$200k - where to invest for safety
ps56k
It's been sitting in the checking account since then.
What would be the best way to invest,
with max safety of principle in mind,
along with max growth or divs...
ie - what kind of mutual fund from Fidelity/Vanguard
would be appropriate - and all at once, or dollar avg...
--
----------------------------------
"If everything seems to be going well,
you have obviously overlooked something." - Steven Wright
Douglas Johnson
>What would be the best way to invest,
>with max safety of principle in mind,
>along with max growth or divs...
You realize that max safety is in direct conflict with max growth or divs?
>ie - what kind of mutual fund from Fidelity/Vanguard
>would be appropriate - and all at once, or dollar avg...
It depends. How long are you investing for? What other investments do you
have? Do you have an emergency fund? What kind of risk are you willing to take
for what kinds of rewards? I'll trot out my standard advice to go read
"Investing for Dummies".
Dollar cost averaging is a means of minimizing emotional pain at a cost of
reduced returns. The assumption is that the stock market has a long term up
trend with lots of unpredictable ups and downs along the way. If that's true,
the way to maximize returns is to invest everything immediately.
But that runs the emotional risk of investing just before one of those
unpredictable downs. Ouch. DCA gives you two emotional crutches. If the
market goes up as you are making the investment, you can tell yourself "I'm
making money". If it goes down, you can tell yourself "I'm buying more".
Nothing wrong with that, much of good investing is managing your emotions. But
mathematically, the best thing to do with a lump sum is invest it all
immediately.
-- Doug
ps56k
"Douglas Johnson" <po...@classtech.com> wrote in message
news:1tqon51c09sv5kfnn...@4ax.com...
sorry - forgot about the 20 questions....
This is special gravy money - short term -
let's say for college in the next couple of years.
All our other portfolio investments are spread around in various funds
that run the entire spectrum.... risk vs reward
domestic, intl, emerging, growth, value, divs, small, med, large, etc -
SO - don't really want to gamble with this $200k -
that's why it's been sitting in the dumb checking account.
Douglas Johnson
>SO - don't really want to gamble with this $200k -
>that's why it's been sitting in the dumb checking account.
Then why move it?
-- Doug
dapperdobbs
> [snip]
> SO - don't really want to gamble with this $200k -
> that's why it's been sitting in the dumb checking account.
>
As Douglas Johnson said, if the money is already earmarked, then what
is so dumb about (200k in) a checking account?
A savings account paying 1.x% would be an improvement, but maybe
prepaying for college would be worth 7%. If it is indeed gravy money
you wish to consume, these days cash can negotiate 10%, 20% - even 50%
discounts. Sounds pretty safe to me. I've even heard of some people
negotiating 50% off on a house!
Money is a medium of exchange for product. Investment involves an
exchange for inputs of production, then production, then an exchange
for money.
Ron Peterson
> My wife last year received about $200k from her parents life insurance...
> It's been sitting in the checking account since then.
> What would be the best way to invest,
> with max safety of principle in mind,
> along with max growth or divs...
Pick a few of the larger diversified utilities to average your risk.
You should get at least 4% in dividends plus some capital growth.
--
Ron
ps56k
"Ron Peterson" <r...@shell.core.com> wrote in message
news:9efd0a9f-6867-489e...@g28g2000yqh.googlegroups.com...
and I've been looking at div paying stocks & funds,
but balanced with the factor of preserving the principle
vs betting on cap growth in a shakey economy.
Wallace
> sorry - forgot about the 20 questions....
>
> This is special gravy money - short term -
> let's say for college in the next couple of years.
>
> All our other portfolio investments are spread around in various funds
> that run the entire spectrum.... risk vs reward
> domestic, intl, emerging, growth, value, divs, small, med, large, etc -
>
> SO - don't really want to gamble with this $200k -
> that's why it's been sitting in the dumb checking account.
>
buy a CD
Bill
> SO - don't really want to gamble with this $200k -
> that's why it's been sitting in the dumb checking account.
Then an FDIC insured CD is the answer.
--
.Bill.
BreadW...@fractious.net
That's nowhere near consistent with "max safety of principal".
For example, the two biggest utility ETFs, the SPDR (XLU)
and the Vanguard one (VPU) both went down by approximately
29% in 2008.
Now, over longer periods, their average returns have been
quite decent - trouncing the S&P 500 over, say, 5 and
10 year periods. But these come with substantial volatility
and sometimes with big lags (ie. both were trounced by
the SP500 in 2009).
These types of investments may have a place within a larger
diversified portfolio, but if the OP is interested in
stability of principal (note that the money is currently
in *cash*) then at best utilities could be a very small
part of that portfolio.
They do both throw off current yields in the area of 4%,
which is lovely. And in the long run, that certainly
helps smooth things out -- but you must account for
periodic huge losses with this kind of investment.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
PeterL
wrote:
Bank CD's or Treasuries for max protection of principle. Spread it
out to 4 different banks if you want even more safety.
Mark Freeland
news:bf1655e4-b025-4d93...@x1g2000prb.googlegroups.com...
> Bank CD's or Treasuries for max protection of principle. Spread it
> out to 4 different banks if you want even more safety.
Depends on what you're protecting against. If you need full liquidity, then
by using multiple banks, you're increasing the odds that some of your money
will be frozen for a day or so when a bank fails. On the other hand, if
you're trying to ensure _some_ liquidity, then spreading the money across
multiple banks decreases the probability that _all_ of the accounts will be
frozen simultaneously. (For this purpose, the incremental benefit of using
more than two banks is miniscule.)
This is all predicated on the fact that with FDIC insurance, there is no
risk of loss, just risk of being frozen.
Mark Freeland
nBe...@nyc.rr.com
--- news://freenews.netfront.net/ - complaints: ne...@netfront.net ---
Don
> This is all predicated on the fact that with FDIC insurance, there is no
> risk of loss, just risk of being frozen.
But there is still the risk that FDIC will fail. That risk may be
small, but then who would have believed that Lehman Brothers and all
the rest would fail. Maybe next time there will not be any bail out.
It is easy to list a lot of things NOT to do, but investments with high
yield and no risk do not exist. For that matter, investments with
pretty good yield and minimal risk do not exist either, despite what
the sales people may tell you. (Actually, such investments may exist,
but you probably have to be an insider or be willing to commit a crime
in order to have access to them. Any who comes to you promising such an
investment surely is a scammer.)
All this was explained by Confucius, or somebody, who stated: "You
can't have your cake and eat it too."
Ron Peterson
> This is all predicated on the fact that with FDIC insurance, there is no
> risk of loss, just risk of being frozen.
Yes, and in addition, it's not likely that the funds would all be
needed immediately.
--
Ron
Default User
> On 2010-02-21 20:19:21 -0800, "Mark Freeland" <nBe...@nyc.rr.com>
> said:
>
> > This is all predicated on the fact that with FDIC insurance, there
> > is no risk of loss, just risk of being frozen.
>
> But there is still the risk that FDIC will fail.
According to the FDIC:
"FDIC insurance is backed by the full faith and credit of the United
States government. Since the FDIC began operation in 1934, no depositor
has ever lost a penny of FDIC-insured deposits."
<http://www.fdic.gov/deposit/deposits/insured/basics.html>
Brian
--
Day 391 of the "no grouchy usenet posts" project
Don
> According to the FDIC:
>
> "FDIC insurance is backed by the full faith and credit of the United
> States government. Since the FDIC began operation in 1934, no depositor
> has ever lost a penny of FDIC-insured deposits."
Perhaps I am a pessimist, but I always look for the worst possible
thing that can happen when considering investments. I suppose Lehman
Brothers could have put a similar sentence in their advertisements, and
a lot of people certainly would have believed it. The chances of major
disasters may be small, but we know they do happen. Perhaps
diversification is a good idea, even if you are a conservative investor
wanting minimum risk. Personally I would not want all my eggs in one
basket, even if that basket is backed by "the full faith and credit of
the United States government."
Default User
> On 2010-02-28 12:21:54 -0800, "Default User"
> <defaul...@yahoo.com> said:
>
> > According to the FDIC:
> >
> > "FDIC insurance is backed by the full faith and credit of the United
> > States government. Since the FDIC began operation in 1934, no
> > depositor has ever lost a penny of FDIC-insured deposits."
>
> Perhaps I am a pessimist, but I always look for the worst possible
> thing that can happen when considering investments. I suppose Lehman
> Brothers could have put a similar sentence in their advertisements,
> and a lot of people certainly would have believed it.
Do you think Lehman could have said that for very long before getting a
call from the US Attorney General? It's not just the FDIC
"advertisements" either. It's posted in every FDIC member institution.
<http://www.fdic.gov/regulations/resources/signage/images/signFDICxl.gif
>
You'd think someone else in the government would have noticed and said,
"HEY!" If it weren't true. Do you have some evidence that FDIC is not
backed by FF&C? If you agree that it is, are you still concerned?
Personally, if the case is a FF&C institution failing, I suspect we'd
have bigger problems than insured CDs.
Bill
> Perhaps I am a pessimist, but I always look for the worst possible
> thing that can happen when considering investments. I suppose Lehman
> Brothers could have put a similar sentence in their advertisements,
You seem to imply that the statement that the FDIC is backed by the
full faith and credit of the U.S. government is an advertising claim.
It is, in fact, black letter law. Read the Glass-Steagall Act of 1933.
--
.Bill.
Don
> You seem to imply that the statement that the FDIC is backed by the
> full faith and credit of the U.S. government is an advertising claim.
> It is, in fact, black letter law. Read the Glass-Steagall Act of 1933.
Just poor wording on my part. I realize that FDIC protection is not
"advertising." People did not expect Lehman Brothers to fail, but it
did. Similarly, people do not expect FDIC to fail, but to my mind a
prudent investor should never make the assumption that any particular
event with economic and financial implications is impossible.
Don
> You'd think someone else in the government would have noticed and said,
> "HEY!" If it weren't true. Do you have some evidence that FDIC is not
> backed by FF&C? If you agree that it is, are you still concerned?
> Personally, if the case is a FF&C institution failing, I suspect we'd
> have bigger problems than insured CDs.
What I am saying is that not only would the banks fail, but that the
full faith and credit of the government could turn out to be worthless.
In that case, insured depositors still would not get any money back
from either bank or government insurance. A lot of people evidently
thought we were close to a large scale meltdown in this last crisis.
Who knows what could happen in the next one. It is prudent to keep one
eye on the "worst case scenario."
bo peep
> Perhaps I am a pessimist, but I always look for the worst possible
> thing that can happen when considering investments.
What would be an example of an investment that would be immune from
damage from "the worst possible thing that can happen"?
Douglas Johnson
>Similarly, people do not expect FDIC to fail, but to my mind a
>prudent investor should never make the assumption that any particular
>event with economic and financial implications is impossible.
What steps are you taking to protect yourself against a US government default?
-- Doug
Ron Peterson
Canada has a national debt of $15,000 per capita compared to the US
national debt of $40,000 per person. It looks like Canada bonds may be
safer.
--
Ron
Don
> What would be an example of an investment that would be immune from
> damage from "the worst possible thing that can happen"?
I doubt there is any such thing. But diversification helps. I would not
want everything in one asset class. If really bad things are expected,
maybe even some gold bars under the mattress would be a good idea.
Don
> What steps are you taking to protect yourself against a US government default?
Diversificsion is the key word! Not just diversification among stocks
and funds, but also among asset classes including real estate.
bo peep
> If really bad things are expected,
> maybe even some gold bars under the mattress would be a good idea.
The government confiscated all privately owned gold bullion and coins
in 1934. There is no reason to think that they could not do it again.
ps56k
"PeterL" <po....@gmail.com> wrote in message
news:bf1655e4-b025-4d93...@x1g2000prb.googlegroups.com...
Looked at the ALLY Bank again - have some laddered CD's there -
With the potential of rate increase maybe by summer,
the Online Savings (1.30%) or the MM (1.30%)
might be a good short term parking place
until we see how rates are going to be set in the next 6 mos.
Heck - anything is better than $200k sitting in my wife's checking at
Chase...