 7mm unless it's a hedge fund/managed futures
Like I said in my post...An investment advisor "MAY" want 2%.....A fool would pay that percentage of course......Alas, there's alot of fools out there......watch CNBC - American Greed...
Like I said in my post...An investment advisor "MAY" want 2%.....A fool would pay that percentage of course......Alas, there's alot of fools out there......watch CNBC - American Greed...
I may want to retire tomorrow as well. No reputable wire house is charging 2 on 7mm let alone much of any other relationship for that matter
interesting enough vanguard would disagree with you:
vanguard , the people who brought you low cost do it yourself indexing released a study that for the typical investor with little investing knowledge an advisor can add as much as 3% in gains to that return since the typical fund investor lags the funds they were in by that much..
why?
because left to their own devices few folks stay the course, have a comprehensive plan and lack knowledge for good diversification. and so they get less than the fund to the tune of about 3%
vanguard quantified the results as an advisor :
"Being an effective behavioral coach. Helping clients maintain a long-term perspective and a disciplined approach is arguably one of the most important elements of financial advice. (Potential value add: up to 1.50%.)
Applying an asset location strategy. The allocation of assets between taxable and tax-advantaged accounts is one tool an advisor can employ that can add value each year. (Potential value add: from 0% to 0.75%.)
Employing cost-effective investments. This critical component of every advisor’s tool kit is based on simple math: Gross return less costs equals net return. (Potential value add: up to 0.45%.)
Maintaining the proper allocation through rebalancing. Over time, as its investments produce various returns, a portfolio will likely drift from its target allocation. An advisor can add value by ensuring the portfolio’s risk/return characteristics stay consistent with a client’s preferences. (Potential value add: up to 0.35%.)
Implementing a spending strategy. As the retiree population grows, an advisor can help clients make important decisions about how to spend from their portfolios. (Potential value add: up to 0.70%.)"
Ok, I see your point on this one. Of course, people don't have to listen to their advisers, either...but I guess there's a greater chance they will.
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