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$200k - where to invest for safety

 
 
ps56k
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      02-17-2010, 07:31 PM
My wife last year received about $200k from her parents life insurance...
It's been sitting in the checking account since then.

What would be the best way to invest,
with max safety of principle in mind,
along with max growth or divs...

ie - what kind of mutual fund from Fidelity/Vanguard
would be appropriate - and all at once, or dollar avg...


--
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"If everything seems to be going well,
you have obviously overlooked something." - Steven Wright

 
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Douglas Johnson
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      02-17-2010, 10:31 PM
"ps56k" <(E-Mail Removed)> wrote:


>What would be the best way to invest,
>with max safety of principle in mind,
>along with max growth or divs...


You realize that max safety is in direct conflict with max growth or divs?

>ie - what kind of mutual fund from Fidelity/Vanguard
>would be appropriate - and all at once, or dollar avg...


It depends. How long are you investing for? What other investments do you
have? Do you have an emergency fund? What kind of risk are you willing to take
for what kinds of rewards? I'll trot out my standard advice to go read
"Investing for Dummies".

Dollar cost averaging is a means of minimizing emotional pain at a cost of
reduced returns. The assumption is that the stock market has a long term up
trend with lots of unpredictable ups and downs along the way. If that's true,
the way to maximize returns is to invest everything immediately.

But that runs the emotional risk of investing just before one of those
unpredictable downs. Ouch. DCA gives you two emotional crutches. If the
market goes up as you are making the investment, you can tell yourself "I'm
making money". If it goes down, you can tell yourself "I'm buying more".

Nothing wrong with that, much of good investing is managing your emotions. But
mathematically, the best thing to do with a lump sum is invest it all
immediately.

-- Doug

 
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ps56k
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      02-17-2010, 11:02 PM

"Douglas Johnson" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> "ps56k" <(E-Mail Removed)> wrote:
>
>
>>What would be the best way to invest,
>>with max safety of principle in mind,
>>along with max growth or divs...

>
> You realize that max safety is in direct conflict with max growth or divs?
>
>>ie - what kind of mutual fund from Fidelity/Vanguard
>>would be appropriate - and all at once, or dollar avg...

>
> It depends. How long are you investing for? What other investments do
> you
> have? Do you have an emergency fund? What kind of risk are you willing
> to take
> for what kinds of rewards? I'll trot out my standard advice to go read
> "Investing for Dummies".
>
> Dollar cost averaging is a means of minimizing emotional pain at a cost of
> reduced returns. The assumption is that the stock market has a long term
> up
> trend with lots of unpredictable ups and downs along the way. If that's
> true,
> the way to maximize returns is to invest everything immediately.
>
> But that runs the emotional risk of investing just before one of those
> unpredictable downs. Ouch. DCA gives you two emotional crutches. If the
> market goes up as you are making the investment, you can tell yourself
> "I'm
> making money". If it goes down, you can tell yourself "I'm buying more".
>
> Nothing wrong with that, much of good investing is managing your emotions.
> But
> mathematically, the best thing to do with a lump sum is invest it all
> immediately.
>
> -- Doug
>


sorry - forgot about the 20 questions....

This is special gravy money - short term -
let's say for college in the next couple of years.

All our other portfolio investments are spread around in various funds
that run the entire spectrum.... risk vs reward
domestic, intl, emerging, growth, value, divs, small, med, large, etc -

SO - don't really want to gamble with this $200k -
that's why it's been sitting in the dumb checking account.

 
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Douglas Johnson
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      02-18-2010, 01:03 AM
"ps56k" <(E-Mail Removed)> wrote:

>SO - don't really want to gamble with this $200k -
>that's why it's been sitting in the dumb checking account.


Then why move it?

-- Doug

 
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dapperdobbs
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      02-18-2010, 01:59 AM
On Feb 17, 6:02*pm, "ps56k" <(E-Mail Removed)> wrote:
> [snip]


> SO - don't really want to gamble with this $200k -
> that's why it's been sitting in the dumb checking account.
>


As Douglas Johnson said, if the money is already earmarked, then what
is so dumb about (200k in) a checking account?

A savings account paying 1.x% would be an improvement, but maybe
prepaying for college would be worth 7%. If it is indeed gravy money
you wish to consume, these days cash can negotiate 10%, 20% - even 50%
discounts. Sounds pretty safe to me. I've even heard of some people
negotiating 50% off on a house!

Money is a medium of exchange for product. Investment involves an
exchange for inputs of production, then production, then an exchange
for money.

 
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Ron Peterson
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      02-18-2010, 04:58 AM
On Feb 17, 1:31*pm, "ps56k" <(E-Mail Removed)> wrote:
> My wife last year received about $200k from her parents life insurance...
> It's been sitting in the checking account since then.


> What would be the best way to invest,
> with max safety of principle in mind,
> along with max growth or divs...


Pick a few of the larger diversified utilities to average your risk.
You should get at least 4% in dividends plus some capital growth.

--
Ron

 
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ps56k
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      02-18-2010, 05:45 AM

"Ron Peterson" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed)...
> On Feb 17, 1:31 pm, "ps56k" <(E-Mail Removed)> wrote:
>> My wife last year received about $200k from her parents life insurance...
>> It's been sitting in the checking account since then.

>
>> What would be the best way to invest,
>> with max safety of principle in mind,
>> along with max growth or divs...

>
> Pick a few of the larger diversified utilities to average your risk.
> You should get at least 4% in dividends plus some capital growth.
>
> --

Half of the money has been in some laddered 6mos CD's
and I've been looking at div paying stocks & funds,
but balanced with the factor of preserving the principle
vs betting on cap growth in a shakey economy.

 
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Wallace
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      02-18-2010, 10:11 AM


> sorry - forgot about the 20 questions....
>
> This is special gravy money - short term -
> let's say for college in the next couple of years.
>
> All our other portfolio investments are spread around in various funds
> that run the entire spectrum.... risk vs reward
> domestic, intl, emerging, growth, value, divs, small, med, large, etc -
>
> SO - don't really want to gamble with this $200k -
> that's why it's been sitting in the dumb checking account.
>


buy a CD

 
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Bill
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      02-18-2010, 02:35 PM
ps56k wrote:

> SO - don't really want to gamble with this $200k -
> that's why it's been sitting in the dumb checking account.


Then an FDIC insured CD is the answer.

--
.Bill.

 
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BreadWithSpam@fractious.net
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      02-18-2010, 05:28 PM
Ron Peterson <(E-Mail Removed)> writes:
> On Feb 17, 1:31*pm, "ps56k" <(E-Mail Removed)> wrote:


> > My wife last year received about $200k from her parents life insurance...
> > It's been sitting in the checking account since then.

>
> > What would be the best way to invest,
> > with max safety of principle in mind,
> > along with max growth or divs...

>
> Pick a few of the larger diversified utilities to average your risk.
> You should get at least 4% in dividends plus some capital growth.


That's nowhere near consistent with "max safety of principal".

For example, the two biggest utility ETFs, the SPDR (XLU)
and the Vanguard one (VPU) both went down by approximately
29% in 2008.

Now, over longer periods, their average returns have been
quite decent - trouncing the S&P 500 over, say, 5 and
10 year periods. But these come with substantial volatility
and sometimes with big lags (ie. both were trounced by
the SP500 in 2009).

These types of investments may have a place within a larger
diversified portfolio, but if the OP is interested in
stability of principal (note that the money is currently
in *cash*) then at best utilities could be a very small
part of that portfolio.

They do both throw off current yields in the area of 4%,
which is lovely. And in the long run, that certainly
helps smooth things out -- but you must account for
periodic huge losses with this kind of investment.



--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

 
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