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Well that's the problem. I don't know the answers to most of your questions, so I'm basically just flying blind and trusting that the CPA knows what he's doing.
Respectfully, that may not be the best advice.
I suggest you call your local Fidelity branch and make an appointment with an advisor there. I suggest Fidelity because their advisors do not work on commission. And ask them to educate you. Fidelity has many online classes designed for people who are complete novices. You can do the same thing at Schwab. Take six months and just try to learn and to find out what they would recommend and why they would recommend it. You really have to learn things. The good news is the "what you should do" is pretty straightforward. There is a ton of complexity behind the "why" that you might or might not be interested in learning, but the "what" is pretty easy.
And ask them to comment on Edward Jones investment products.
Quote:
Originally Posted by dpow
So based on my circumstances and my past history, would I be better off just putting all of my money into one of the 5% high yield savings accounts that several of the banks in my area offer?
5% of $850,000 is $42,500 per year in interest, which is almost double the $20-$25k that I currently live on. So would it be safer and easier to just go with a 5% bank rate, rather than stressing out about losing all of my money in a stock market that I don't understand?
That is the wrong question for right now.
The first step in investments is to determine your investment risk tolerance. Do a google search on "investment risk tolerance questionnaire" and you'll find many questionnaires - you need to take several of these so you can determine your comfort with risk. Don't sign up or give your personal information, and certainly don't pay money. You can do these anonymously. Here are just a couple examples of the types of questions that are posed to help determine your personal tolerance for risk - note that there is no "right" answer. Expect maybe 50 or so questions. Don't over think them.
You are on a TV game show and can choose one of the following. Which would you take?
a. $1,000 in cash
b. A 50% chance at winning $5,000
c. A 25% chance at winning $10,000
d. A 5% chance at winning $100,000
You have just finished saving for a "once-in-a-lifetime" vacation. Three weeks before you plan to leave, you lose your job. You would:
a. Cancel the vacation
b. Take a much more modest vacation
c. Go as scheduled, reasoning that you need the time to prepare for a job search
d. Extend your vacation, because this might be your last chance to go first-class
When you think of the word “risk” which of the following words comes to mind first?
a. Loss
b. Uncertainty
c. Opportunity
d. Thrill
ONLY once there is a good determination of your personal tolerance for risk can someone then help design a combination of risk-bearing investments and risk-free investments for your level of risk.
Last edited by moguldreamer; 02-03-2024 at 08:01 AM..
I suggest you call your local Fidelity branch and make an appointment with an advisor there. I suggest Fidelity because their advisors do not work on commission. And ask them to educate you. Fidelity has many online classes designed for people who are complete novices. You can do the same thing at Schwab. Take six months and just try to learn and to find out what they would recommend and why they would recommend it. You really have to learn things. The good news is the "what you should do" is pretty straightforward. There is a ton of complexity behind the "why" that you might or might not be interested in learning, but the "what" is pretty easy.
And ask them to comment on Edward Jones investment products.
That is the wrong question for right now.
The first step in investments is to determine your investment risk tolerance. Do a google search on "investment risk tolerance questionnaire" and you'll find many questionnaires - you need to take several of these so you can determine your comfort with risk. Don't sign up or give you information, and certainly don't pay money. You can do these anonymously. Here are just a couple examples of the types of questions that are posed to help determine your personal tolerance for risk - note that there is no "right" answer. Expect maybe 50 or so questions. Don't over think them.
You are on a TV game show and can choose one of the following. Which would you take?
a. $1,000 in cash
b. A 50% chance at winning $5,000
c. A 25% chance at winning $10,000
d. A 5% chance at winning $100,000
You have just finished saving for a "once-in-a-lifetime" vacation. Three weeks before you plan to leave, you lose your job. You would:
a. Cancel the vacation
b. Take a much more modest vacation
c. Go as scheduled, reasoning that you need the time to prepare for a job search
d. Extend your vacation, because this might be your last chance to go first-class
When you think of the word “risk” which of the following words comes to mind first?
a. Loss
b. Uncertainty
c. Opportunity
d. Thrill
ONLY once there is a good determination of your personal tolerance for risk can someone then help design a combination of risk-bearing investments and risk-free investments for your level of risk.
well. said , and i will even add the fact that we don’t know our actual risk tolerance until we have our own actual money on the line at risk and hit a down turn and experience the feeling .
actual research by jason zweig using brain imaging showed how hypothetically when we play hypothetically , different parts of the brain are used to rationalize what to do .we get even,y balanced rational thoughts.
but under battle field conditions when real money was in play , the fact the brain hates losing money more then making money came in to play .
the scans showed different parts of the brain came in to play and the logic being rationalized was flawed .
the thought of losing money had the scans mimic how the subjects reacted smelling dog poop , or watching someone vomit .
so like we learn to throw a ball , it is a feeling we develop by actually doing it .
most have a pucker factor far lower then they thought hypothetically looking at things
what was interesting was once the money was lost or down , the brain went back to normal again , once it stopped the thought of being down or losing.
so it is the fear of potentially losing in a down turn that does it to us …once lost the brain goes back
Just saying..our Edward Jones representative has never tried to sell us anything. Fidelity is a huge company with a bunch of employees who will sell you anything to make a buck. My Edward Jones Rep needs to sit across from me and justify everything.
Fidelity employees are not on commission. Their compensation is not dependent upon selling you anything.
I'm glad your EJ advisor has been good. Note that each Edward Jones office is an independently owned franchise, and your experience is only going to be as good as your individual guy.
i would never want anything but 100% equities in my accumulation stage .
bonds are for mitigating temporary short term dips , which for someone in their accumulation stage plays no role yet .
all those bonds will do is hurt long term returns as a drag .
that becomes a different situation as we enter the proverbial red zone pre retirement
LOL, yeah I remember. We discussed this in a previous thread where you finally admitted that bonds make sense, albeit under the pretense that you pretended you were only talking "long term" vs. "short term" portfolios. In short, you simply didn't want to admit you were wrong.
Anyways, AGAIN, I wasn't talking about allocation, he doesn't want a bond fund in his 3 funds, then he can go with another fund.
my stance has never changed .. the accumulation stage is not the place for bonds .
retirement and pre retirement there is absolutely a place .
you would have to struggle to find a typical accumulation period which typically spans 2 to 3 decades where bonds and equities beat 100% in a simple index fund if one such time frame even exists where that happened .
in fact for most of the last two decades equities and gold has beaten the traditional equity and bonds combo , but that hasn’t beaten 100% equities either over typical accumulation stages.
if one is going to exhibit poor investor behavior then they should have someone else manage their money .
morningstar small investor returns show that conservative investors in more conservative portfolios don’t stay the course any better , they just have lower trigger points to bad behavior.
my view on this has never been any different.
now that doesn’t mean we all don’t have short term money in cash , or bonds or other fixed income .. but that should not be part of one’s long term investment allocation which is for a different time frame and different purpose.
long term money is just that and should be invested accordingly without the drag and weight of less capable assets over the long term.
it can make planning much more difficult trying to use one bucket or one portfolio for all uses .
there are very few here in their accumulation stage that don’t have separate checking accounts , savings and emergency funds that are handled differently then their long term money.
in fact if you remember the allocation thread here , most do not even count their short term money in the talk about how they are allocated
suggested savings rates are different as well . 15% is suggested for long term money .. 5% is suggested for funding short term money
so they are totally different from each other and should be kept separate in any allocation decisions on that long term money
Last edited by mathjak107; 02-03-2024 at 08:20 AM..
In the normal course of events, a 100% equity portfolio is not on the efficient frontier. That is, by including other asset classes with correlations that are not 1.0, the risk of the portfolio can be reduced while preserving the expected returns of that 100% equity portfolio, or, conversely, by incorporating other asset classes, the risk of the 100% equity portfolio is preserved but there is a higher expected return.
A person would have to have very unusually drawn indifference curves such that the optimal portfolio would contain zero bonds. It is the beauty of the mathematics of portfolio optimization.
like i said , go run any 20-30 year typical accumulation stage periods and show us where a combo of bonds and equities grew more money then 100% s&p fund.
like i said , go run any 20-30 year typical accumulation stage periods and show us where a combo of bonds and equities grew more money then 100% s&p fund.
you would have to hit the outliers
You have to adjust for risk, and you also have to take into account the indifference curves of the investor.
I've spoken to family about investing and they said it's too risky. I counter that with wages not keeping up with inflation or tuition cost, it's risky not to be investing. My retirement and brokerage accounts are making equivalent to a second full time job at this point. I was dumbfounded a few years ago when I realized the gains were more than my annual income, and I'm only 43.
Last edited by Lizap; 02-03-2024 at 07:49 PM..
Reason: Deleted Prior Poster's Comments
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