What Fund to pick for Retired Mom?

[austin944]

I'd go for a municipal bond fund. She seems pretty risk averse (in volatility terms).

I got the impression that the 70K was Mom's only investment, so maybe plunking the whole thing down into a single investment type would violate the diversification rule.

Actually I wonder how much assets Mom has, and where they are located. Is the 70K the only significant liquid assets she's got, and the rest is SS and Pension income? Or maybe she's got 2M hidden in the mattress? If so that's a whole different discussion.

It's probably rude to ask her much she's worth, but some approximate numbers might help the discussion.

 

[SnowballCamper]

It's probably rude to ask her much she's worth, but some approximate numbers might help the discussion.

Exactly. Without knowing income level/sources and existing wealth it is hard to give a decent recommendation. I just went off her apparent risk aversion, the possibility of needing money quickly in the future for medical costs, and assumed there was some income to get in a middling tax bracket (but not a complex situation).

 

[austin944]

Exactly. Without knowing income level/sources and existing wealth it is hard to give a decent recommendation. I just went off her apparent risk aversion, the possibility of needing money quickly in the future for medical costs, and assumed there was some income to get in a middling tax bracket (but not a complex situation).

Yes, that makes perfect sense, given limited information. I have a large chunk of muni bonds myself, but only as part of a diversified investment portfolio.

 

[plex]

I would like to add a note of caution with Wellesley, the fund is highly concentrated in medium-term medium grade bonds, which looks great when bonds are doing well, which they have for quite a long time, but we seem to entering a not so great time for bonds, with rates at an all time low. On a real basis, Wellesley lost a lot of money in the 70's, something like 1/3 of a portfolio. While uncontrolled inflation like the 70's isn't likely, as I don't see us doing something similar to back then such as switching from the dollar to bitcoin-esque currency, I would recommend something that either doesn't overweight bonds so heavily for the stabler income side, or something that weights stocks somewhat more heavily like Wellington.

 

[MarieIG]

I noticed recently that Morningstar downgraded Wellington and Wellesley from 5 star down to 4 Star.
Also if you have Wellesley in taxable account you may like Vanguard Tax-Managed Balanced Adm VTMFX better as doesn't typically put out capital gains and has higher returns than Wellesley.

This is an interesting looking fund. I just checked it out on Morningstar.

 

[RetireeRobert]

Vanguard Wellesley is good. Another Vanguard fund which I haven't seen mentioned yet, and which has lower volatility than many "pure stock market" investments is Vanguard's STAR fund. Recommended this to SIL 15 years ago who was a "stocks scare me" type person and one to just let things sit for years. The average annual return over longer time frames is decent (though not spectacular), way better than "savings" type vehicles. SIL has done well enough over those years with this fund.

Info about STAR fund (VGSTX): Investment Strategy
Vanguard says the fund “may be considered a 'one fund option' for investors looking for broad diversification across asset classes who can tolerate moderate market risk that comes from the volatility of the stock and bond markets.”
Role in Portfolio
The fund could be used as a core holding in a portfolio for those seeking a fund that employs a balanced approach.
Management
William Coleman and Walter Nejman have managed the fund since 2013. Both are veteran Vanguard employees who manage a number of other funds for the firm.
Performance
The fund has returned 21.20 percent over the past year, 10.70 percent over the past three years, 12.97 percent over the past five years and 9.74 percent over the past decade.

 

[imnontrad]

It may not need to be invested. Research the "three bucket" approach to retirement funds. this money could be in "bucket 1".

 

[gooddog]

I would look at the two links I pasted below. The first is an explanation. The second has two boxes that you can choose different types of diversified portfolios (Global, U.S., Income) and 'aggressiveness'. This is an AI 'Intelligent Portfolio' system that lets a person sleep real easy at night. There are (in theory) no fees. Been using it for a few years myself.




https://intelligent.schwab.com/page/asset-allocation



https://content.schwab.com/intelligent-portfolios/historical-performance/

 

[lawman]

For the life of me I cannot see bonds doing anything but losing ground for the next few years..I recently moved a lot of my money from bond funds to equity index funds not because I think equities are good but more because for long term I think equities pose less risk than investment grade bonds. Having said that I still have a lot of money in bond funds..How about some REIT's like O, REIT. STOR, IRM, NNN, MPW, WPC,or LTC ?

 

[target2019]

I have one other question...
Is it tax "efficient" having Wellesley in the Taxable Account? I know some Funds are discouraged going into a Taxable Account which is why I'm asking.

Thank you for all the advice everyone. It definitely helps!

Are you aware of her last few years of tax returns? Have to check those to help her make a better decision. Funds with taxable bond income may not move the tax needle. Whether it will keep her happy is another question.

My mother had lower income, and didn't need to file taxes returns each year. At the time the interest she received did slightly decline when she renewed. But having been poor as a child and aware of recessions, she was only interested in guaranteed bank investments.

I remember mentioning stock fund to my mother. She made it clear she was still making decision(s) and not interested in changing direction at 89 or so.

 

[rrandol]

Spread out investment.

I suggest that you not invest all of her money at once. Spread it out over several months to a year. Like dollar cost averaging. Plus it gives her time to adjust to the fact that her money is invested.