Author Topic: Where to invest $4.5 million today?  (Read 9695 times)

GreenEggs

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Where to invest $4.5 million today?
« on: April 12, 2017, 03:52:52 PM »
So, my elderly eccentric father has a pile of cash that I need to help him with.  First I will obviously need to deposit it into the bank, and then "what"?   I've read here that Vanguard index funds are great, but it's also important to diversify. 

He already has stocks with Edward Jones, which I recently got PoA papers filed with.  I asked what his yields had been for the past 3 years, and it was about 5%.  I've been his caregiver for a while, but only recently have access to helping with his funds.  It's been tough acting as his caregiver, but I have been able to accomplish a lot towards getting his legal affairs in order (the $4.5 is part of the results :) ).  The EJ account has about $3.2, and I may want to move it too.

If you guys can offer advise about what mix of investments you'd consider safe and/or wise I'd love to inject some "wisdom" into this situation.  ;)  (It's amazing how much $$$ crazy people can amass.)

Note: if the answer is "go to XYZ threads" that's fine.  (My eyes are fried from reading legal & medical stuff..., so just pointing me in the right direction would be great.)

thanks,

Frankies Girl

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Re: Where to invest $4.5 million today?
« Reply #1 on: April 12, 2017, 04:13:12 PM »
There is no "maybe" about moving his money away from EJ. They are horrible, awful and not even sure how what they do is even considered legal, but they are considered so, unfortunately.

They act like they are family friends. They make it a point to ingratiate themselves with their clients - how's your grand kid Billy doing with his soccer game? Oh nice! How was your vacation to Florida last month? Super! Hey, I'm your buddy, so I'm going to take goooood care of you...

They prey on the naive and elderly who may feel just a bit lonely. It is part of their company structure to make folks think they're just a friendly neighborhood adviser. But all of their funds are loaded or have insanely high expenses and management fees (or both). And I say this from personal experience - my MIL has all her accounts with them because she is so stupid she thinks the guy she's been "friends" with for the last 20 years is looking out for her best interests... holy hell, no he isn't - but you can't tell her that.

So if you have the ability - RUN AWAY FROM EJ ASAP.

Look into Vanguard for the accounts, and if you aren't interested in creating a basic lazy portfolio out of their top recommendations (usually VTSAX and their total bond and then maybe some international index fund mixed in - see the link for ideas), then check out their Wellesley which is a very conservative fund composed of roughly 40% stock/60% bonds, or Wellington fund, which is a bit more into stocks (60%stock/40% bond) for your dad's money.

Both of these are a one and done fund. You can buy them, pay very low cost expense ratios (both are ~0.15% all inclusive and self-balancing meaning you don't have to babysit them yourself - they'll grow and rebalance as needed automatically) and they will preserve his money with either modest to medium growth depending on how conservative you wish to be.

You should be able to contact Vanguard, explain the situation (have dad's PoA, want to tranfer from EJ and sell off all the crap funds there and invest in X with Vanguard) and they can walk you through the process. From what I had to deal with transferring my own accounts, it's likely going to be: paperwork you fill out, create account(s) that equal what he currently has over at EJ - so like if he's got an IRA, a 401k and a taxable, then you'd need to create the same three types of accounts over at Vanguard for the EJ ones to go into. May need to sell off all the EJ funds while they still exist at EJ (you can transfer "in kind" also, but ask Vanguard which would be better). Then email/mail to Vanguard the filled out forms, and they should be able to handle the transfer and then you just go into the account and put in a buy order for each account. EJ likely will hit you with a sell fee, a transfer fee and even possibly a closed account fee (because they are bastard-coated bastards), but it will be a small price to pay to get the money out of their disgustingly grubby little hands.

Deposit most of the cash into a taxable might be the best, but you may want to have several years' worth of expenses available for him in either laddered CDs or a high yield savings account.
« Last Edit: April 12, 2017, 04:21:30 PM by Frankies Girl »

Classical_Liberal

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Re: Where to invest $4.5 million today?
« Reply #2 on: April 12, 2017, 04:20:40 PM »
All of their funds are loaded or have insanely high expenses and management fees.

RUN AWAY ASAP.

Look into Vanguard for the accounts, and if you aren't interested in creating a basic lazy portfolio out of their check out their Wellesley which is a very conservative fund composed of roughly 40% stock/60% bonds, or Wellington fund, which is a bit more into stocks (60%stock/40% bond) for your dad's money.

+1 to this.  Investments at this level should be treated a bit differently IMO. The goal becomes long term wealth preservation.  It's not popular here, but Browne's permanent portfolio is pretty simple and has a good track record for doing just that.  I would, however, consider adding a real estate portion to such a portfolio, if they own there own home it may not be necessary.

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #3 on: April 12, 2017, 05:11:08 PM »
The "maybe" about the EJ accounts is they are already established.  The Cash "has to be" invested somewhere,  there's no question about that. 

Dad still has a voice & an opinion that I have to consider.  After the new accounts are established it should be relatively simple to move the funds from EJ.

Real Estate was mentioned, and I wanted to add that he has approximately $8-10  million in lakefront property that has been appreciating nicely, especially recently.  Waterfront property has been a very good investment here, since the supply is limited & the demand keeps increasing.  If real estate was simpler to buy & sell I would be tempted to purchase more with the cash.  (excavation recently began for a 25,000 sf home about 500 feet from from one of his places!)  We never realized back in the 70's that "big shots" would be driving exotic cars around here someday.  Dad's street was gravel back then, and they'd spray it with used motor oil to keep the dust down! 

Thanks for the advise so far,

brooklynmoney

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Re: Where to invest $4.5 million today?
« Reply #4 on: April 12, 2017, 05:36:48 PM »
I believe with that level of assets you should have access to an advisor at Vanguard, but even if you don't you can sign up for their Personal Advisor service and they can help you come up with an allocation.

totoro

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Re: Where to invest $4.5 million today?
« Reply #5 on: April 12, 2017, 07:21:48 PM »
If your dad is elderly and has a pile of cash and other assets you should get someone with some estate planning experience involved - if that matters to him.  You are in a conflict of interest in this respect which maybe he is okay with but I wouldn't want my kids paying out for estate taxes and fees when they didn't need to do so.

Our money is in a mix of RE and low cost index funds. Ditto getting out of Edward Jones.

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #6 on: April 12, 2017, 07:33:28 PM »
I believe with that level of assets you should have access to an advisor at Vanguard, but even if you don't you can sign up for their Personal Advisor service and they can help you come up with an allocation.

I'll do that.  I Read about Vanguard advisers, but it slipped my mind.
 
(Forgot to mention that my mind is frazzled too from all Dad's stuff.  I've been living away from home caring for him for about a year now.  Vision impairment first, as I was trying to get assistance he was diagnosed with throat cancer, again.  Now he's on a feeding tube because he can't swallow properly yet.  Oh, and dementia is beginning which makes things even trickier.) 

Frugancial Advisor

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Re: Where to invest $4.5 million today?
« Reply #7 on: April 12, 2017, 07:47:12 PM »
Vanguard published a study quantifying the value of working with a Financial Planner, and the results were surprising considering the research was performed by a company who tenaciously defends index investing and is often confused with a company who relents working with a professional at all.

$4.5 million is a significant amount of money whichever way you look at it. Seeking investment advice from an online forum for this amount of money is akin to asking how to write your own will. There are many educated and sophisticated investors on this forum, but there is no icon indicating whether they've received any accreditation in portfolio management whatsoever. Therefore, are you willing to take the advice of a 30 year-old self-directed investor who has only invested during a bull market, and has never seen a 2008-like downturn?

I can only urge that you seek guidance from a professional: CFA, CFP, etc. They may charge for their time, but that will be worth every penny compared to your other options: managing the portfolio yourself, or working with an overpriced salesmen who calls himself an "Advisor".

In full disclosure, I am an active CFP professional and have seen situations like yours many times before. My only concern is ensuring you are consulting with someone who is fully educated and qualified to give you proper advice.

bigchrisb

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Re: Where to invest $4.5 million today?
« Reply #8 on: April 12, 2017, 07:57:48 PM »
Concur with the comments about getting some fee for service advice.  Its a significant amount of money, and there are probably some estate planning issues to consider too.

As for Edward Jones (or any other % of portfolio fee group), get it out.  I had a joking chat with a mate of mine who defended the "companionship" elements of that kind of service.  2% on $3.2m is $64,000 a year.  You could buy a whole lot of "fee for service" companionship for that annual spend!  He saw the light at that point.


GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #9 on: April 12, 2017, 08:29:52 PM »
If your dad is elderly and has a pile of cash and other assets you should get someone with some estate planning experience involved - if that matters to him.  You are in a conflict of interest in this respect which maybe he is okay with but I wouldn't want my kids paying out for estate taxes and fees when they didn't need to do so.

Our money is in a mix of RE and low cost index funds. Ditto getting out of Edward Jones.


I located the best estate attorney in the area, and the Will, Trust,  Health Care & Financial PoA's have been addressed.  He presented the Dad's options for handling the tax issues, so that has been addressed too. 

The real estate has remained unsold since it's worth much less "on paper" than in reality.  It was easy to see the inherent tax sheltering nature, without really studying it.  It may not have been so apparent for lower priced property, but one parcel has an appraisal value of about $1.2-$1.6 mil & we can easily divide it and get $3.0-$4+ mil for it. 

I'm not sure how I can be a conflict of interest, as long as I avoid any self-serving actions.  That was a struggle for a while, during a time when I was feeling depressed and trapped here, but I have come to appreciate how important my time here has been for our entire family, and it has given me a sense of pride, purpose, and accomplishment.  I can't even imagine the nightmare if Dad hadn't had a Will, and whatever was left after probate got hit by the estate tax. 

When I consider how things were a year ago compared to how everything is today it feels very good.   The last major goal I have, or can think of...., is dealing with the investments, which were really out of my reach until his estate tax hurdle was solved.  I admit "Luck" has been on my side, but persistence as always was the key.  This past year has been an emotional roller-coaster to say the least.

Sorry, if I've rambled a bit.

Thanks again for the help,

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #10 on: April 12, 2017, 08:38:05 PM »
Vanguard published a study quantifying the value of working with a Financial Planner, and the results were surprising considering the research was performed by a company who tenaciously defends index investing and is often confused with a company who relents working with a professional at all.

$4.5 million is a significant amount of money whichever way you look at it. Seeking investment advice from an online forum for this amount of money is akin to asking how to write your own will. There are many educated and sophisticated investors on this forum, but there is no icon indicating whether they've received any accreditation in portfolio management whatsoever. Therefore, are you willing to take the advice of a 30 year-old self-directed investor who has only invested during a bull market, and has never seen a 2008-like downturn?

I can only urge that you seek guidance from a professional: CFA, CFP, etc. They may charge for their time, but that will be worth every penny compared to your other options: managing the portfolio yourself, or working with an overpriced salesmen who calls himself an "Advisor".

In full disclosure, I am an active CFP professional and have seen situations like yours many times before. My only concern is ensuring you are consulting with someone who is fully educated and qualified to give you proper advice.


That sounds like good advice.  Can you recommend how to locate a good CFA, CFP, etc. ,and how to evaluate their skills & knowledge?  What should I look for, and what should I avoid?

Frankies Girl

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Re: Where to invest $4.5 million today?
« Reply #11 on: April 12, 2017, 08:41:12 PM »
Ramble away. What you've been dealing with likely has been crazy stressful and you likely don't have many folks you can talk to about this sort of thing without them getting all slack-jawed in disbelief or suggesting assinine things to do with your dad's investments.

You're doing a very hard job, and I think it is really amazing and you deserve lots of internet hugs for having to shoulder this burden and dealing with the medical issues and stress involved. Your dad is so lucky to have you looking out for him.

With the level of assets he has, I agree taking things slowly and with as much input from him as he feels comfortable with, you can't really go wrong with going over to Vanguard and getting their professional management to guide you and him. And the real estate can just sit there, being a nice hedge in the event he needs it for anything (though I doubt he'll need it with his other assets). IANAL, however so definitely think your locating the estate planning attorney is a very smart move.


Another Reader

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Re: Where to invest $4.5 million today?
« Reply #12 on: April 12, 2017, 09:33:04 PM »
While I generally agree with Frankies Girl, this is one case where I do not.  At this level of assets, you need an estate planning attorney, a CPA with experience in tax management as well as estate planning, and some higher level financial  planning.  I would not use Vanguard's people for any of this.  They have no knowledge of real estate or where it fits into his portfolio of assets.  They are fine for a simple $1MM estate comprised of a house and some funds.  Not this.

If the EJ people have him in taxable accounts that have grown significantly over the years, it may be unwise to extract the money now.  The capital gains in those funds may be huge and the tax bill egregious if you move them.  It may be better to wait until he passes and the basis is stepped up to sell.  You are also going to be handing the federal government 45 percent of everything over a certain amount when he dies, and you need to plan how to avoid as much of that tax as possible as well as putting the estate in a position where assets do not have to be liquidated to pay the estate tax bill.

totoro

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Re: Where to invest $4.5 million today?
« Reply #13 on: April 12, 2017, 09:49:44 PM »

I'm not sure how I can be a conflict of interest, as long as I avoid any self-serving actions.  That was a struggle for a while, during a time when I was feeling depressed and trapped here, but I have come to appreciate how important my time here has been for our entire family, and it has given me a sense of pride, purpose, and accomplishment.  I can't even imagine the nightmare if Dad hadn't had a Will, and whatever was left after probate got hit by the estate tax. 

When I consider how things were a year ago compared to how everything is today it feels very good.   The last major goal I have, or can think of...., is dealing with the investments, which were really out of my reach until his estate tax hurdle was solved.  I admit "Luck" has been on my side, but persistence as always was the key.  This past year has been an emotional roller-coaster to say the least.

Sorry, if I've rambled a bit.

Thanks again for the help,

The conflict of interests arises because you are a beneficiary (I presume?) and may be hiring and directing the estate planning folks.   I'm not implying you are acting in a self-serving manner, just to be aware of it as other beneficiaries sometimes object to certain arrangements and decisions later.  Probably not your scenario but given that you have mentioned dementia things get a lot more tricky and sometimes contentious.

I'd just pay for good advice in your shoes.  If there is so much cash maybe your dad wants to gift it while alive so the beneficiaries can invest it in their names instead of having it as part of the estate and taxed as such.  I'm in Canada so not up on the US issues but the property transfer is a big one here -- best to have it transferred at the lowest cost basis possible. 

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #14 on: April 12, 2017, 09:57:29 PM »
While I generally agree with Frankies Girl, this is one case where I do not.  At this level of assets, you need an estate planning attorney, a CPA with experience in tax management as well as estate planning, and some higher level financial  planning.  I would not use Vanguard's people for any of this.  They have no knowledge of real estate or where it fits into his portfolio of assets.  They are fine for a simple $1MM estate comprised of a house and some funds.  Not this.

If the EJ people have him in taxable accounts that have grown significantly over the years, it may be unwise to extract the money now.  The capital gains in those funds may be huge and the tax bill egregious if you move them.  It may be better to wait until he passes and the basis is stepped up to sell.  You are also going to be handing the federal government 45 percent of everything over a certain amount when he dies, and you need to plan how to avoid as much of that tax as possible as well as putting the estate in a position where assets do not have to be liquidated to pay the estate tax bill.

Thanks for pointing this out.  I had a feeling there would be things to consider or address with the EJ accounts.  I'll be underlining that in my mental notebook. 

Car Jack

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Re: Where to invest $4.5 million today?
« Reply #15 on: April 13, 2017, 06:48:05 AM »
How old is "elderly"?  I ask because it does seem that younguns seem to think that a parent who is 52 is elderly these days.  They're not.  95, ok, I'll agree.

Next, what does he want done with the money?  Even with a PoA, you can't just impose your will over what he wants.  If he's incapacitated or unable to handle his money, then you can work in his interest.  If he says "I love that girl at Edward Jones.  She has nice hair.  Leave all my money with her", even though that's a stupid reason to leave the money with those crooks, he gets to make his own decisions.

Ok, with that out of the way, assuming none of that's the case, he's asked that you do what you feel is best without restraints, then sure.  First get money out of Edward Jones and into a low cost provider, keeping whatever tax advantage you can.  What's his current AA?  What's appropriate?  Is he still working?  Is he drawing on this or just pulling $1000 out of his mattress when he wants to go have a good time on the town?  What are his goals?  If he's looking to grow money for his heirs, you'd want a more aggressive AA than if he just wants to keep what he's got to live off of.

And just to let you know my feelings of Edward Jones.....I've read this entire piece:  http://kronstantinople.blogspot.com/p/edward-jones-saga.html

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #16 on: April 13, 2017, 07:22:20 AM »
Car Jack,

"Elderly" is almost 80, a worn out to hell, chain smoking, alcoholic, blind, half crazy, needs full-time care almost 80. 
He's always been a crabby old drunk fart, but can't drink or smoke since the last throat cancer.
He's always loved money over people. 

His goals at this point are waking up in the morning.  Getting strong enough to walk around the yard & putz around again.  He's finally realized that his money can't make him healthy, or live longer.  I am his "everything" at this point, and although he appreciates it he doesn't like it.  He doesn't like thinking about losing all his money & possessions.  He's bitter over recent estate planning activities, but realizes it's necessary.   

The EJ accounts aren't my primary concern at this point.  Just concentrating on the cash at the moment. 

Another Reader

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Re: Where to invest $4.5 million today?
« Reply #17 on: April 13, 2017, 07:34:31 AM »
You can put it treasuries through Treasury Direct.  Banks will be happy to accept the money, but will want you to invest with them.  They will offer you mostly bogus "wealth management" services to get your business.  In your shoes, I would politely decline.  FDIC insurance does not help you much, so be cautious with leaving large sums of money there.

I would choose Fidelity over Vanguard if you want to place it with one of the major retail companies.  Better service, bricks and mortar locations, more personalized attention.  Don't use them for anything other than housing the investments.  You need top notch help.

Another forum that has an older, higher income slice of the population as participants is early-retirement.org.  You will get more relevant information over there.

RWD

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Re: Where to invest $4.5 million today?
« Reply #18 on: April 13, 2017, 07:37:23 AM »
Have you read JL Collins stock series?
http://jlcollinsnh.com/stock-series/

DrF

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Re: Where to invest $4.5 million today?
« Reply #19 on: April 13, 2017, 09:48:39 AM »
If you aren't the sole heir, I would suggest writing something up in regards to your compensation for handling your father's affairs. Think of how much it would have cost if your father had to hire a caregiver, or move to an assisted living facility. You have given up time for your personal career/family which should be compensated for.

You should be able to do a transfer in kind (no selling of funds which would incur tax liability) out of Edward Jones. They may have you in some Edward Jones specific investments though. If so, transfer in kind as much as possible to another Broker (Fidelity, Vanguard, Schwab, etc), then sell/use the remaining Edward Jones account on an ongoing basis until you've closed everything out.

Aggie1999

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Re: Where to invest $4.5 million today?
« Reply #20 on: April 13, 2017, 10:04:05 AM »
If you aren't the sole heir, I would suggest writing something up in regards to your compensation for handling your father's affairs. Think of how much it would have cost if your father had to hire a caregiver, or move to an assisted living facility. You have given up time for your personal career/family which should be compensated for.

+1. My father went through the same thing with his mother. She got Alzheimers and my parents had to attend to her affairs for ~10 yrs. I don't know all the details but my father was able to claim some amount of money from my grandmother's assets after death before the assets were distributed to the heirs.

Spork

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Re: Where to invest $4.5 million today?
« Reply #21 on: April 13, 2017, 10:11:42 AM »
While I generally agree with Frankies Girl, this is one case where I do not.  At this level of assets, you need an estate planning attorney, a CPA with experience in tax management as well as estate planning, and some higher level financial  planning.  I would not use Vanguard's people for any of this.  They have no knowledge of real estate or where it fits into his portfolio of assets.  They are fine for a simple $1MM estate comprised of a house and some funds.  Not this.

If the EJ people have him in taxable accounts that have grown significantly over the years, it may be unwise to extract the money now.  The capital gains in those funds may be huge and the tax bill egregious if you move them.  It may be better to wait until he passes and the basis is stepped up to sell.  You are also going to be handing the federal government 45 percent of everything over a certain amount when he dies, and you need to plan how to avoid as much of that tax as possible as well as putting the estate in a position where assets do not have to be liquidated to pay the estate tax bill.

Thanks for pointing this out.  I had a feeling there would be things to consider or address with the EJ accounts.  I'll be underlining that in my mental notebook.

Depending on exactly what vehicle this is invested in... you may be able to transfer the assets to Vanguard (or elsewhere) "in-kind".  I.e., without selling them and creating a taxable event.

BigHaus89

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Re: Where to invest $4.5 million today?
« Reply #22 on: April 13, 2017, 02:58:59 PM »
Vanguard published a study quantifying the value of working with a Financial Planner, and the results were surprising considering the research was performed by a company who tenaciously defends index investing and is often confused with a company who relents working with a professional at all.

$4.5 million is a significant amount of money whichever way you look at it. Seeking investment advice from an online forum for this amount of money is akin to asking how to write your own will. There are many educated and sophisticated investors on this forum, but there is no icon indicating whether they've received any accreditation in portfolio management whatsoever. Therefore, are you willing to take the advice of a 30 year-old self-directed investor who has only invested during a bull market, and has never seen a 2008-like downturn?

I can only urge that you seek guidance from a professional: CFA, CFP, etc. They may charge for their time, but that will be worth every penny compared to your other options: managing the portfolio yourself, or working with an overpriced salesmen who calls himself an "Advisor".

In full disclosure, I am an active CFP professional and have seen situations like yours many times before. My only concern is ensuring you are consulting with someone who is fully educated and qualified to give you proper advice.

Not trying to derail the thread, but I am curious what kind of things you would recommend as a CFP professional. Perhaps it is my ignorance, but I guess I don't understand the benefit of having an adviser manage the money. Risk-adjusted returns? Tax planning? Why isn't an individual who doesn't have formal training capable of this?

tomsang

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Re: Where to invest $4.5 million today?
« Reply #23 on: April 13, 2017, 03:18:57 PM »
Vanguard published a study quantifying the value of working with a Financial Planner, and the results were surprising considering the research was performed by a company who tenaciously defends index investing and is often confused with a company who relents working with a professional at all.

$4.5 million is a significant amount of money whichever way you look at it. Seeking investment advice from an online forum for this amount of money is akin to asking how to write your own will. There are many educated and sophisticated investors on this forum, but there is no icon indicating whether they've received any accreditation in portfolio management whatsoever. Therefore, are you willing to take the advice of a 30 year-old self-directed investor who has only invested during a bull market, and has never seen a 2008-like downturn?

I can only urge that you seek guidance from a professional: CFA, CFP, etc. They may charge for their time, but that will be worth every penny compared to your other options: managing the portfolio yourself, or working with an overpriced salesmen who calls himself an "Advisor".

In full disclosure, I am an active CFP professional and have seen situations like yours many times before. My only concern is ensuring you are consulting with someone who is fully educated and qualified to give you proper advice.

Not trying to derail the thread, but I am curious what kind of things you would recommend as a CFP professional. Perhaps it is my ignorance, but I guess I don't understand the benefit of having an adviser manage the money. Risk-adjusted returns? Tax planning? Why isn't an individual who doesn't have formal training capable of this?

You could end up saving $50k in estate planning fees and end up paying millions in estate taxes at these levels.  A good advisor could minimize or eliminate the taxes completely.  A reputable good quality estate planner should be able to save significantly more in taxes than their fees.  At these levels it could be a factor of 100. 

Frugancial Advisor

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Re: Where to invest $4.5 million today?
« Reply #24 on: April 13, 2017, 05:09:17 PM »
Vanguard published a study quantifying the value of working with a Financial Planner, and the results were surprising considering the research was performed by a company who tenaciously defends index investing and is often confused with a company who relents working with a professional at all.

$4.5 million is a significant amount of money whichever way you look at it. Seeking investment advice from an online forum for this amount of money is akin to asking how to write your own will. There are many educated and sophisticated investors on this forum, but there is no icon indicating whether they've received any accreditation in portfolio management whatsoever. Therefore, are you willing to take the advice of a 30 year-old self-directed investor who has only invested during a bull market, and has never seen a 2008-like downturn?

I can only urge that you seek guidance from a professional: CFA, CFP, etc. They may charge for their time, but that will be worth every penny compared to your other options: managing the portfolio yourself, or working with an overpriced salesmen who calls himself an "Advisor".

In full disclosure, I am an active CFP professional and have seen situations like yours many times before. My only concern is ensuring you are consulting with someone who is fully educated and qualified to give you proper advice.

Not trying to derail the thread, but I am curious what kind of things you would recommend as a CFP professional. Perhaps it is my ignorance, but I guess I don't understand the benefit of having an adviser manage the money. Risk-adjusted returns? Tax planning? Why isn't an individual who doesn't have formal training capable of this?

The way I like to explain it is that investment management, including asset allocation and management fees, makes up roughly 20% of a proper financial plan (especially for a client with a multi-million dollar portfolio). The other 80% consists of risk management & insurance, estate & tax planning, succession and wealth transfer amongst dependents and beneficiaries, etc. In addition to this, the confidence of an educated investor is often not taken into consideration when making recommendations. In this particular case, a quality financial planner or portfolio manager may identify that capital preservation is more important than seeking maximum returns while minimizing fees.

For example, some guaranteed investments that offer interest rates equivalent to inflation are offered with no 'MER' whatsoever, and are therefore cheaper than even Vanguard. Will they match market returns? No. Does this client's father need to grow his $4.5M to $7M? I doubt it. There are opportunities that become available with this level of wealth that are beyond the usual "reduce fees and buy index funds" that may require legal and tax advice, including holding companies, family trusts, income-splitting and so on.

In general, I respect and agree with the advice given on this forum. But this particular case has me concerned that someone is willing to entrust millions of dollars to the advice of an Internet forum who has not done a proper data-gathering consultation.

Lastly, as a CFP professional, we have to adhere to a code of ethics which would require us to consult with accountants or lawyers for a client in this situation without blindly making recommendations based on a paragraph of information. This is crucial in giving the best possible advice.

Another Reader

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Re: Where to invest $4.5 million today?
« Reply #25 on: April 13, 2017, 05:15:47 PM »
Vanguard published a study quantifying the value of working with a Financial Planner, and the results were surprising considering the research was performed by a company who tenaciously defends index investing and is often confused with a company who relents working with a professional at all.

$4.5 million is a significant amount of money whichever way you look at it. Seeking investment advice from an online forum for this amount of money is akin to asking how to write your own will. There are many educated and sophisticated investors on this forum, but there is no icon indicating whether they've received any accreditation in portfolio management whatsoever. Therefore, are you willing to take the advice of a 30 year-old self-directed investor who has only invested during a bull market, and has never seen a 2008-like downturn?

I can only urge that you seek guidance from a professional: CFA, CFP, etc. They may charge for their time, but that will be worth every penny compared to your other options: managing the portfolio yourself, or working with an overpriced salesmen who calls himself an "Advisor".

In full disclosure, I am an active CFP professional and have seen situations like yours many times before. My only concern is ensuring you are consulting with someone who is fully educated and qualified to give you proper advice.

Not trying to derail the thread, but I am curious what kind of things you would recommend as a CFP professional. Perhaps it is my ignorance, but I guess I don't understand the benefit of having an adviser manage the money. Risk-adjusted returns? Tax planning? Why isn't an individual who doesn't have formal training capable of this?

The way I like to explain it is that investment management, including asset allocation and management fees, makes up roughly 20% of a proper financial plan (especially for a client with a multi-million dollar portfolio). The other 80% consists of risk management & insurance, estate & tax planning, succession and wealth transfer amongst dependents and beneficiaries, etc. In addition to this, the confidence of an educated investor is often not taken into consideration when making recommendations. In this particular case, a quality financial planner or portfolio manager may identify that capital preservation is more important than seeking maximum returns while minimizing fees.

For example, some guaranteed investments that offer interest rates equivalent to inflation are offered with no 'MER' whatsoever, and are therefore cheaper than even Vanguard. Will they match market returns? No. Does this client's father need to grow his $4.5M to $7M? I doubt it. There are opportunities that become available with this level of wealth that are beyond the usual "reduce fees and buy index funds" that may require legal and tax advice, including holding companies, family trusts, income-splitting and so on.

In general, I respect and agree with the advice given on this forum. But this particular case has me concerned that someone is willing to entrust millions of dollars to the advice of an Internet forum who has not done a proper data-gathering consultation.

Lastly, as a CFP professional, we have to adhere to a code of ethics which would require us to consult with accountants or lawyers for a client in this situation without blindly making recommendations based on a paragraph of information. This is crucial in giving the best possible advice.

Agree completely.  This individual (and family) need top notch professional help from tax, estate planning, and investment professionals.  The assets appear to be in the $20MM range when the real estate is included.  Vanguard does not cut it here.

MustacheAndaHalf

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Re: Where to invest $4.5 million today?
« Reply #26 on: April 14, 2017, 03:31:25 AM »
The estate tax will be significant, but there isn't much your dad can do about it.  If he gifts more than $14,000/year now, it starts counting as part of his estate.  I've heard of some people in your dad's situation have their children buy life insurance policies (on your dad's life) and then your dad would gift each child $14,000/year to pay for that life insurance policy.  The gifts are below the IRS limit, and the life insurance is owned by each child, so it's not part of the estate.

You really, really want to look at Vanguard tax-exempt bond funds.  With $4.5 million invested, be it stocks or bonds, the 2% yield is about $90,000/year.  So by itself that will bring out the 25% or higher tax bracket, and I'm sure there's other things going on making the tax bracket higher.  The higher the tax bracket, the more it makes sense to have tax-exempt bonds.

Having those real estate properties handled by a trust could be very important to keeping the family happy when inheritances kick in.  Large amounts can trigger feuding.  A trust/estate lawyer will hopefully suggest a "no contesting the will" (or trust) clause, where someone who goes to court to get more winds up being written out of the will (or trust).  When including that clause, it's important everyone gets told it exists so everyone has a big incentive to play nice.

davisgang90

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Re: Where to invest $4.5 million today?
« Reply #27 on: April 14, 2017, 05:13:47 AM »
I'll take a slightly contrarian view on EJ.  My folks are in EJ and really like their shyster...er um their adviser.  They are comfortable and not interested in a change.  At their age (mid 70's) I decided it wasn't worth them getting upset by me jumping up and down for them to move to Vanguard or virtually anywhere else.

I did make it clear that over the long haul, EJ and their ilk are much more expensive and have a huge negative impact on potential investment returns.

So a long winded way of recommending you take your dad's feelings into account and perhaps not try to force him into huge shifts in his investments.  It's not like he's going to run out of money at this point.

Spork

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Re: Where to invest $4.5 million today?
« Reply #28 on: April 14, 2017, 08:23:38 AM »
I'll take a slightly contrarian view on EJ.  My folks are in EJ and really like their shyster...er um their adviser.  They are comfortable and not interested in a change.  At their age (mid 70's) I decided it wasn't worth them getting upset by me jumping up and down for them to move to Vanguard or virtually anywhere else.

I did make it clear that over the long haul, EJ and their ilk are much more expensive and have a huge negative impact on potential investment returns.

So a long winded way of recommending you take your dad's feelings into account and perhaps not try to force him into huge shifts in his investments.  It's not like he's going to run out of money at this point.

I had much the same conversations with my dad and his Merrill Lynch shyster advisor.  I finally backed way off as well because... they were not ripping him off nearly as bad as his previous advisors.  Heck, they never even got arrested and had their credentials revoked like the previous guy.

dixonge

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Re: Where to invest $4.5 million today?
« Reply #29 on: April 14, 2017, 08:14:50 PM »
So, my elderly eccentric father has a pile of cash that I need to help him with.  First I will obviously need to deposit it into the bank, and then "what"?   I've read here that Vanguard index funds are great, but it's also important to diversify.

Wait, are you saying that his cash is sitting in a safe? It's not currently deposited in a financial institution?

TomTX

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Re: Where to invest $4.5 million today?
« Reply #30 on: April 15, 2017, 01:24:03 PM »
One note: Ensure ANY advisor is a fiduciary. That means they are legally required to put the clients' interest first.

marty998

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Re: Where to invest $4.5 million today?
« Reply #31 on: April 15, 2017, 04:26:56 PM »
Probably not relevant to your father but,

Apparently if Trump had simply invested his initial inheritance / loan / whatever in a basic S&P 500 fund, he would have vastly more money now than instead of embarking on all the real estate nonsense.

However satisfaction of ego requires more obvious displays of wealth to the general population. Like sticking your name on every landmark tower in the world...

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #32 on: April 16, 2017, 09:33:21 AM »
Probably not relevant to your father but,

Apparently if Trump had simply invested his initial inheritance / loan / whatever in a basic S&P 500 fund, he would have vastly more money now than instead of embarking on all the real estate nonsense.

However satisfaction of ego requires more obvious displays of wealth to the general population. Like sticking your name on every landmark tower in the world...


Trump, wishing he would rid us of the estate tax before Dad's in the ground.  Not holding our breath on that, other arrangements have been made.

Speaking of the stock market.  My gambling mother, who is now broke as a result, once held 10,000 shares of Priceline.com stock that she bought at about $2 per share....Seems she "should" have held on to that one!!  Her estate would be my concern now, instead of dad's.

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #33 on: April 16, 2017, 09:36:07 AM »
Happy Easter everyone,

Thanks for all the advice so far.  Have been listening to & considering all of it.  :)

DavidAnnArbor

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Re: Where to invest $4.5 million today?
« Reply #34 on: April 16, 2017, 03:34:50 PM »
Are the EJ assets in taxable accounts?
If so I'd worry about triggering a taxable event if they're sold.

Maybe put all assets in a trust from which heirs receive an income - to avoid estate tax above $5.4 million

peterchrs

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Re: Where to invest $4.5 million today?
« Reply #35 on: April 16, 2017, 04:11:32 PM »
I think it's awesome that you are helping out your elderly father!  I also think you have received a lot of great advice already in this thread. 
Given the amount of money you are allocating, I would consider some alternative investments as well to diversity the portfolio.  I have personally been investing in first lien mortgages through a private RE lending firm.  The returns are great and it provides monthly cash flow that I'm using to cover expenses.  Food for thought...

bacchi

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Re: Where to invest $4.5 million today?
« Reply #36 on: April 16, 2017, 04:25:28 PM »
I think it's awesome that you are helping out your elderly father!  I also think you have received a lot of great advice already in this thread. 
Given the amount of money you are allocating, I would consider some alternative investments as well to diversity the portfolio.  I have personally been investing in first lien mortgages through a private RE lending firm.  The returns are great and it provides monthly cash flow that I'm using to cover expenses.  Food for thought...

And you'd be happy to PM others with a link to this private RE lending firm....

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #37 on: April 16, 2017, 05:38:00 PM »
Are the EJ assets in taxable accounts?
If so I'd worry about triggering a taxable event if they're sold.

Maybe put all assets in a trust from which heirs receive an income - to avoid estate tax above $5.4 million

Dad's days are numbered, so EJ accounts aren't a big concern at the moment.

Trusts only avoid probate and keep the contents of the will private.  They don't effect the estate tax.

Another Reader

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Re: Where to invest $4.5 million today?
« Reply #38 on: April 16, 2017, 05:40:55 PM »
Are the EJ assets in taxable accounts?
If so I'd worry about triggering a taxable event if they're sold.

Maybe put all assets in a trust from which heirs receive an income - to avoid estate tax above $5.4 million

Dad's days are numbered, so EJ accounts aren't a big concern at the moment.

Trusts only avoid probate and keep the contents of the will private.  They don't effect the estate tax.

It's comments like this that make me reiterate the statement that you need top drawer professional help.  And your father has to accept the help to make it worth anything.

MustacheAndaHalf

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Re: Where to invest $4.5 million today?
« Reply #39 on: April 16, 2017, 07:48:25 PM »
An added thought on speculative investments - and this goes for anyone reaching their retirement goal, not just $15 million estates.  When you've already won the game, stop playing.

Meaning once you have more than enough to retire, you take risk off the table.  You shift to somewhere near half bonds (40-60% range) because preserving retirement matters more than growing something that is already enough.  Don't speculate on isolated real estate deals or put everything into P2P lending... you can stick to a 3 fund portfolio to get the returns of the stock and bond markets, and remain retired without added risk.

Know when your retirement assets are enough.

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #40 on: April 16, 2017, 08:54:39 PM »

[/quote]

It's comments like this that make me reiterate the statement that you need top drawer professional help.  And your father has to accept the help to make it worth anything.

[/quote]

Luckily dad & I found an estate attorney with an elite education & background.  Even so, there are situations that require uncommon or unconventional solutions which require a bit of "creative thinking", in order to achieve the desired goals and remain within the law.  Sometimes, you may be faced with issues that you aren't sure you will like the legal answer to, and also don't want to create an ethical issue between yourself & your attorney. 

I find anonymous forums valuable for "brainstorming", realizing the responses are only worth what I've paid for them, and my due diligence is required to sift through the ideas. 

I understand and agree with what you are saying about hiring professionals.  Getting dad to agree has recently been an "issue", but so far either the facts or my persistence have prevailed.  ;)   


GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #41 on: April 21, 2017, 09:34:18 PM »
The guys at Vanguard seem to think it's an April Fool's joke when you call and tell them you have $4.5 million to invest, but you need to deposit it into the bank first. 

Btw, it takes a while to count that much cash.  I didn't know what to expect, so I carried one cardboard file box filled with $1.5 mil in $100's.  Using a bill counter, the assistant manager & I sat across the table from each other.  She'd break open $10K bundles & run them through the machine & I'd wrap them with a new wrapper & she'd initial them.  It took about 1:30 per $1.5 mil to count.  It's really strange to handle so much money.  It almost seems like play money, except it's wrapped in a variety of mint wrappers and some bundles (of 10 packs) are still in the original plastic sealed wrappers.  A few packs have old rubber bands that have melted over the years in the safe in the summer heat.  They're sticky & can't be run through the counting machine.  I joked about them coming from an amusement park, or the ghetto.  I asked if she's ever seen cash with bullet holes, she said "no, but I've seen some with a bit of blood on it." 

I've been there twice, and have one more trip next week. 

The second Vanguard guy was a bit more helpful than the first, that I called a couple of days ago.  He said he was just down the road, in Charlotte.  I said "Good, if there's any problems I can come down and straighten it out face-to-face."  He seemed pretty friendly & said that he'd get all the paperwork moving & FedEx it to us & send a FedEx mailer for us to send it to their HQ in PA.  He said they'd handle the computer registration and send me the password.  The first guy'd just sent a generic reply & told me to register myself...  And then wait 2 weeks to get to speak to an adviser!  That didn't sound like he was taking me seriously.  I guess he figured I was Jethro Bodine & Uncle Jed had just struck oil in the backyard.  He didn't seem very impressed with the intellectual capacity of my 6th grade education! 

They should realize 1/2 the population is mentally ill, and some crazy folks know how to make money...  ;)








MustacheAndaHalf

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Re: Where to invest $4.5 million today?
« Reply #42 on: April 22, 2017, 03:49:30 AM »
With $1 million invested in Vanguard funds/ETFs, you reach "Vanguard Flagship" level of service.  Cash, CDs, and investing in non-Vanguard stuff doesn't count towards the $1 million according to Vanguard's website.  But with Vanguard Flagship you can avoid that first guy and talk to a group who Vanguard assigns to those with $1 million - $5 million.  (It's "Vanguard Select Flagship" for those with over $5 million but not institutional level money).

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #43 on: April 22, 2017, 07:42:50 AM »
Wow.

That would be a great scene in a movie or TV series.

Did they test the money for drug residue?  Or ask if your dad was the local equivalent of the Breaking Bad dude?


No, he's been banking with them for years.  They had cashed all those large checks over the years & knew he had a lot, but probably didn't realize how much.

The lady that I count with chatted a lot about the drug cartels & crooked politicians that have people like us sitting in rooms counting cash & weighing drugs in their underwear.  She's sort'a cute, so that gave me something else to think about too.  ;)

It's a crazy story, and it's sure a load off of my mind to be getting everything in order.  I wish dad had been more open & reasonable before now, but at least the end didn't come before I could do it.  I'm still caregiving 24/7, but it can't last much longer.  He and I are entering a phase that will too much for me handle alone. 

TomTX

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Re: Where to invest $4.5 million today?
« Reply #44 on: April 22, 2017, 02:56:26 PM »
Wow.

That would be a great scene in a movie or TV series.

Did they test the money for drug residue?  Or ask if your dad was the local equivalent of the Breaking Bad dude?


No, he's been banking with them for years.  They had cashed all those large checks over the years & knew he had a lot, but probably didn't realize how much.

The lady that I count with chatted a lot about the drug cartels & crooked politicians that have people like us sitting in rooms counting cash & weighing drugs in their underwear.  She's sort'a cute, so that gave me something else to think about too.  ;)

It's a crazy story, and it's sure a load off of my mind to be getting everything in order.  I wish dad had been more open & reasonable before now, but at least the end didn't come before I could do it.  I'm still caregiving 24/7, but it can't last much longer.  He and I are entering a phase that will too much for me handle alone.

While I understand wanting to help your dad yourself - doing it 24/7 is incredibly wearing. With that level of cash, you should be able to get him some professional care part of the time.

GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #45 on: April 22, 2017, 04:41:47 PM »
 
[/quote]

While I understand wanting to help your dad yourself - doing it 24/7 is incredibly wearing. With that level of cash, you should be able to get him some professional care part of the time.

[/quote]

I agree and do plan to get help soon, but it's been a bit complicated. 

Short version:  He became vision impaired last Spring, and I came down to help him with that.  As I was trying to get nursing help for him he was diagnosed with a recurrence of throat cancer, which required 6 weeks of radiation, so it wasn't a good time to leave him then. After the cancer he couldn't swallow & needed a temporary feeding tube, & he's trying to regain strength now.  And.....now his back hurts. 

While all this has been going on I have been able get him to get a will, living will, financial & health care POA's, and trusts drawn.  We've transferred all his real estate, and accounts to his trust.  I researched his estate tax situation, including the cash stash, and worked out legal solutions for preserving the family wealth.  None of that was in place a year ago, and I couldn't have persuaded him to work on it before his health "softened" his stubborn nature. 

After I get the cash invested my real & lasting purpose here will be complete.  I love my screwed up dad, because he's my dad, but I've always known his days are numbered.  Something will eventually take him.  I have always been one to embrace a challenge, so I have enjoyed some parts of all this. It's been interesting to deal with the medical, financial, legal, psychological, etc. issues.  It's almost like living in multiple story lines, like a lot of TV shows, at the same time.  That has created a lot of mental stress, which is just as complex & has evolved along with the "stories".  It was tough at times, but I never could see a good time to make the transition to get some help, until now. 

I'm not trying to get into heaven, but I'm trying to do my best at making some lasting improvements in the lives of a number of people, across three generations (and hopefully beyond) of my family.  This has been a huge opportunity in that sense, and every bit of stress has been well worth it. 

After it's behind me I'm looking forward to screwing around & enjoying life again.  :) 


GreenEggs

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Re: Where to invest $4.5 million today?
« Reply #46 on: April 22, 2017, 07:51:31 PM »
You've done a good and noble thing, MGE.  I hope your family appreciates it (and you)!

Re:  the pain -- could this be a sign that the cancer has metastasized?    I hope not, but seems like it might be.   Have you been able to convince your dad to talk with palliative care yet?   I know he decided to have the surgery last time, and it seems to have given him longer life, but really, if you can just get him to talk to the palliative care team they might be able to win him over.  They really are a different breed, and so helpful.   I think his final days would be much improved -- and probably longer -- if he started working with them earlier rather than later.  One of the biggest gifts in our situation with my mom is that she has been open to palliative care and hospice from very early on.   She has a strong faith, so I think that is part of it.  But from the moment she decided she didn't want to go through heart surgery again, it has been so much easier for all of us because the main question is not how long can we keep mom alive, but how can we help her be as comfortable and happy as possible.   That immediately rules out most invasive procedures, and makes other decisions (e.g. up the diuretics, and risk kidney damage, or let her lungs fill with so much fluid she can hardly breathe) easier -- we have chosen to up the diuretics every time, which relieves mom's breathing struggles, and makes her more comfortable and happier.   Eventually we may have to deal with kidney failure, but from what I have read that is an easier/less traumatic death than fluid overload. We'll see, I guess.  Anyway, my main point in this ramble is that it was talking with palliative care that made it easier to get comfortable with some of the stark details/choices, and help mom make the choices that were right for her.

Good luck to you and your dad.   I hope he can accept outside help soon, so that you can get the break you need.


Thanks for mentioning palliative care again, which I know you've repeated more than once, I realize you are right.  I admit I have been buying time, for both selfish & unselfish reasons. 

On a health related note, I have been tinkering with dad's meds a little, since he's on a PEG (feeding tube).  The edema in his right ankle & leg wasn't going away using the diuretics, so I remembered he had some cranberry concentrate that we'd tried earlier, but he didn't like the flavor (he's a picky whiner).  Anyway, I used it instead of the Furosemide & the swelling went down in two days.  He was able to stop wearing the compression socks too.
I've been battling his dementia moments by using nicotine patches & then added a dose of coffee, which seems to perk up his brain.  The coffee has the added benefit of being a quick acting laxative!  I'm also going to add some acidophilus, and maybe some green barley powder.   Of course the problem is if his mind fails I don't know if he'd want a healthy(ier) body keeping him alive...

I realize the back pain could be the cancer has metastasized, & he'll be getting a PET scan in a few weeks. 

Sort'a adds to the "it's hard to figure out a "good time" to leave".  Well, at least my head is in a much better place than it was a few months ago. 


trollwithamustache

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Re: Where to invest $4.5 million today?
« Reply #47 on: April 25, 2017, 10:57:16 AM »
A slightly different take... as long as the broker isn't trading/running up fees, its OK to leave the money there.

Thing 1. Stuff is about to get expensive and your dad needs to have cash in savings/checking for the end of life expenses that hopefully won't go too crazy on you too fast.

Thing 2. With real assets you need a good estate attorney to make sure stuff is taken care of right, your dad is secure and legal fallout afterwards is minimal.

Thing 3. Hospice, in home care, ect: since you have the funds available don't be scared to ramp this up sooner than later. You need to take care of yourself too and you need to try to enjoy what time you can with him.

Asset allocation and type of brokerage accounts are less important. Younger folk need to optimize their fee structure, but your dad has enough cash to make it, so making it in a well organized fashion is more important.

Mighty-Dollar

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Re: Where to invest $4.5 million today?
« Reply #48 on: April 26, 2017, 03:43:11 AM »
Get out of EJ. Invest in a couple of index funds. BND and SPY. How much you invest in one versus the other? Use these sites to help decide on a bond/stock allocation ratio that matches desired level of risk...
https://www.blackrock.com/wte/core-builder/us?refType=fi
https://personal.vanguard.com/us/funds/tools/recommendation?reset=true
https://gps.ricedelman.com/
http://www.vanguard.com/nesteggcalculator