84 year old father in law portfolio 90%+ invested in mining and metals, how to convin

[SteveNU]

My 84 year old father in law has his entire life savings of about 150k invested in three different brokerage accounts and it is about 95% invested in mining stocks. His reasoning is that it always goes up after it goes down and gold and silver can never go to zero. I have suggested that he may want to consider diversifying but he thinks he is diversified because he holds about 50 different equities. I'm sure his broker/advisor is very happy!

He recently had a health scare. He is recovering now but he is finally having to face the fact that he will have to spend some of his money to provide for daily care for him and my 92 year old mother in law who needs someone to be with her 24/7.

How do I convince him to move to a more conservative asset allocation? They live a very frugal life and could probably get by on less than $1000 a month with a $2200 month income. They still live on their own but in the past few weeks they have been paying $500 + a week for daily caregivers to come in and help. I know it is very difficult for him to write those checks.

I figure he has a year or so of liquid assets before he has to start pulling from his investments.

[REWahoo]

Quote:

Originally Posted by SteveNU How do I convince him to move to a more conservative asset allocation?

I doubt you can.

If you've discussed it with him and met with resistance, it is highly unlikely he's going to change his investment strategy at this point in his life.

[pb4uski]

Quote:

Originally Posted by REWahoo I doubt you can. If you've discussed it with him and met with resistance, it is highly unlikely he's going to change his investment strategy at this point in his life.

+1 He "knows" he's right and you are wrong.

The only thing you might try is to compare the growth of his portfolio to what it would have been if it had been in Wellesley or some conservative balanced portfolio in a graph so he can see with his own eyes the difference in both growth and volatility. But i doubt it will work.

Another angle might be to focus on the cost of his brokerage portfolio compared to a passive portfolio.

[Lsbcal]

Quote:

Originally Posted by SteveNU My 84 year old father in law has his entire life savings of about 150k invested in three different brokerage accounts and it is about 95% invested in mining stocks. His reasoning is that it always goes up after it goes down and gold and silver can never go to zero. ...

Depends if he is a rational or emotional investor. You might try showing him a long term chart like the one below and point out that he could be right but the timing might be off. He might need the money just when his sector is in the dumps.

[cmndzero]

Now's a great time to buy mining stocks. They've been hit hard and might be the only bargain in the stock market right now. Why should he buy some index fund right now when they are all near their tops waiting for a correction? Imagine a younger person telling you at 84 to do this or that with your money. That would probably not go over well. He's investing in a sector that can only go up from here, it could be a lot worse.

[MooreBonds]

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Originally Posted by cmndzero Now's a great time to buy mining stocks. They've been hit hard and might be the only bargain in the stock market right now. ... He's investing in a sector that can only go up from here, it could be a lot worse.

Gold and Silver have risen roughly 400% over the past 10 or so years. Despite this, mining companies are actually producing profits to give the average mining ETF a PE in the low 20s. And that's with some diversified miners like VALE and RIO with low teen PEs lowering the average.

Do you really think gold/silver/precious metals will rally from here enough to give mining companies enough profits to actually grow from here, compared to other stock indexes with average PEs in the high teens? The cheap metal deposits have mostly been mined already, and I don't see precious metals rising as much from here into the future as they did from 1995-now . Some metal prices may improve a little over time (iron, copper), but I don't see gold/silver increasing enough to give the average miner more growth compared to stock indexes. If I had to put money in the market, I'd rather have a diversified index of stocks, rather than in a sector like mining that I don't really see much growth from.

[Lsbcal]

The OP's issue is not about a particular sector's growth prospects.

The issue is what is the appropriate risk level and AA for an 84 year old who may need to spend from his portfolio in the near term future.

[Texas Proud]

The problem is trying to convince something that someone else believes is true...

I once asked an economics professor what was the best argument I could make to my friend who believes that all the trouble of America is because we went off the gold standard..... (now, this was back in 1980... things have turned out pretty well since then even with the ups and downs)...

The prof asked 'does he really believe in the gold standard?'.... I said yes... he said 'there is nothing you can say to change his mind'.... and walked away....

That is where the OP is now.... there is NOTHING you can do, say, show etc. etc. to change FIL's mind.... so do not try... to me, the worst thing you can do is have him change his investments and then the mining stocks go up 4X and YOU have to live with him telling you "I told you so" for his remaining years....

[cmndzero]

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Originally Posted by MooreBonds Gold and Silver have risen roughly 400% over the past 10 or so years. Despite this, mining companies are actually producing profits to give the average mining ETF a PE in the low 20s. And that's with some diversified miners like VALE and RIO with low teen PEs lowering the average. Do you really think gold/silver/precious metals will rally from here enough to give mining companies enough profits to actually grow from here, compared to other stock indexes with average PEs in the high teens? The cheap metal deposits have mostly been mined already, and I don't see precious metals rising as much from here into the future as they did from 1995-now . Some metal prices may improve a little over time (iron, copper), but I don't see gold/silver increasing enough to give the average miner more growth compared to stock indexes. If I had to put money in the market, I'd rather have a diversified index of stocks, rather than in a sector like mining that I don't really see much growth from.

I would rather be in index funds over the long haul, but I wouldn't be taking positions right now to do so. I would either wait for a pull back or invest in a sector that I thought would benefit from the volatility of the world, is not at 52 weeks highs, and would benefit from a market correction. That's precious metals. I don't see how someone can recommend an 84 year old with limited investment time left to invest in index funds at 52 week highs right now.

[Texas Proud]

Quote:

Originally Posted by cmndzero I would rather be in index funds over the long haul, but I wouldn't be taking positions right now to do so. I would either wait for a pull back or invest in a sector that I thought would benefit from the volatility of the world, is not at 52 weeks highs, and would benefit from a market correction. That's precious metals. I don't see how someone can recommend an 84 year old with limited investment time left to invest in index funds at 52 week highs right now.

Because you are thinking only stocks... I think the OP is talking AA changes... like 60% or so bonds or even cash....

[MRG]

For you to convince him it has to become 'His Idea'.

One tactic that at least got my DF's attention; The cost of more advanced care needs. Best wishes.

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[SteveNU]

Thanks for all the responses. I think the path I will take is to get him to look at how his readily available cash is going to be drawn down over the next year or so and get him thinking about how he will have to liquidate some of his equities. Hopefully he will start to look at how he will do that and where he will put the money.

He is on every scammers and shisters mail list so he gets tons of junk mail and he reads it all. I'm afraid he might decide to put his money in a sure thing like Nigerian lottery tickets or somethin

He has several pieces of land and we are working on trying to get him to put one of them on the market soon also.