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DaveinMtAiry...many thanks!!! This is the kind of info I was looking for. I have appointments scheduled with 3 different financial advisors this coming week and your post has helped me to put together a better list of questions for them.
DaveinMtAiry...many thanks!!! This is the kind of info I was looking for. I have appointments scheduled with 3 different financial advisors this coming week and your post has helped me to put together a better list of questions for them.
Very happy to help, but as I just told another I'm always scared to give advice to strangers. I sure don't want to mess you up. I can only tell you where I have a lot of my money and it's in both of those funds I recommended.
So your appointments, are they one time fee only advisors? The other option is a advisor (or broker) who will set you up in his/her recommendations. Keep in mind if it's an advisor who will make specific recommendations their interest are not always the same as yours. First you will pay 1% per year for as long as you stay in those recommendations. That is on top of the fee the funds charge. Believe me I made that mistake. As a novice I went to the guy who handles our 401 and he put me in a ton of high fee mutual funds. Keep in mind they are paid to set clients up into funds and I'm sure some of that fee goes to them. Again they are not always working in your best interest. So I stayed for several years, paid the high fees on top of the 1% all for the privilege of calling him once and a while to vent on my poor returns.
In your case you will be paying $1,500 a year for the rest of your life for this advice. Once I went on my own I eliminated that 1% and also eliminated the higher fees the funds he recommended represented. I learned the hard way that it's not that complicated, just pick a few low fee mutual funds, such as the ones I suggested, and let it ride. But the fee only advisor will in fact work in your interest most of the time. She/he should tell you about index funds, another smart option. In a nutshell an index fund is not managed, they simply buy all the stocks in a particular index (say all the stocks in the S&P 500 for instance). Those funds are all the rage, virtually every professional recommends them because of their low fees. Index funds out perform the vast majority of managed funds who charger a larger fee once the fees are factored in. I would bring them up as a test, just say "I've heard index funds are good, what do you think?". If they are straight up and working in your best interest they should recommend them. If they steer you away then it tells me they are being paid to set you up in higher fee managed funds. Stay clear of that advisor and their recommendations would be my thought.
Last edited by DaveinMtAiry; 08-13-2017 at 02:35 PM..
Reason: a
Agreed. Maybe a mix of short term bonds funds. Treasury, municipal, corporate.
Depends on what he has when he says "money in the bank". If this $150,000 is just extra money that he is trying to be smart with there is nothing wrong with the stock/bond options a balance fund such as Wellington or Wellesley. I don't see cutting stocks totally out of the equation as the smart move, again provided he has an adequate emergency allotment of cash.
I have $150,000 I'd like to invest but have NO IDEA how to do it. Have never invested before and at this time, don't even know questions to ask a financial advisor.
Invest in bonds and stocks. You can do so with an index fund for each of those two asset classes.
Beware that financial advisors are also sales people. They don't have your best interests.
Daveinmtairy, the vanguard funds you mentioned sound good. Can you set up an account on your own with Vanguard or is it best to go through Fidelity if you have an established IRA?
Depends on what he has when he says "money in the bank". If this $150,000 is just extra money that he is trying to be smart with there is nothing wrong with the stock/bond options a balance fund such as Wellington or Wellesley. I don't see cutting stocks totally out of the equation as the smart move, again provided he has an adequate emergency allotment of cash.
This is the problem with trying to provide financial advise on a forum- this would require a more in depth conversation to clarify what the OP's true needs are, risk tolerances and other asset allocations.
SYes good call. First question: Do you have an adequate emergency stash of money? You referenced money in a bank accout, is it enough to cover a new roof? Buy your next car? If so I cringe at the word "bank" for this money because every bank in town will return less that 1%. With inflation historically at 3% and tax on this interest there is no better way to lose money than to put it in a passbook savings account at the bank. If the answer is no you do not have an adequate emergency savings well that's where you start. And yes the bank or an online money market account is the place. I have a money market account for our emergency stash at www.everbank.com because it pays higher than any bank. Only you can determine how much money that should be but keep in mind it will only gain 1% or so, a losing investment but you pay a price for safety.
Now for the rest. Even at your age you simply have to have some of this in stocks, the rest in bonds. Stocks have more ups and downs but over time they are by far the best return on your money and it isn't even close. Bonds are safer but still go up and down a bit, both will pay off long term way better than savings or money market accounts. Since you are fine with your pensions etc and won't need this money to put food on the table you can afford to ride out the ups and downs, just keep your eye on thebig picture and that is better long term returns. You are in your early 60's, you have years left to ride out the volitility, if you were older I may have different advice.
The easiest way to invest in stocks and bonds is with mutual funds. It allows you to purchase a lot of different stocks/bonds to spread out the risk. The simplest "Set it and Forget" it option could be Vanguard Wellington. This is a favorite here and possibly the most popular mutual fund in the world. Despite being nearly 65% stock/35% bonds it has lost money only 3 times in the last 15 years. https://advisors.vanguard.com/VGApp/...ce?fundId=0021. If you want to be safer it's sister fund Wellesly. https://advisors.vanguard.com/VGApp/...ce?fundId=0527. This fund has more bonds than stocks. Even though it shows more down years if you look at the numbers the down years lost much less, of course the tradeoff is the up years are lower too. Both of these funds are famous for their low fees.
These are just two suggestions, others will have different fund suggestions and they would be fine too provide they are low fee. The key is not necessarily picking the right fund, it's being smart enough to invest in stock/bond mutual funds in the first place. As a novice, and with the stock market at all time highs and on a 9 year run of really good returns (in other words poised for a few down years) it's natural to freak out if your money starts losing money. Don't be that guy. Understand the big picture, realize this is money you don't need in 6 months, have the courage to ride out the down times and you will be rewarded down the road with far better returns than the guy who played it safe and stashed it all in a bank account.
I agree with all of this. I think Vanguard Wellington is an awesome mutual fund. However, I do think an alternative fund that's more conservative might be in order. I'm thinking of Vanguard Wellesley Income. It's 60% bonds and 40% dividend paying stocks. I think that's a better fund for a novice investor. Of course, as you said, you do need to make sure you have money in the bank to pay cash for the next car, plus at least a few months worth of living expenses as well. Beyond that, Vanguard Wellesley Income would be a great fund. Lower returns than Wellington, but also fewer years where it lost money.
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