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neighbors getting sold bonds...he's 35
Old 05-08-2017, 02:36 PM   #1
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neighbors getting sold bonds...he's 35

Soo my neighbor has been coming to me for advice after realizing I know something about investing.

Says he talked to his bank and they offered to take his cash and put it all into bonds since he is conservative and does not want to take risk.


Thankfully he has a pension when he reaches 58. I tried explaining that with at least 20years to go before retirement there is room for risk. I guess the banks know better than I.


I've been trying to preach Vanguard roth contributions...small...baby..steps.


It just seems to me that the first thing you would want to sell someone who needs growth for retirement would not be bonds...unless you're an insurance company...surely than it would be an annuity
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Old 05-08-2017, 02:49 PM   #2
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Banks are often very limited on what they can provide.

i.e. Does not matter if steak, salad, or chicken is the best choice for you, if you go to KFC they're gonna try and sell you chicken.
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Old 05-08-2017, 02:52 PM   #3
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Banks are often very limited on what they can provide.

i.e. Does not matter if steak, salad, or chicken is the best choice for you, if you go to KFC they're gonna try and sell you chicken.
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Old 05-08-2017, 02:59 PM   #4
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Given that interest rates are low and likely to increase, it is not a great time to go all in on bonds.

Since he is looking for advice... it is that a 35 year-old who wants to retire at 58 should invest in a Retirement 2040 fund rather than in bonds. If he wants to intentionally be conservative then perhaps a 2030 fund.

FWIW, the Vanguard 2040 fund is ~85/15 and the 2030 fund is ~70/30.
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Old 05-08-2017, 09:08 PM   #5
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He needs to tune in to CNBC more often. I think Warren Buffet was on both today and said bonds is the worse investment compare to stocks when interest rate is cheap.
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neighbors getting sold bonds...he's 35
Old 05-20-2017, 08:47 PM   #6
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neighbors getting sold bonds...he's 35

I have a few people like that in my life, too: Good, responsible professionals who ask me personal finance questions occasionally but just can't be bothered to read a basic book about investing, even if one buys them the book and puts it in their hands, as I have for two of them. I've stopped worrying about leading horses to water, even the ones who ask me for a drink, and just concentrate on my own circle of control. As the OP says, it's good his neighbor will have a pension.
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Old 05-21-2017, 06:35 AM   #7
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I have a few people like that in my life, too: Good, responsible professionals who ask me personal finance questions occasionally but just can't be bothered to read a basic book about investing, even if one buys them the book and puts it in their hands, as I have for two of them. I've stopped worrying about leading horses to water, even the ones who ask me for a drink, and just concentrate on my own circle of control. As the OP says, it's good his neighbor will have a pension.
+1. Additionally if you talk him into investing in stocks, he will blame you for his (hopefully, paper) losses during the next crash. No good deed goes unpunished.
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Old 06-22-2017, 09:25 PM   #8
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+1. Additionally if you talk him into investing in stocks, he will blame you for his (hopefully, paper) losses during the next crash. No good deed goes unpunished.
+2. Neighbour should make his own decisions, without the OP preaching Vanguard or anything else.
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Old 06-23-2017, 05:04 AM   #9
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it's probably based on the questionnaire he filled out ... he probably filled out a risk questionnaire ... and the advisor at the bank put him in the appropriate allocation for that risk.. WIth the fiduciary rule in effect.. advisors can't take a chance cause they stand the risk of getting sued if they pitch something more aggressive when the questionnaire clearly points out that he 's very conservative.
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Old 06-23-2017, 05:07 AM   #10
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+1. Additionally if you talk him into investing in stocks, he will blame you for his (hopefully, paper) losses during the next crash. No good deed goes unpunished.
that's the problem with pitching stocks to people who don't like to take risk .. even if they understand the concept.. wen their balance drops 40% .. they get uncomfortable since that they know they're exposed to even more losses ... it's not what the market does , it's how people react to market losses.. .we can't force someone to be someting that they're not
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Old 06-23-2017, 06:06 AM   #11
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it's probably based on the questionnaire he filled out ... he probably filled out a risk questionnaire ... and the advisor at the bank put him in the appropriate allocation for that risk.. WIth the fiduciary rule in effect.. advisors can't take a chance cause they stand the risk of getting sued if they pitch something more aggressive when the questionnaire clearly points out that he 's very conservative.
This is what I was thinking. If the person said he doesn't want to take on any risk, what's the bank supposed to do? I wonder if it's bonds, as in single bonds, or a bond fund. A bond fund seems more risky than CD's without a lot more expected income.
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Old 06-23-2017, 01:39 PM   #12
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This is what I was thinking. If the person said he doesn't want to take on any risk, what's the bank supposed to do? I wonder if it's bonds, as in single bonds, or a bond fund. A bond fund seems more risky than CD's without a lot more expected income.
If the person is just starting out, it's almost certainly a bond fund. From what little I know, individual bonds start out at fairly high face values ($10K is a typical "low" face value), and most people recommend buying multiple bonds if one is investing in individual bonds as opposed to bond funds. So a typical starting bond portfolio might be $100K = $10K x 10 bonds. That way you can minimize individual bond risk - if the issuer goes bankrupt, or whatever, you still have $90K left.

I would be nervous to own individual bonds if I only owned a few. Personally I invest in Vanguard's Total Bond Index fund.
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Old 06-23-2017, 01:43 PM   #13
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If the person said he doesn't want to take on any risk, what's the bank supposed to do?
I think the problem is that there are several different kinds of risk. You can't sidestep them all with a limited set of choices.
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