Author Topic: Investing when older 80+  (Read 3679 times)

never give up

  • Walrus Stache
  • *******
  • Posts: 6915
  • Location: UK
  • Kindness is free to give and priceless to receive
Investing when older 80+
« on: November 16, 2019, 06:24:00 AM »
Hello. I had a question about older age investing. I try to help my parents with their savings. The majority is in cash. They are computer illiterate (can barely distinguish the internet from a word processor :-) so Iíve helped them get the best rates.

They do have a proportion in stocks and shares ISAís though. I helped them out (or tried to) a couple of years ago by moving them out of Woodford (phew) and into VG LS20. This was a simple one fund portfolio and was low risk. They would be adverse to ďlosing moneyĒ which we on here would just refer to as having gone down for a bit.

I took a closer look at this fund the other day and nearly a third was in corporate bonds. I donít invest in corporate bonds myself. Iím following the Monevator approach of stocks and UK Governments bonds. So I began to feel guilty I had recommended something for them that I donít invest in myself. I tend to think corporate bonds can plunge in downturns but yet donít have the rewards of stocks to compensate.

Would I be better matching a global stock fund with a UK Government Bond fund in a 20:80 ratio rather than using this LifeStrategy fund? I like the 60, 80 and 100 LifeStrategy funds but these would be too aggressive for my parents. Bearing in mind their age should they only be in cash now? Iím conscious though that they want to keep up with inflation from a home maintenance and potential care costs perspective, so it would be good to have some invested. Anyone else looking after older relatives funds and have any challenges youíve faced?

frugledoc

  • Pencil Stache
  • ****
  • Posts: 740
Re: Investing when older 80+
« Reply #1 on: November 16, 2019, 02:06:33 PM »
I think VLS 20 seems like a fine choice.

I help my FIL who is 75 and very aggressive.  Apart from his teachers and state pension he is 80% stocks and moans about the other 20% being uninvested, but he doesnít want gov bonds.

I had to talk him out if investing in a social housing crowdfunding just yesterday.

never give up

  • Walrus Stache
  • *******
  • Posts: 6915
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Investing when older 80+
« Reply #2 on: November 16, 2019, 02:11:44 PM »
Haha thanks for your reply frugledoc. Thatís great. He really sounds like a character. Yes I think I feel a fair bit of responsibility in advising them, that I may be overthinking it. Iím just not a corporate bond fan.

PhilB

  • Magnum Stache
  • ******
  • Posts: 4378
Re: Investing when older 80+
« Reply #3 on: November 17, 2019, 12:01:30 AM »
Well done for helping out your parents.  I've never plucked up the courage to try and persuade mine to hold anything other than cash as I just know how appalled they'd be in any downturn.  Fortunately my Dad's DB pension pays out way more than they spend so they can afford to do this.
I'm not big on corporate bonds, but I'd still prefer them to gilts at the moment.  Long dated gilts have a very low return and huge scope for capital loss if interest rates rise and/or we end up with a government that starts sprinkling new ones about like confetti.  As at any other age, I think the trick is to make sure you match the investment approach to what your parents see the money as being for ie what is there expected timescale for spending it.  It might be worth looking at investment trusts which pay a decent dividend and tend to be a bit less volatile in capital value.

TempusFugit

  • Pencil Stache
  • ****
  • Posts: 593
  • Location: In my own head, usually
Re: Investing when older 80+
« Reply #4 on: November 17, 2019, 04:27:39 PM »
I'm in the US, but I have a similar situation.  I manage my mother's finances (she's 81). 

It is quite stressful to be responsible for someone else's money, I must say. 

I've allocated her money in cash (25% in money market funds)  US stock index (20%) and International stock index  (5%) and a 3 bond funds (50%).  The bonds are weighted toward short and medium term bonds and are about 60% US government issue.   
 


never give up

  • Walrus Stache
  • *******
  • Posts: 6915
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Investing when older 80+
« Reply #5 on: November 17, 2019, 10:53:35 PM »
Thanks PhilB, thatís useful advice. There are some long term government bonds and linkers in VGLS20. Iím thinking this is a good lower risk fund for someone with a long time horizon but that in my parents case it may be worth moving away from it now. I appreciate your thoughts.

Thanks TempusFrugit. Yes it is definitely more stressful than looking after my own money thatís for sure. Other than being 50% cash your asset allocation is very similar other than the bond duration. The  VGLS20 fund Iím referring to has about a dozen funds in it. I think I may be better off splitting this now so that I can select bond funds with a much shorter duration. Many thanks for your input.

MustacheAndaHalf

  • Moderator
  • Walrus Stache
  • *****
  • Posts: 5826
Re: Investing when older 80+
« Reply #6 on: December 17, 2019, 10:48:59 AM »
The Vanguard LifeStrategy 20% Equity Fund has a lot more than just corporate bonds.  It has lots of government bonds, and even diversifies across UK equities and international equities.  My guess is the company with trillions invested (Vanguard) and over a billion pounds (in this fund) is confident they're making the right choices for low risk retirees.
https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-20-equity-fund-gbp-gross-accumulation-shares

Did you know that 100% bonds is actually riskier than 90% bonds / 10% equities?  Equities are volatile - but there are times when bonds drop, and equities make gains.  So overall 90% bonds / 10% equities is lower risk - lower volatility - than all bonds.  A portfolio with 20% equities is very low risk, in my view.  I think you should put your mind at ease that you've made the best choice with the information you have available.

never give up

  • Walrus Stache
  • *******
  • Posts: 6915
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Investing when older 80+
« Reply #7 on: December 17, 2019, 11:32:29 AM »
Hi MustacheAndaHalf. Thanks for your comments. Yes it is a very well diversified fund. I was aware that 100% bonds was riskier than having a proportion in stocks. Interestingly there is a LifeStrategy 100% equity but not a 0% equity, I would assume because of the very reasons you point out.

I remember reading that Jack Bogle himself invested 35% stocks 65% fixed income for the last 20 years of his life so the VGLS20 fund is probably a sound choice. I haven't made any changes but VGLS40 with 10-15% or so in a shorter term bond fund may also be a reasonable combination, but moves away from the simplicity of a single fund. I'm probably overthinking it.

Manchester

  • Bristles
  • ***
  • Posts: 405
  • Location: UK
Re: Investing when older 80+
« Reply #8 on: December 18, 2019, 03:38:19 AM »
I reckon anything you do is better than leaving it in cash. 

I'd stress to your parents that although losing money in stocks is somewhat unpleasant at their age, they're consistently losing money (due to inflation) by holding it in cash. 

never give up

  • Walrus Stache
  • *******
  • Posts: 6915
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Investing when older 80+
« Reply #9 on: December 18, 2019, 11:31:39 AM »
Yes I agree but there is also an element of not wanting to play the game when youíve already won. They wouldnít enjoy volatility but I agree that 100% cash wasnít the way to go.

MustacheAndaHalf

  • Moderator
  • Walrus Stache
  • *****
  • Posts: 5826
Re: Investing when older 80+
« Reply #10 on: December 18, 2019, 09:12:39 PM »
Something I forgot to mention if you're trying to convince older parents: show them that you're already doing it.  If you have years of past statements, even better.  I suspect when it's their own children, and there's a paper trail showing healthy gains over time, they might find that more convincing than other approaches.

 

Wow, a phone plan for fifteen bucks!