New investor - what to do?
Tim.Fo...@gmail.com
$500,000 in cash which had been parked in a money market account
paying circa 4%.
I don't immediately need access to the cash, am debt free, own my
house, daughter gone thru' school etc. have well funded 401k / 403b
etc. etc.
None the less as I hope to retire in the next 5 years I'm risk adverse
- so after talking to a financial advisor he persuaded me that
municipal bonds would be a good idea.
So on his advice and with his help I put $500k into Federated Stock &
California Muni Fund A SCFAX. The front end load was $12.5k ie 2.5%.
Now a few months later I'm down my front end load (of course) plus a
further 6%.
I'm now thinking the economy is tanking even more and maybe I should
go back to cash and just put this down to experience. I clearly
didn't understand the amount of risk I was taking on.
I'm completely new to investing and have little understanding - none
the less I'm willing to learn.
Any advice gratefully received and of course understand that bottom
line it's my decision and that no one can really predict the future !
bunny...@aol.com
Hi,
Unfortunately, timing was off for your investment. Also, sometimes it
is better to go into individual bonds rather than a fund.
Still, I would not be too hasty -- I'd watch it for a few more months
and if it goes up I may get out and make some changes.
For now, I would post on other sites that are dedicated to questions
like yours. I like www.moneyrec.com-- the site has helped me come to
some good decisions. It is a tough market right now, but I would
hesitate making any changes without more information. Moneyrec also
has some updated market news by money market professionals; helps keep
me posted on what's currently going on in the market.
Best of Luck!
L
FrediFizzx
news:8eb67971-b2b6-46a7...@l42g2000hsc.googlegroups.com...
> Here's my situation, over the past few years I had accumulated
> $500,000 in cash which had been parked in a money market account
> paying circa 4%.
> I don't immediately need access to the cash, am debt free, own my
> house, daughter gone thru' school etc. have well funded 401k / 403b
> etc. etc.
> None the less as I hope to retire in the next 5 years I'm risk
> adverse
> - so after talking to a financial advisor he persuaded me that
> municipal bonds would be a good idea.
> So on his advice and with his help I put $500k into Federated Stock
> &
> California Muni Fund A SCFAX. The front end load was $12.5k ie
> 2.5%.
> Now a few months later I'm down my front end load (of course) plus a
> further 6%.
Is your financial advisor a CFP? Sounds more like they were a sales
person. I can't believe a good CFP would let you put it all into one
thing. Though SCFAX is likely to give you some tax advantage. If not
a good CFP, find one and have them explain this all to you.
> I'm now thinking the economy is tanking even more and maybe I should
> go back to cash and just put this down to experience. I clearly
> didn't understand the amount of risk I was taking on.
>
>
> I'm completely new to investing and have little understanding - none
> the less I'm willing to learn.
>
> Any advice gratefully received and of course understand that bottom
> line it's my decision and that no one can really predict the future
> !
Get Ken Fisher's book "The Only Three Questions That Count" and study
it until you understand all of it. It will explain to you why "risk
adverse" can actually end up being more risky. Inflation will take a
big chunk out of your retirement funds if you don't pay attention.
Fred
Tim.Fo...@gmail.com
Hi Fred,
it was because of inflation that I figured I should move away from
cash, that and because I'm in the highest tax brackets I wanted to
minimize my tax liability. Quite a dilemna, but fortunately I'm able
to make up the losses from my disposable income.
The advisor was a financial advisor from Etrade who told me he's not
on commission and is paid to retain clients - thus I trusted his
advise only later did I find out that SCFAX is a $7M fund with little
history.......
None the less I'll be visiting with him shortly to discuss the
situation and what to do next - if anything.
Fortunately it's not a significant percentage of my total assets :-)
L,
Thanks for the link - I'll check that group ot as well.
Tim
FrediFizzx
news:2ecfd7c8-bbb7-4007...@2g2000hsn.googlegroups.com...
>
> Hi Fred,
>
> it was because of inflation that I figured I should move away from
> cash, that and because I'm in the highest tax brackets I wanted to
> minimize my tax liability. Quite a dilemna, but fortunately I'm
> able
> to make up the losses from my disposable income.
>
> The advisor was a financial advisor from Etrade who told me he's not
> on commission and is paid to retain clients - thus I trusted his
> advise only later did I find out that SCFAX is a $7M fund with
> little
> history.......
>
> None the less I'll be visiting with him shortly to discuss the
> situation and what to do next - if anything.
NOT! Spend two or three hundred bucks and get with a real independent
Certified Financial Planner. You definitely need help from an expert
at this stage of knowledge. Doesn't ever hurt to get a second
opinion. If you have a CPA they should know a good CFP or Certified
Financial Advisor they could recommend.
Fred
Steven L.
A few more points:
It's not just how long you have till retirement. It's how long you will
need the money to live on. IOW, your life expectancy. These days,
folks who retire at age 65 can live till they're 95. In which case, you
really still need that money to keep ahead of inflation for 35 more years.
If so, then a 100% bond portfolio just won't cut it. They don't offer
much appreciation.
You still need to have a significant component in stocks and/or hard
assets like real estate, if you're to have any hope of outpacing
inflation for the rest of your *life*. If you live for decades, then
the current troubles in the market won't matter that much to you in the
long run--as long as your risk tolerance can see you through them.
Assuming a decent life expectancy, you're still considered a long-term
investor--it's not when you're going to retire, it's how long you are
going to have to *live* off your nest egg that counts.
For that reason, I suggest a portfolio that contains a mix of stocks and
bonds, carefully adjusted to fluctuate no more than half as much as the
broader market (beta coefficient less than 0.5). That way, if the
market declines 20%, your portfolio only declines 10%, which is easier
to stomach.
A good place to start is an above-average investment newsletter like
No-Load Fund Investor, or Richard Band's Profitable Investing. Most of
Band's subscribers are in their fifties, approaching retirement like
you, and so his model portfolios are designed for the conservative
investor. In particular, Mr. Band likes to recommend dividend-paying
stocks that will throw off decent income for you to live on, plus still
offer some hope for appreciation (which bonds won't).
You can google for their websites.
--
Steven L.
Email: sdli...@earthlinkNOSPAM.net
Remove the NOSPAM before replying to me.
Don
> So on his advice and with his help I put $500k into Federated Stock &
> California Muni Fund A SCFAX. The front end load was $12.5k ie 2.5%.
> Now a few months later I'm down my front end load (of course) plus a
> further 6%.
I would never put any amount of money into any fund with a front end
load under any circumstances, no matter what the past performance of
the fund might be or how renowned the manager might be. My .02.
Steven L.
There's another point too. At this stage of his life, this person has
to start thinking about estate planning too, if he's affluent with a
large nest egg and income (and it sounds like he is). He needs a
certified Financial Planner who can handle the estate issues, the tax
issues, the whole nine yards. This is way beyond the usual "what fund
should I buy" type questions.
FrediFizzx
news:wfKdnUhGsfEYvO3V...@earthlink.com...
Yeah, it definitely looks like he needs someone that can look at his
whole situation before giving proper advice on what to do with part of
it. Just make sure they are independent and not getting commisions
from anyone. An Etrade advisor is not independent. That is for sure.
They might be trying to help you out but you can rest assured they are
looking out for Etrade more. And I hate to say it, but I think they
already "got him".
Fred
Steven L.
Neglecting estate planning is a chronic problem with affluent folks at
this OP's age. Partly that's because it's complex, involving all kinds
of quirks in the tax laws that Congress keeps finagling with. Hence
it's one part of investment that absolutely requires professional
consultation and maybe even professional management--even in this day
and age of self-directed retirement plans.
Tim.Fo...@gmail.com
> FrediFizzx wrote:
> > "Steven L." <sdlit...@earthlink.net> wrote in message
> >news:wfKdnUhGsfEYvO3V...@earthlink.com...
> >> FrediFizzx wrote:
> >>> <Tim.Forres...@gmail.com> wrote in message
> Remove the NOSPAM before replying to me.
Hi Guys,
Yep - I agree with all of you, especially the bit about being 'got' by
Etrade. Fortunately this issue is only a minor blip in terms of $
amount but not one I wish to repeat on a regular basis.
My situation is somewhat complex in as much as I hold dual UK / US
citizenship with assets in both countries - but considering just my US
assets all the retirement tools tell me I can easily retire at 55 and
have enough income to cover my needs indefinitely. The UK assets are
just gravy.
None the less I will certainly being talking to a CFP and tax adviser
etc before visiting my 'adviser' at Etrade again.
As I suspect nobody can predict the bottom of the current cycle - my
gut is telling me cash is king and thus revert to high interest money
market - currently at 7% in the UK, of course there's risk with
exchange rates .....
I consider myself reasonably savvy, but just shows how it's possible
to be sucked in......
Thanks for all the helpful advice - I'll check back in with
updates :-)
Tim