Author Topic: help for my friend  (Read 2792 times)

crazy jane

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help for my friend
« on: August 02, 2013, 12:51:44 PM »
A dear friend of mine needs advice on what to do with a substantial sum of money. This approximately $250, 000 is just sitting around doing nothing at the moment. My friend is retired, owns a home free and clear, is debt free and collects a pension that easily covers living expenses. Other assets include roth and traditional iras and 403b. The goal for maximum growth. Please advise.

KingCoin

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Re: help for my friend
« Reply #1 on: August 02, 2013, 01:25:31 PM »
The goal for maximum growth.

This essentially means your friend should own primarily equity. He/She should consider a stock heavy, periodically rebalanced, multi-asset portfolio like the following:

60% Domestic Equity
10% Foreign Developed Equity
10% Foreign Emerging Market Equity
10% REITs
10% Government Bonds

Your friend should also read a few introductory personal finance books (like those recommended by MMM) so he/she understands the investments and the risks being taking on.

aj_yooper

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Re: help for my friend
« Reply #2 on: August 02, 2013, 07:26:44 PM »
I think your friend is in a pretty good spot  already: a pension covering expenses, a paid for house, Roth, 403b, and $250k in cash.  What makes her want to go for maximum growth, which translates to higher risk of principal, at this time? 


crazy jane

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Re: help for my friend
« Reply #3 on: August 02, 2013, 07:33:32 PM »
I'm trying hard to be a good friend and my friend asked me to ask the mmm community. I have given advice based largely on what I have learned from these forums, mmm and my own experiences. My friend hears me talk about the awesome people here on the forums and has read many posts. Your advice and ideas will be taken to heart and greatly appreciated. My friend would probably appreciate some very specific recommendations.

aj_yooper

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Re: help for my friend
« Reply #4 on: August 02, 2013, 08:14:00 PM »
Your friend needs to become educated more on investing herself so she will literally, intellectually, and emotionally own her investments.  Start with:  http://www.bogleheads.org/wiki/Bogleheads_investing_start-up_kit.  They also have a number of book recommendations.  They are the real deal.

She should go through that information carefully, figure out what asset allocation she wants to use, and do a written asset allocation plan.  If she decides to invest further, I suggest using a low cost provider like Vanguard, since investment costs strongly influence the investment rate of return. 

IMO, there is a benefit in having a strong cash position, but everyone has different risk and reward preferences.  Your friend needs to understand that investments can significantly and even catastrophically decline and may take decades to recover.  It is very painful to see $$ drop big and take a long time, if ever, to recover.  Get educated, understand the investment ideas, have a written AA plan, and re-balance yearly.  Investing can be very rewarding and fun, but it isn't throwing darts or following some internet guy's prescription.  She could step up and post something herself on the forum too.

Best wishes.

crazy jane

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Re: help for my friend
« Reply #5 on: August 02, 2013, 08:40:47 PM »
Aj thank you for the excellent information. I especially like your vanguard suggestion and cautionary advice with respect to risk. I will share your suggestions with my friend soon.