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Slow and steady, smooth ride
Old 10-09-2012, 04:17 PM   #1
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Slow and steady, smooth ride


I am looking for a smooth ride. My spouse and I are 45. We manage our money separately. My current portfolio is:

Preferred shares total - $581,741
Annuity total - $553,330
Bonds total - $804,634
Mutual Funds total - $359,995
I-bonds - $15,000
Cash - $108,852
Total = $2,423,552

We jointly own our home worth about $500k. We have no mortgage or debt of any kind. The annuities will provide a lifetime income payment of $103K per year for life starting at 65 (in 20 yrs) but I will not have access to the principal again.

My investment history is pretty much all individual stocks, then a mix of stocks and mutual funds, then pulled it all out of the stock market and put it in to bonds and cash. Now redistributing it with a new philosophy of smooth and steady but modest returns.

My current portfolio is expected to yield 5.28% overall. However that is goosed up a bit because it includes a 6.9% increase in the value of the annuities. In my spreadsheet I only expect about 3% a yr from HSTRX. My bond yield is a meager 2.2%. So the bulk of my expected returns is from the preferred and the annuities (I know I don't see the principal again). My preferreds are mostly utilities and insurance companies. I avoided the financial companies.

I would like to diversify my holdings as I tend to get over concentrated very quickly. For example almost all the mutual fund money is in HSTRX. Of the preferred shares my largest holding is IPLPRB with $170K (I was seduced by the 7.46% return - old habits die hard).

The bonds mature at a rate of about 100K per year for the next 8 yrs. The preferred's spit out income also. This all needs to be reinvested so I'm looking for new potential investments to diversify. I have income to live on and since I live below my means, extra money from that will be invested each year also.

I am interested in any suggestions for investment areas I may have over looked. I did look into buying rental property (and have a lovely spreadsheet to show for it) but decided that it would be too much trouble to manage.

As my title suggests I would like a smooth ride from anything I put my money into. There is another thread floating around discussing the idea of 'making it' and not needing to play the game any more. I think I'm pretty much in that category so am trying to stay away from anything risky or bubbly.

If I can continue to average the 5.28% and do a 4% withdrawal rate on the non-annuity portion, my income at 65 is a more than respectable $288,431 (in today's dollars, assuming a 3.3% annual inflation rate that will be $150,673). This assumes I don't put any more in and suffer no losses. I do intend to put more aside but I would like to not suffer any more losses.

Any suggestions (especially specific symbols or funds) will be much appreciated.
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Old 10-09-2012, 05:04 PM   #2
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Do a search of this site under "Psst"

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Old 10-10-2012, 06:18 AM   #3
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No suggestions about AA but why wait for 65? You could undoubtedly cut back to a still very nice life style and become financially independent 10 years earlier.
Every man is, or hopes to be, an Idler. -- Samuel Johnson
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Old 10-10-2012, 06:23 AM   #4
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Thank you for sharing, Sun456. I am pleased to see that I am not the only one to rely on annuities. I plan to have my annuities start paying out when I reach 62.
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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Old 10-10-2012, 08:17 AM   #5
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Thanks for the replies.
Pb4uski, thanks for the suggestion for VWINX. I was in it briefly during my transition period. Perhaps I will go back at some point. I graphed it vs HSTRX and decided during my transition period I didn't want any big drops while shuffling things around since it could mess up my plan. However it is a good fund and may have a place going forward. One thing I thought about in my 20s and 30s was that I wanted to move out of things like stocks before the baby boomers did as I don't know that upcoming generations could support the levels of investment that the giant generation did. But that thought process ran its course before the QEs. Now I have no idea how to view the market with the fed messing around with it so much. However moving out of stocks was painful. Lots of taxes to pay. If I'd pulled out at earlier points in time I would have been better off but taxes were higher then and I foolishly thought the market wouldn't fall more than the taxes. Can't go back and rewrite history. At least I got out during the 15% long term gains time period.

Thanks for the vote of confidence. Were probably in good enough shape to go now. We manage our money separately which avoids manager risk (we both don't do the same stupid thing at the same time) so if you add it all together I'm sure things would be fine. We also both have lived through each up and down so should one of us need to take over the whole thing were both prepared. Our expenses are pretty low compared to most folks. I think our story is the same as most non materialistic folks on the forum. We spend money where it matters to us but not to try and keep up with the Jones. It's a happy way to live. I've never tracked our expenses so don't really know but I think it is probably no more than $60K. It would pop a bit in a new car year but given where we are financially we don't really have to evaluate whether we can afford it, we just do what needs to be done when it needs it.

Thanks for the support. It took me a good long time to evaluate the annuities. But I'm glad I did. Not having a pension always worried me. I may put a little more in, just because it seems to be my best option for extra $s right now.
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