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Money on the sideline...
Old 10-06-2010, 10:37 AM   #1
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Money on the sideline...

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
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Old 10-06-2010, 10:40 AM   #2
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Hmmmm......bonds? Now? I don't know a whole lot....but the bond situation/stories would keep me from putting more into them.
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Old 10-06-2010, 10:42 AM   #3
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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.
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Old 10-06-2010, 12:48 PM   #4
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Hmmmm......bonds? Now? I don't know a whole lot....but the bond situation/stories would keep me from putting more into them.
Oh really what stories are you hearing?
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Old 10-06-2010, 01:25 PM   #5
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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.......
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Old 10-06-2010, 01:46 PM   #6
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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.......
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!
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Old 10-06-2010, 02:01 PM   #7
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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...
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Old 10-06-2010, 02:03 PM   #8
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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...
Thanks any tips on which funds I thought I found a good total bond one but it turns out to be closed to initial funding!!
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Old 10-06-2010, 03:27 PM   #9
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I have a substantial (600K) amount of cash sitting in a 1.4% savings account
Alan
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.
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Old 10-06-2010, 03:34 PM   #10
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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.

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.
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Old 10-06-2010, 03:41 PM   #11
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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...
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Old 10-06-2010, 03:41 PM   #12
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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.
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Old 10-06-2010, 04:56 PM   #13
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Thanks any tips on which funds I thought I found a good total bond one but it turns out to be closed to initial funding!!
I believe the consensus would be Vanguard's funds.
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Old 10-06-2010, 05:52 PM   #14
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I also prefer CDs to bonds.

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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.
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Old 10-06-2010, 06:45 PM   #15
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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...
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.
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Old 10-06-2010, 06:48 PM   #16
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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.
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.
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Old 10-06-2010, 06:51 PM   #17
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I am not too comfortable with the market volatility issues as yet.
I think it unlikely market volatility will disappear any time soon - but then I'm a notoriously poor predictor of market movement.
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Old 10-06-2010, 10:57 PM   #18
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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.
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Old 10-07-2010, 10:12 PM   #19
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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?
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Old 10-07-2010, 10:29 PM   #20
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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.
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