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%.
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 !
> 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%.
> 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 !
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.
> 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.
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.
> 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.
bunnyco...@aol.com wrote: > On Jul 5, 1:39 pm, Tim.Forres...@gmail.com wrote: >> 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%.
>> 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 !
> 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.
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.
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On 2008-07-05 10:39:27 -0700, Tim.Forres...@gmail.com said:
> 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.
>> 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.
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.
-- Steven L. Email: sdlit...@earthlinkNOSPAM.net Remove the NOSPAM before replying to me.
>>> 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.
> 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.
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".
>>>> 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.
>> 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.
> 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".
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.
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