Looking for Investment Ideas

In My Humble Opinion
1

Hi Everyone

I’ve recently come into a small bit of cash- five figures. Nothing life changing, but enough to be significant to me.

I’m a saver by nature, so we are in good shape. We’ve got the retirement well funded and the emergency fund. We are far from rich, but because we’re pretty frugal we’re doing fine.

I promised the missus that we would set this money aside for something fun. We’ve toyed with the idea of a vacation cabin up in the hills, she’s occasionally mentioned Europe first-class, and believe it or not, we both kind of like the Corvette and maybe one of those in the future. All this is because I am sure someone will come along and say we should sock it away for retirement, but that really isn’t necessary.

So we want to set this money aside in something with fair returns and moderate risk. We’ll add to the money and if the market should be in a down phase, we can wait it out. This isn’t money that we anticipate needing with any sort of urgency.

I was thinking maybe the following mutual fund allocation: 1/3 in high yield bonds, 1/3 S&P 500 index, and 1/3 in something stodgy? But what?

In general, any suggestions on where to put the money for a time horizon of 3-7 years would be welcome. And fret not- I’m not the type to just take advice from a message board, I will investigate any suggestions before acting… I am just not coming up with good ideas so I am looking for some help.

And specific fund suggestions are welcome. We have an account with Fidelity, if that matters.

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One of my funds is made up of dividend paying stable stocks, which offers a reasonable return without a lot of price fluctuation. I don’t know how easy it is to cash out since it is in my IRA and I don’t need it. And index funds are always good, though the market is high enough now that I’d be nervous about putting a lot in.

BTW, you should get your financial planner to do a retirement analysis. We got a Monte Carlo analysis of where we could expect to be by 90. I have just retired, and that made me feel quite comfortable that we will have plenty with an 80% chance, and more than plenty with a 50% chance.

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KISS Principle - Three-fund portfolio - Bogleheads

4

+1

Best to stick with Vanguard, fees with any other mutual funds or brokers just whittle away at your money.

I follow the Three-fund plan but a female friend prefers the Vanguard Wellington fund. As another friend says, “Wellington is the mainstay of widows portfolios since the 1920s” (it is a very low cost fund that survived the Great Depression).

5

Fidelity has a good selection of very low-cost funds that are competitive with equivalent Vanguard funds in many cases. That wiki page even lists some Fidelity funds that will make a good three-fund portfolio.

6

Another vote for Vanguard.
For stodgy: if we weren’t in recovery from the financial crisis (or recession), I’d think about treasury notes or bonds (either directly or through a Vanguard mutual fund). But if the economy snaps back to prosperity, such bonds will get creamed as rates rise. Treasury rates are very low at the moment.

So. Here are 2 options.

  1. Go with a savings account that pays a high rate and has FDIC protection. Goldman Sachs currently pays 1.05%. And they are Too Big To Fail. Visit this website for a list: 10 Best Money Market Account Rates for April 2023 | Bankrate

  2. Too simple? Want a more complicated financial instrument? You can put up to $10,000 per year in an inflation protected savings bond. The current rate is inflation plus about 0.25%. Inflation is currently at 1.0% and rising. So you would get 1.25% now, and probably more later.

After 5 years (I think - you better check this) you can cash the bond in without penalty. That’s nice, since if inflation adjusted rates go up, you can essentially refinance, selling the bond and buying something else. With most bonds, their price goes down as the interest rate rises. Savings bonds have special rules though, which explains the limits placed on purchases.

Sometimes savings bonds are a good deal, sometimes an ok deal, sometimes a terrible deal.

https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm

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We’re facing a similar situation. OP - let me know if you mind me piggybacking on your thread.

My wife is set to inherit an amount somewhat larger than the OP’s. 6 figures. Currently the majority is being held by a Merrill Lynch advisor in stocks. She has the option of taking it either in kind, or cash.

I tend to be wary of Merrill Lynch and other similar operations, fearing their transaction and maintenance fees exceed what is available elsewhere. I’m concerned there will be considerable transaction fees if my wife requests that the stock be sold and passed to her in cash. But if she keeps them with ML, there will be a 1% annual wrap fee. So - essentially - the manager/advisor would have to beat the indexes by 1%. And, I imagine there would still be transaction fees down the line whenever we wanted to sell stock.

My wife’s sister, who is administering the estate, works in some capacity for Ed Jones. I know little about them, but have heard generally negative things - that they focus on maximizing their fees with little advantage to their clients. That sister is taking her share in kind, and keeping it with the ML guy who managed the decedent’s $.

My thought would be to take it in cash, and invest it in some Vanguard-type index funds. Neither I nor my wife has the desire to exert much effort into actively managing our investments. Moreover, we are pretty set otherwise in terms of income and savings, such that we don’t really have any clear immediate or longterm need for this money. We’ve got a couple of stocks, some bond/stock/gov’t securities funds through my work, a couple of IRAs, and I’ll get a pension. So we are somewhat diversified.

We might splurge on a couple of things we probably could have bought anyway, but the majority of this $ will just sit for our retirement, or to gift to our kids, grandkids’ education, etc. I’d prefer not to see it just sit there and not grow at least a decent rate. But I’d also hate to see it dwindle.

There are probably 2 big incentives towards keeping it with the ML guy. One, laziness and ignorance on our part. Keeping it with him would be the easiest thing to do. Neither of us is interested in researching funds, reading prospectuses, etc. The second thing is that my FIL initiated the relationship with this ML guy. And my FIL is a cheapass greedy SOB. That my FIL saw some value in a relationship with this guy, suggests to us that there is SOME value there. We’ll be seeing the FIL over the weekend - hope to have the opportunity to discuss this with him.

So, thoughts on how you want my wife to invest her $?

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Here’s my advice for what it’s worth:

40% in VTSAX, a total stock market index
20% in VTIAX an international stock market index
30% in VBTLX a bond market index
10% in VGSLX a real estate investment trust index

All of them are Vanguard funds with low expense ratios.

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REIT is an area I’ve thought about for some time, and would likely be wise to investigate now.

Thanks. You wouldn’t buy and hold ANY single stocks? My dad’s policy (dead 15 years) was always to buy and hold 10-15 stocks, generally in DRIPs, with no more or less than a certain percentage in any one stock. Mostly conservative big name, dividend paying companies (COP, IBM, Pepsi, etc.) But he enjoyed paying enough attention to them to anticipate/react to changes.

When we had to hold the profits from the sales of our last home somewhere before buying out new one, the ML guy advised 10 or so large stocks, giving us some diversity across energy, pharma, etc. As I recall, they at least matched the index, tho we only held them there a couple of years and I’m not sure of the fees/costs.

My problem is that I don’t see any particular companies that I’d really love to own, and that I think look strong. But I keep seeing things that make me think “Damn, I thought Apple/Google/Amazon/FB/etc looked good 5-10 years ago. If only I’d bought them then. And they STILL look to have considerable upside…”

Any experience in working with a fee-for-service financial planner/investment advisor? I’d be willing to pay some amount to get a couple of opinions from folk more expert than me as to how they would style our assets and why?

The other route is to subscribe to a Motley Fool type service…

Or we could just buy a bigger mattress! :wink:

10

Like your FIL, I used ML for years for an old IRA. Most of my money was in a company 401k. I (mostly foolishly) invested in stocks and traded infrequently so the fees were small.

When I got close to retirement, things changed. The broker wanted to manage my 401k as well and pitched a mix of mutual funds.

I dumped him when he explained the 1% fee.

My reasoning was that a safe withdrawal rate in retirement is 3-4%… So the broker was asking for 25-33% of my annual income as fees!!!

This is a good PBS video that explains how fees can seriously impact your long term results.

Frontline - The Retirement Gamble.

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The problem you’re facing at this exact time is that the stock market has just had a pretty big run up, and is at an all-time high. This is without the economy doing comparably well. So there’s a serious risk that we’re in some sort of bubble, and IMO the bias is to the downside. Could be wrong, though. So you’re stuck either way. You can go with 1% in a bank and miss 3%-4% in mutual funds, or you can go for the stock-related investments and possibly lose 20% of your investment.

All that said, if I were you I would go for 1% savings account if you can get one with without withdrawal fees. Then if the market declines significantly from where it is now, you switch into a mutual fund of the types others have described up-thread.

12

You are correct to be wary.

Set yourself up for some hassle. One option is to transfer the shares directly to Vanguard, which has a brokerage service. Then sell the shares at Vanguard, which has lower fees.

The key thing is to set up a plan ahead of time. Otherwise you will might just transfer the shares to Vanguard and have them sit there. Not the end of the world. But you may as well think the whole plan through ahead of time. It’s easier to sleep that way.

I understand Vanguard has advisors that you can pay for. I’ve never used them, but spending a fixed amount on such advice might bring greater peace of mind.

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This technique is called “Market Timing” and is among the worst investment strategies to follow. It seems logical, but history has shown it to be wrong.

Here is a good discussion.

It takes intestinal fortitude, but the best thing I ever did with my money was buy and hold - regardless of what the market was doing.

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Perhaps a one-bedroom condo to rent out? Around here 50K would be able to buy something like that and net you about $650/mo. after HOA, etc.

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That’s an option. With a $50,000 minimum Vanguard will partner you with a personal advisor for an annual charge of only 0.30% of the assets under management. That’s likely the lowest fee in the industry for someone who won’t saddle you with a lot of high fee and heavily loaded vehicles.

Over the years I built up a portfolio of individual stocks, at one time owning 42 issues, but I’ve aged to the point where I don’t really want to spend 20 hours a week following the market, so I divested over the last half year and have put it all in the funds I listed above.

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Enough to take care of my own home. Zero interest in being a landlord!

I’ll definitely look into Vanguard. My dad was a big fan of their services. Didn’t know if anything had changed in their offerings or the industry over the past 10-15 yrs.

17

I disagree with you. That article seems to be about trying to pick specific stocks at their lows.

And many of the market timers do the exact opposite of what I’m advocating - when the market is doing well they jump on the bandwagon, and when things tank they give up and sell, so they end up buying high and selling low.

Beyond all that, the issue here is that the Fed has kept interest rates very low for some time, and this has introduced a considerable skew to the market.

Bottom line is that IMHO, buying stocks when the market is at an all-time high and P/E ratios are seriously stretched might not be the best idea. I myself am not looking to sell what I already have (for a number of reasons), but I wouldn’t be looking to buy in at this time. No guarantees, or course.

18

I dunno, my slow-motion investing strategy is to buy stocks at or near their lows, or preferably, just after they get hammered, and hold them until the price recovers to where I want to sell. But this requires keeping long term tabs on a series of stocks and markets so you know at least a bit about them before jumping in.

One example;

Bought Target at $57.40 after they got hammered by the CC issue, for one example, it is over $75 now. Obvious buy opportunity as the company wasn’t going to go under and was most certain to recover from it.

But again, and I can’t stress this enough, it requires years of keeping track of a portfolio of stocks you may not necessarily own to find the right opportunity to buy and make some money on it. The only times I’ve been burned are when I didn’t know enough about the field or the individual company.

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Ignoring the question about what you should do with the money - you can transfer the actual stock (well, I presume it is really an accounting entry, very few people have actual stock certificates anymore) to any other firm at no cost. Vanguard and Fidelity both reasonably priced trades, so once you decide where to reinvest the funds, you can sell it with tem and buy whatever replacement funds you desire.

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That’s really good to know. I guess it should have been obvious, but I am quite ignorant in so many aspects of finances/investments.