Best place to put a fairly large sum of money..... (supplement, taxes)
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Thank you Dave. I will keep that fund in mind. It will be a couple of years from now when I sell the house. The key for me is no loss of principle or at least a minimal loss of principal. Time horizon is going to be fairly long I hope if not even as a legacy fund for our daughter.
If it is a legacy fund you may want to consider themirror fund Wellington. It's a mirror of Wellesly, one is say 40/60 stock/bonds the other 60/40 (they both vary their ratio a bit based on the markets). Many retirees looking for preservation amd some growth split it evenly between the 2 which gives you close to an even 50/50 split.
I understand much of this is over the opening poster's head being new to this, it is how the board works as we go off on our ideas. Bottom line is this:
It's a crappy time to invest. Cash pays little, bonds aren't much better right now, and stocks are a bit risky as they have been going up for so long they are bound to come back at least temporarily.
It is important to understand that this crappy time to invest in stocks and bonds is temporary. What this means is while cash will continue to pay little to nothing for a long time as interest rates have been really low for 15 years and they ain't going up anytime soon a little stocks with bonds will work for you.. If your timeline is longer than a few years the move is a mutual fund consisting of both stocks and bonds. The Vanguard fund I suggested Wellesly is an excellent call, again seconded by another poster. Simply call their 800 number and they will walk you through the process. They are great, when I was a total beginner they made it easy.
Only a complete idiot converts to cash and stashes it somewhere to earn nothing and possibly stolen or lost in a house fire.
Where would you guys recommend putting a fairly large sum of money where it will draw interest and still be fairly safe? Someone I know said they put theirs into a Horace Mann fund of some type and it draws....oh, I think they said 3 or 4%.
There is no reason to put all this in one fund, because you need asset allocation.
How much money are we talking about? $250K or more? Less?
Ask around for a recommendation for a FA (financial advisor) from the major brokerage houses. Contact them, and tell them your wishes, and ask to meet with those FA who have extensive experience in retirement planning and have retirees currently as clients. Then you go meet with them and have a discussion and review their proposals. Take your time doing this and meet with them all, then make a choice of who you think will give you the best working relationship on your account. If anyone you meet with doesn't explain things and make you feel you can fully understand it all, then ask questions, and if they still can't do this, find someone else. Don't invest in things you don't understand.
If you are stuck on you need 4% a year return guarantee, then don't be surprised if they talk to you about getting an annuity which can be complex to understand and have a lot of rules and restrictions.
What you don't want, is to become a stock or fund picker of sorts. That's not investing for the long-term, doing that is gambling.
it all depends on the op's goals and temperament . is it betting on low rates and only prosperity ? is it never being devastated by a scenario not playing out as planned ?
do they want max growth , a combo in the middle , under what scenario"s are they betting ?
there are all weather portfolio's that give up gains in the bull but make it back in the bear . there are others that strive for a positive real return no matter if it is prosperity or a depression .
it is all a question of personal strategy and goals . once you get away from the traditional bets on low rates , maximum gains and prosperity "only " for success ,there are a whole lot of different portfolio types . looking back as far as 1972 shows many do okay in any kind of weather .
it all depends on what your benchmark is for the money and what your goals for the money are . investing correctly for yourself can be far more complex than buy some allocation of agg and voo and have a nice life .
I agree with CDs as a Least risk and minimum inflation loss place to park money. Ladder it if you may need access to some funds sooner. No one "parks" money in equities or bonds if they want access to the capital amount on demand. You invest money for growth or income in funds for the long term. As Dave said, now may not be the best time at all, as rates are slated to rise, so bonds will drop at each Fed raise, and stocks are at an all time high. About 60% of my invested money is currently parked in a money market in each plan, waiting for the next correction.
I agree with CDs as a Least risk and minimum inflation loss place to park money. Ladder it if you may need access to some funds sooner. No one "parks" money in equities or bonds if they want access to the capital amount on demand. You invest money for growth or income in funds for the long term. As Dave said, now may not be the best time at all, as rates are slated to rise, so bonds will drop at each Fed raise, and stocks are at an all time high. About 60% of my invested money is currently parked in a money market in each plan, waiting for the next correction.
What he means by "ladder" is a CD is a way to earn more interest, you buy a 5 year CD but the catch to the higher interest is you can't touch the money without penalty for 5 years. So by "laddering" you buy them with different increments. Say get a 1 year CD where you have access to that money in a year, then maybe put some in a 2 year, then a 5 year to get higher returns. But again longer means locking in to current low rates, at under 2% you are losing money to inflation and of course the interest is taxable. But it is a way to solve one of your goals, it will be totally safe. But it won't come close to matching your goal of 3-4%.
Under no circumstances would I hire a financial planner. Either you pay them a one time fee of thousands (one time fee only advisor) or they lock you in and charge you 1% forever for putting you into their recommended investments. I made that mistake when I was new, never again.
Why pay an advisor when so many experts recommend Vanguard Wellesley mutual fund? A a mutual fund is a collection of a bunch of different stocks, bonds and some cash to smooth out the bumps. Call Vanguard and they will walk you through the process, buy it and simply leave it there. This is by far your best option assuming you have more than 2-3 years IMO. Again every stock/bond investment can lose money but I believe this mutual fund is one of the few to never had 2 losing years in a row. And what ever you do DO NOT panic if it goes down and sell. That is how the smart people make money, they profit from beginners selling low. Don't be that guy. Be patient, not always an easy thing for a beginner who has never had money, but this is clearly the best method to ride out the lows. Not even a question.
Do you like Mac n Cheese? They own Kraft too or maybe it's the other way around but whatever, they're in bed together.
Where is this money coming from? That makes a difference too. If it's coming from the sale of a house you may have capital gains tax to pay.
I believe that Kraft still owns his own company. He might have shares in Phillip Morris but doesn't every millionaire?
As for capital gains for the sale of the primary home will not be as devastating. Even if the home was purchased for very short money. As long as the home was a long term primary residence.
Quote:
Originally Posted by DaveinMtAiry
If it is a legacy fund you may want to consider themirror fund Wellington. It's a mirror of Wellesly, one is say 40/60 stock/bonds the other 60/40 (they both vary their ratio a bit based on the markets). Many retirees looking for preservation amd some growth split it evenly between the 2 which gives you close to an even 50/50 split.
Actually I am not expecting to leave it as legacy. She is already getting some of that as we breath now. It is primarily to be used as LTC funds. Even at that I might not need all of it or any of it. I prefer a 60/40 bond/stock mix or even 80/20. If it pays a nice steady 3% to 4% I will be very happy. Income and savings wise we live below our means and have reached the point to which can just enjoy. My current mix in TSP is near 80/20 mix and thus far I have been taking 3% and that balances our former income and has not touched principle.
Our current plan is to no have a house or cars for a while. To live in a condo or an apartment for the next few years. Most of the time though staying in hotels and B&B and returning to reset. We will pay more to enjoy the travel but we will save nearly as much in payments to insurance and property taxes.
We paid a flat fee of $600. for about a 2 1/2 hr. consult with our financial adviser. The guy did it from home. Cash only, he's retired so he's got a nice little side business going on.... and he was well worth the money. He asked that all our info be mailed to him before our appt so he had suggestions for us even before we got there. He also told us he's available at no extra charge for any questions we had later on which we have taken advantage of many a time.
So, bottom line.. Ask around before you hire a financial adviser, get recommendations and then ask what they charge.
We knew nothing about investing and like you OP we didn't even understand half the words and phrases that people who are familiar with investing use. The guy we went to explained everything and answered all our questions so by the time we left we were more knowledgeable about investing.
He recommended Vanguard Wellesley for part of our funds too.
i like wellesley a lot . but to to tell you the truth i would only use wellesley in a portfolio as just one of the funds not just putting all my money in it like a might have a few years ago .
with bond rates teeter tottering at a point now where we may see a long term trend back up a 40/60 mix like wellesly can be hurt quite a bit ,. i would still use it but i would divvy up the money among individual bond and stock funds that could be adjusted as the bigger picture unfolds .
in the fidelity insight model i was following we sold the balanced type funds a while ago and opted for separate bond and stock funds in the conservative model so they could be adjusted to fit the environment better as it shifts
We nw have 3-4 people backing the mattress idea and frankly I am stunned that there is so much ingnorance on this boad if the posts are legit.
There is no logic what so ever in taking your money and putting it in physical cash and stashing it where it earns nothing. If nothing else Don should have put it in an account at that bank and at least earned close to 1% and is FDIC insured. There is a reason everyone uses grandpa putting his money in a matress as the extreme example of exactly what not to do.
My circumstances may not be the same as yours. Maybe I do not need or care about the 1% or whatever gain vs the security I feel by having instant access to as much cash as I might need at any time. That, and the ease my sons will have in inheriting my money when I pass on.
In these goofy times, I just prefer to have sole control of my resources. I do not need growth, I need sustainability and access.
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