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Old 04-15-2015, 07:12 AM
 
Location: Jamestown, NY
7,841 posts, read 7,347,727 times
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Quote:
Originally Posted by wall st kid View Post
You need a lot of knowledge to know what to purchase in the first place. There's nothing "simple" about investing in stocks, bonds and other market stuff, its not as easy as 123 and there's risk. You don't have to know biology about baby formation to be good parents, but if you did a lot of research on how to be good parents, you would have a better shot to be good parents rather than someone who is winging it.
No, you don't. You need some basic knowledge of general investment concepts so that you understand that the best way for the novice investor to have success is to have a diversified portfolio using mutual funds. Then you need to do some "research" (C-D Economics forum offers some good advice) to decide on which ones to invest in. If you want some "hands on" guidance, hire a fee for service investment adviser.

Millions of people who have 401k and 403b retirement accounts have been doing this for decades, and most of us don't know all that much about individual stocks or bonds -- or are that interested in investing to build any great knowledge "bank".
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Old 04-15-2015, 07:19 AM
 
Location: Jamestown, NY
7,841 posts, read 7,347,727 times
Reputation: 13779
Quote:
Originally Posted by whocares811 View Post
I just wanted additional opinions from those who have actually been in our position.

The main reason we went to the CFP was to get advice about how to maximize our savings without risking anything, and we do agree with his advice regarding paying off the car and keeping the mortgage (at 3.75% interest, he proved that it was to our advantage to do so). However, it just seemed (and still seems) to me that he was putting maximizing our potential income over what was 100% safe.

Anyway, to repeat, even if we had not received the inheritance, we would still have enough to see us through retirement (barring any major and unforeseen catastrophes), but that doesn't mean that we want to waste our "windfall"; and gambling in any form simply does not interest us, even if the risk is almost infinitesimal.

And so at this point, we will definitely pay off the car, and we are now leaning towards investing about 2/3 of it in bonds and leaving the remaining 1/3 in savings.
That seems like a good compromise since you are really concerned about risk.
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Old 04-15-2015, 07:21 AM
 
12,710 posts, read 10,004,742 times
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Don't buy bonds paying 2% and keep a 4% mortgage. It makes no sense.
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Old 04-15-2015, 07:52 AM
 
1,227 posts, read 1,263,800 times
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I've given this some thought. You could also purchase a Multi-Year Rate Guaranteed annuity (MYGA) MYGA's act like CD's but are tax deferred until you withdraw the money and they usually pay a bit more than a typical bank CD. You buy them for short time spans like a CD... 3, 4, or 5 years. They have a low commission which is built into the cost of the MYGA so that you don't see the commission and ALL of your money is deposited into the MYGA to grow tax deferred.

On the negative side of a MYGA you have to make sure that the surrender period (fee to break the MYGA) matches up with the guarantee period (maturity date of the MYGA). This is easy to do when you look at the contract. The other thing you need to be aware of is like a CD, the MYGA automatically renews if you don't contact the insurance company and tell them you don't want it renewed. The agent who sells it to you can do this for you.

The MYGA would give you zero risk but pay more than a CD and would be tax deferred.
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Old 04-15-2015, 09:08 AM
 
12,710 posts, read 10,004,742 times
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Quote:
Originally Posted by LookingatFL View Post
I've given this some thought. You could also purchase a Multi-Year Rate Guaranteed annuity (MYGA) MYGA's act like CD's but are tax deferred until you withdraw the money and they usually pay a bit more than a typical bank CD. You buy them for short time spans like a CD... 3, 4, or 5 years. They have a low commission which is built into the cost of the MYGA so that you don't see the commission and ALL of your money is deposited into the MYGA to grow tax deferred.

On the negative side of a MYGA you have to make sure that the surrender period (fee to break the MYGA) matches up with the guarantee period (maturity date of the MYGA). This is easy to do when you look at the contract. The other thing you need to be aware of is like a CD, the MYGA automatically renews if you don't contact the insurance company and tell them you don't want it renewed. The agent who sells it to you can do this for you.

The MYGA would give you zero risk but pay more than a CD and would be tax deferred.
Zero risk? What if the company goes bust?
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Old 04-15-2015, 09:10 AM
 
29,837 posts, read 34,924,704 times
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Quote:
Originally Posted by LookingatFL View Post
I've given this some thought. You could also purchase a Multi-Year Rate Guaranteed annuity (MYGA) MYGA's act like CD's but are tax deferred until you withdraw the money and they usually pay a bit more than a typical bank CD. You buy them for short time spans like a CD... 3, 4, or 5 years. They have a low commission which is built into the cost of the MYGA so that you don't see the commission and ALL of your money is deposited into the MYGA to grow tax deferred.

On the negative side of a MYGA you have to make sure that the surrender period (fee to break the MYGA) matches up with the guarantee period (maturity date of the MYGA). This is easy to do when you look at the contract. The other thing you need to be aware of is like a CD, the MYGA automatically renews if you don't contact the insurance company and tell them you don't want it renewed. The agent who sells it to you can do this for you.

The MYGA would give you zero risk but pay more than a CD and would be tax deferred.
Which would leave him how much in the way of liquid assets? They have sufficient income flow with their pensions and SS.
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Old 04-15-2015, 09:11 AM
 
6,324 posts, read 4,768,647 times
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I am absolutely amazed at the common attitude towards investing. First there seems to be the idea that investing means buying stocks. And then we hear about the horrors of the stock market. I cannot imagine what most people do with their money. I suppose that would be CDs that pay nothing or bonds that right now are a much higher risk than stocks.

Investing does not have to be at all complicated. In fact you can look at your assets, determine how much money you should keep in cash to cover expenses for several months or even a few years. The rest can go into a balanced mutual fund. And then you leave it alone. Sounds risky? Not at all. Look what happened with the "Great Recession." Some fools panicked and sold their stocks at the bottom of the market and never reinvested. Those of us who followed a simple strategy have done very well. My net worth is up 2.5X what it was before the recession. That increase did not come from salary since I have been retired for 4 or the past 5 years. I may have done a bit better than most investors but not by much. Of course, the argument can be made that the past few years have been special. Well I don't see anything special about including the effects of a nasty recession. You can instead look at Monte Carlo simulations or you can look at historical data. Long term a diversified portfolio has returned about 7% minus average inflation of about 3.5%. Currently we are doing much better.

People complain that the rich are getting richer and the average person is losing. One reason is investing.
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Old 04-15-2015, 09:16 AM
 
1,227 posts, read 1,263,800 times
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Ncole1, All states have a guaranty fund which will either reimburse the value of the annuity or will place the annuity with another solvent insurance company, Insurance companies are rated and the purchaser has the obligation to investigate the insurance company's strength.

Which is the same as putting money into a bank. Banks become insolvent too.
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Old 04-15-2015, 09:18 AM
 
1,227 posts, read 1,263,800 times
Reputation: 4310
TuborgP, just like a CD, the money is not liquid until maturity. However, in both instances the annuity or the CD can be broken before maturity. However, there is a penalty in both cases for doing that. Putting money into a 5 year MYGA is shorter term than putting it into a Bond. Bonds aren't liquid either.

Edited to add: MYGA's contracts will give an amount that can be withdrawn monthly/annually without penalty. However, once the money is withdrawn, it does become taxable.

Last edited by LookingatFL; 04-15-2015 at 09:27 AM..
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Old 04-15-2015, 09:47 AM
 
Location: Idaho
1,457 posts, read 1,160,613 times
Reputation: 5540
Quote:
Originally Posted by jrkliny View Post
I am absolutely amazed at the common attitude towards investing. First there seems to be the idea that investing means buying stocks. And then we hear about the horrors of the stock market. I cannot imagine what most people do with their money. I suppose that would be CDs that pay nothing or bonds that right now are a much higher risk than stocks.

Investing does not have to be at all complicated. In fact you can look at your assets, determine how much money you should keep in cash to cover expenses for several months or even a few years. The rest can go into a balanced mutual fund. And then you leave it alone. Sounds risky? Not at all.

Long term a diversified portfolio has returned about 7% minus average inflation of about 3.5%. Currently we are doing much better.

People complain that the rich are getting richer and the average person is losing. One reason is investing.
jrkliny,

I totally agree. I am glad that we started dipping our toes in the mutual fund world early on in our career starting with IRA then with 401K and post-tax savings.

Our parents came from depression era and had very conservative investments. They never bought anything on credits and did not even have mortgages. Saving accounts, CDs and Treasury Bonds were their main ways of savings. My father did buy some company stocks mainly because of the 15% discount. Years later, the sale of the stocks constituted a large part of his retirement fund.

When my PILs in their 50's, they were talked into investing a bit of their money in mutual funds by a financial savvy friend. They opened 3 funds (a Ginnie Mae Fund, a mutual bond fund and a mutual stock fund) in equal amounts and never contributed any additional amounts. Years later, when they passed away in their early 80's, my husband and I went through the records and were astonished to find that the mutual stock fund had returned hundred times more than the other 2 funds.

Our estimates were that the money they invested in those funds were just a very small part of their lifetime savings (most of it were in saving accounts & CDs) and yet it became a sizable portion of their 'legacy'. It took several years to sell their house and we ended up selling it in a kind of a loss (getting about half of what they spent on the house). Our own experience with owning homes were not much better. We barely recovered the cost of the first home, lost some money on the second one and if we are to sell the current home at the appraised value, the small gain over the original cost was probably just enough to cover the repair and improvement cost over the year.

We still plan to own a home but instead of paying cash, we will get a mortgage on the next home with the currently very low mortgage interest rate.
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