Money on the sideline...

A

afntrn56

Recycles dryer sheets
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Sep 9, 2010
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I have a substantial (600K) amount of cash sitting in a 1.4% savings account and want to start putting it to work. Am age 54 and will retire soon (56). I am hesitant about pouring much into the market and not crazy about mutual funds but will consider all plans that I feel can deliver a modest safe return. I realize nothing is 100% SAFE. I considered part as an annuity but decided it is too early for that. Am looking at some mutuals. Bonds are something I have very little of so I would like a look at those as well. Any ideas welcome at this point. Just want to do a bit better without risking too much. Sounds like a common problem I am sure!!!

Thanks in advance,

Alan
 
Hmmmm......bonds? Now? I don't know a whole lot....but the bond situation/stories would keep me from putting more into them.
 
I think this is a bad time to enter the bond market in a big way. I prefer buying CDs (or i-bonds) at this point.
 
I will again point out the part where I state "I know nothin'"....but just general cruising of my regular finance sites. Yahoo finance, CNNmoney (various other sites about the same), I like looking at CNBC just for the "the sky is falling" stories (both up and down...never have understood why they have soooo many stories stating either a big rise or big fall at the same time....you could get really nuts if you took everything too seriously). There seems to be a steady trend on what I consider somewhat reliable sites that bonds have gone up too far. I was thinking about putting some money into Wellseley....I don't know enough to know how that does if bonds go down. Maybe I should get off my butt and check.....but I am a lazy fella.......
 
F4mandolin said:
I will again point out the part where I state "I know nothin'"....but just general cruising of my regular finance sites. Yahoo finance, CNNmoney (various other sites about the same), I like looking at CNBC just for the "the sky is falling" stories (both up and down...never have understood why they have soooo many stories stating either a big rise or big fall at the same time....you could get really nuts if you took everything too seriously). There seems to be a steady trend on what I consider somewhat reliable sites that bonds have gone up too far. I was thinking about putting some money into Wellseley....I don't know enough to know how that does if bonds go down. Maybe I should get off my butt and check.....but I am a lazy fella.......
Click to expand...

wellseley is about a 60/40 bond equity split fund so it would be impacted by poor bond performance. It has a great track record but of course that doesn't predict the future!
 
Interest rates are at historic lows. Bond prices move inversely to interest rates. Therefore, with interest rates having nowhere to go but up, it's expected that bond prices will fall. Or so goes the theory...

Dirty market timing aside, put one-third in a TIPS fund, one-third in a total bond market fund, and one-third in a total world stock fund. Rebalance once every three years. Go fishing...
 
HFWR said:
Interest rates are at historic lows. Bond prices move inversely to interest rates. Therefore, with interest rates having nowhere to go but up, it's expected that bond prices will fall. Or so goes the theory...

Dirty market timing aside, put one-third in a TIPS fund, one-third in a total bond market fund, and one-third in a total world stock fund. Rebalance once every three years. Go fishing...
Click to expand...

Thanks any tips on which funds:confused: I thought I found a good total bond one but it turns out to be closed to initial funding!!
 
afntrn56 said:
I have a substantial (600K) amount of cash sitting in a 1.4% savings account
Alan
Click to expand...

Alan,

I hope you mean you have 600K spread across several savings accounts, with none having more than the 250K FDIC insurance limit. If not, you are already taking a not insignificant risk. If you are comfortable with that risk, you should have little to fear from investing in broadly diversified mutual funds.
 
grumpy said:
Alan,

I hope you mean you have 600K spread across several savings accounts, with none having more than the 250K FDIC insurance limit. If not, you are already taking a not insignificant risk. If you are comfortable with that risk, you should have little to fear from investing in broadly diversified mutual funds.
Click to expand...


I do have them spread out a bit and they are joint with the wife so covered FDIC to 500K. I am looking into the mutual stuff for sure but would like some more ideas.
 
Alan,

How long has this money been in cash? The reason I ask is conventional wisdom (FWIW) says the closer to retirement the more conservative you should be with your investments, yet you seem to be swimming against the tide. Has this money been in more aggressive investments in the past and is in cash due to risk aversion related to the recent market unpleasantness?

Just trying to understand your investment strategy...
 
Mutual funds are just portfolios of underlying assets. They can hold anything from treasuries to US equity to foreign bonds to commodity futures, depending on which fund you pick. I would suggest reading up on ivesting before you do anything else. One of the forum FAQs has a suggested reading list.
 
REWahoo said:
Alan,

How long has this money been in cash? The reason I ask is conventional wisdom (FWIW) says the closer to retirement the more conservative you should be with your investments, yet you seem to be swimming against the tide. Has this money been in more aggressive investments in the past and is in cash due to risk aversion related to the recent market unpleasantness?

Just trying to understand your investment strategy...
Click to expand...

You hit it on the head. It is the market drop that caused the holdback. The money was sitting in a blend of equities and some Cd's as well. Then I pulled it into cash because I was considering a major real estate investment but decided against it. That was before the big crash and slowly I am feeding some cash back into equities and am now trying to figure if that is still good strategy or just to go into CD's with it. Lots of decisions to be made and I do want to remain conservative since I am nearing my retirement target.
 
brewer12345 said:
Mutual funds are just portfolios of underlying assets. They can hold anything from treasuries to US equity to foreign bonds to commodity futures, depending on which fund you pick. I would suggest reading up on ivesting before you do anything else. One of the forum FAQs has a suggested reading list.
Click to expand...

I do understand what the Mutual Funds offer. I have read a lot on investing but being as conservative as I am I tend to move very slowly before an investment. I am not too comfortable with the market volatility issues as yet. I am hoping to get a lot of ideas and then mull them over to decide how I want to mix it up.
 
I recently read, and recommend, All About Asset Allocation (2nd edition, 2010) by Rick Ferri. Lots of other great reading suggestions on this forum but I found this book particularly helpful.
 
Ok guys so after a close look at the Wellesley fund from Vanguard I wonder how many think it fits the bill for around 1/3 of my cash? Less than 2 years from retirement... conservative investor at this point.... Good odds of returning better than CD over a 5 year time window... Does it make sense to anyone or are there better less risky options for me?
 
DW's IRA is 65% VG Wellesley and 35% VG Star fund. Not that Wellesley is the best place for everything but it has several points in its favor: it has a long record that does not look likely to radically change, they seem to have a good selection of bonds that I could not get on my own, very rarely lose money (but they can), they are a very simple solution so my wife can manage the funds without me.
Two years from retirement, probably a longer term for withdrawals, sure I would use Wellesley for part of a portfolio, the question would be how to 'enhance' a Wellesley core portfolio. In our case we added the Star fund, you might want to add short/intermediate bond funds for safety.
 
You could go with a diversified slice and dice portfolio with a 30/70 equity/fixed ratio:

20% VTSAX Vanguard Total Stock Mkt Admiral Shares, ER=.07%

4% VEUSX Vanguard European Stock Index Admiral, ER=.16%

4% VPADX Vanguard Pacific Stock Index Admiral, ER=.16%

2% VGSLX Vanguard REIT Index Admiral, ER=.13%

30% VBTLX Vanguard Total Bond Index Admiral, ER=.12%

30% VFSUX Vanguard Short Term Invstmt Grade Admiral, ER=.12%

10% Cash/CDs/Money Market (your choice)

Broadly diversified, blended ER of around .10%, conservative asset allocation. I don't believe Total Intl Stock is available in Admiral Shares class so suggested European and Pacific funds.

One option, many ways to go that would be fine.
 
yakers said:
DW's IRA is 65% VG Wellesley and 35% VG Star fund. Not that Wellesley is the best place for everything but it has several points in its favor: it has a long record that does not look likely to radically change, they seem to have a good selection of bonds that I could not get on my own, very rarely lose money (but they can), they are a very simple solution so my wife can manage the funds without me.
Two years from retirement, probably a longer term for withdrawals, sure I would use Wellesley for part of a portfolio, the question would be how to 'enhance' a Wellesley core portfolio. In our case we added the Star fund, you might want to add short/intermediate bond funds for safety.
Click to expand...

Thanks for the thoughts on this. It seems to be a sane approach and you make a very good point on the wife being able to maintain with it if I should pass. She is not into the finances at all and it would overwhelm her if I went back to my old investment methods of single equities and bonds. I will have a look at the star fund as well. Again thanks for the advice.
 
califdreamer said:
You could go with a diversified slice and dice portfolio with a 30/70 equity/fixed ratio:

20% VTSAX Vanguard Total Stock Mkt Admiral Shares, ER=.07%

4% VEUSX Vanguard European Stock Index Admiral, ER=.16%

4% VPADX Vanguard Pacific Stock Index Admiral, ER=.16%

2% VGSLX Vanguard REIT Index Admiral, ER=.13%

30% VBTLX Vanguard Total Bond Index Admiral, ER=.12%

30% VFSUX Vanguard Short Term Invstmt Grade Admiral, ER=.12%

10% Cash/CDs/Money Market (your choice)

Broadly diversified, blended ER of around .10%, conservative asset allocation. I don't believe Total Intl Stock is available in Admiral Shares class so suggested European and Pacific funds.

One option, many ways to go that would be fine.
Click to expand...

more good thoughts on the subject!! It still keeps the money spread over many points and is easier if the wife takes over!!! Thank you! I knew you guys would come up with some good thoughts. Am still trying to find the CD that is best. Anyone know what the penalty for early withdrawal on the PenFed CD is?
 
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