KCallie,
Welcome to the Investing During Retirement forum. It's always good to hear from new posters.

I note that earlier you wrote "More than a few people who post on these boards are brokers so keep that in mind if any posters defend what this broker did." Those of us who have been reading Roberta's posts for years know that she is now, I believe, dealing with her third parent requiring assisting living/nursing home care. She has dealt with their brokers and has made a few posts keeping us updated on how their portfolios have held up under the strain of  these added expenses.

Most of us here have "known" each other for quite some time. Why don't you take a few minutes to  tell us a little about yourself? Are you retired? How long have you been investing? What strategy have you settled on? I find that knowing something about those giving advice helps me determine whether or not it may be appropriate.

JimBBB, I apologize for taking your post off-topic. Good luck to you in dealing with upcoming events.

Bobbi 

bobbinm:

I note that earlier you wrote "More than a few people who post on these boards are brokers so keep that in mind if any posters defend what this broker did." Those of us who have been reading Roberta's posts for years know that she is now, I believe, dealing with her third parent requiring assisting living/nursing home care. She has dealt with their brokers and has made a few posts keeping us updated on how their portfolios have held up under the strain of  these added expenses.

I am not sure how someone gets a third parent, but I guess if you meant step-parents or in-laws then your post makes sense.  I chuckled when I read the part about 3 parents.  I guess if someone was adopted that might make sense, too.

Anyhow, unless you know someone in person, all you know about them online is what they post, which may or may not be accurate.  If I come across as suspicious, it is because I am, not necessarily about any particular poster here, but in general about any poster online.  My point was directed toward the OP in general, not about any poster in particular.  Not sure why you jumped to the conclusion you did.

bobbinm:

Most of us here have "known" each other for quite some time. Why don't you take a few minutes to  tell us a little about yourself? Are you retired? How long have you been investing? What strategy have you settled on? I find that knowing something about those giving advice helps me determine whether or not it may be appropriate.

What you "know" is what people post here, which may or may not be accurate unless you know them in person.  I don't consider anything anyone says on the internet as advice.  It is simply their opinion and caveat emptor.  Please don't consider my posts as advice - they are my opinions and may be worth what you paid for them, maybe less.  I like to read others' opinions, too and presume that is why people post/read on the internet.  If they are looking for sound investment advice, they should find a competent hourly-rate financial adviser, IMO, and not rely on the opinions of anonymous internet posters.  I wouldn't rely on the advice of a commission-based broker, either - there is just too much of an inherent conflict of interest.

I don't work full time any longer, but do some part-time consulting work and actively keep up with advancements in my field.  I think of myself as retired, though, since I don't work very much now.  I haven't really settled on a strategy other than to diversify, do my research and try to make informed choices. 

If I am lucky enough to make it to 86, I will quit trying to make informed choices and settle on safe fixed income investments, which is what the OP's dad should have been in at 86 with Alzheimers IMO.

So Bob, how about you tell me a bit about yourself now?

I'll bow out of this conversation, but I am in my 80's and don't believe fixed income investments are necessarily safe, particularly as the only components of a portfolio. I would never let the bond component of my portfolio get above 50%, recognizing that there are other "fixed income" investments, such as senior bank loans, which move independently.  Chacun a son goût!

chamois:

I'll bow out of this conversation, but I am in my 80's and don't believe fixed income investments are necessarily safe, particularly as the only components of a portfolio. I would never let the bond component of my portfolio get above 50%, recognizing that there are other "fixed income" investments, such as senior bank loans, which move independently.  Chacun a son goût!

Fixed income doesn't just mean bonds.  I think CDs, high grade munis and money markets are very safe fixed income investments and that is what I said - safe fixed income investments.  Of course there are high yield bonds that are not very safe, but I wouldn't be investing in those at 86, either.

OK, I wouldn't invest more than 50% of my portfolio in  treasury and high grade muni bonds, money market accounts and CDs.   They aren't "safe" if you need (or want) a higher return on investment than they provide.  In the current environment, short term securities pay too little and long term commitments have principal risk in the event of rising rates when funds are needed before maturities. Bond funds fluctuate as well.  None do well during inflationary periods.

Having a significant portion of a well diversified portfolio in quality, dividend paying equities of varied sectors reduces many of the risks associated with an uncertain market and economy. One purpose is to reduce the correlation of one's holdings..   JMO as always.

chamois:

OK, I wouldn't invest more than 50% of my portfolio in  treasury and high grade muni bonds, money market accounts and CDs.   They aren't "safe" if you need (or want) a higher return on investment than they provide. 

Well, if that is what you mean by safe we are talking about two different things.  I am talking about capital preservation and income generation, and I agree, if your capital is eroded by inflation, that is an issue.  There are munis out there whose tax-adjusted return beat inflation.  CDs right now aren't that great, but this is an unusual time in our economic history.  Typically laddered CDs can provide income and beat inflation.

 

chamois:

In the current environment, short term securities pay too little and long term commitments have principal risk in the event of rising rates when funds are needed before maturities.

It is an unusual time right now with regard to short term securities.  Long term commitments do present issues if you need to get to principal.  That is why you start planning for these things years in advance so you can meet your needs.  

 

chamois:

Bond funds fluctuate as well.  None do well during inflationary periods.

But bond funds fluctuate less in general than equity funds or equity-income funds.  I am not sure whether it is true or not that none do well during inflationary periods.  That depends on what you mean by do well.  If you mean beat inflation, that of course depends on the rate of inflation.

 

chamois:

Having a significant portion of a well diversified portfolio in quality, dividend paying equities of varied sectors reduces many of the risks associated with an uncertain market and economy. One purpose is to reduce the correlation of one's holdings..   JMO as always.

I love my dividend paying stocks and with the current QDI and long term capital gains tax treatment, they do make good investments.  But I am not so sure they beat munis without the QDI and long term capital gains tax treatment and I fear that if we get a fool like Obama in the white house along with a democratic congress, we will be saying hello to 28% long term capital gains taxes and buh bye to the current favorable QDI tax rates.

With regard to being able to access principal, though, in a down market (like now) if you need to get at principal, it is not a good time to sell most of the sectors.  So there is the risk of having to sell low and losing quite a bit of principal if you need to get at principal with dividend paying equities in a down market.  Take Citigroup, Washington Mutual and Wachovia, for instance.  They all cut their dividends and have gone down in value, too, so you would be taking quite a loss if you needed to get at the principal now but if you can wait a few years, I think they will be fine investments again.  At 86, you may not be able to wait a few years, though.

Whatever your strategy, the key is to have planned well in advance for your needs, which means anticipating your needs.  At 86 years old even if you don’t have Alzheimers, the chances someone will need some sort of assisted living soon is high.  That is expensive.  A person in that life situation can not afford to be taking the sort of risks with their portfolio that can result in a 10% loss in principal over 6 months when their portfolio is under $500k.  I don’t know if the problem with the portfolio was too many risky stocks or not enough diversification but I think there was a problem with anticipating the OP’s dad’s needs.  

I just don't see how anyone can justify putting someone who is 86 years old and has less than $500k in his portfolio in a 70/30 equities to fixed income portfolio that, whatever the asset allocation was, has lost 10% in 6 months and on top of that, add in another $8k a year loss to the portfolio in fees.  (And that assumes no commissions were paid on top of the $8k).  Not only was the asset allocation not well thought out, the OP’s dad’s needs were not anticipated well.  But I am sure the broker planned well enough to ensure that he/she got his/her $8k a year on time.

But you said:

" If I am lucky enough to make it to 86, I will quit trying to make informed choices and settle on safe fixed income investments, which is what the OP's dad should have been in at 86 with Alzheimers IMO?

That assumes, by my interpetation of your comment, that the poster's Dad will  still be the manager and therefore going to fixed income is the better choice, even if it might not have been otherwise.  Many people in their 80's are still actively managng portfolios and continue to build wealth.  Those who unfortunately become disabled should have prearranged for someone competent to manage their affairs.  That was Riberta's point, I think, that the portfolio should be managed to produce the  needed return adjusted for risk.  That will likely not include  "stopping making informed decisions and instead settling on  fixed income."

Obviously in a risk managed, well diversified portfolio, fined income has it's place; in mine it's 40%, much of which is in laddered state munis and national muni CEF.  But I also have funds in REITs, energy and pipeline MLPs, utilities, international equities, natural resources, etc etc, which provide additional  "safety" against rising rates and inflationary pressures.  Best wishes
 

chamois:

But you said:

" If I am lucky enough to make it to 86, I will quit trying to make informed choices and settle on safe fixed income investments, which is what the OP's dad should have been in at 86 with Alzheimers IMO?

That assumes, by my interpetation of your comment, that the poster's Dad will  still be the manager and therefore going to fixed income is the better choice, even if it might not have been otherwise. 

I am not sure why you make that assumption when the OP said that he has had to take over managing his dad's investments since his dad has Alzheimers. 

chamois:

Many people in their 80's are still actively managng portfolios and continue to build wealth. 

Most people don't make it to their 80's and of those that do, many of them are not the same cognitively.  Of those who are luckier and live to their 80's and maintain their full cognitive capacity, if they choose to continue to try to build wealth, they have chosen to take risks.  Now some may feel the need to take risks at that age because they didn't plan approrpriately for their 80's and others may feel they can afford to take risks because they did plan appropriately and have a lot more money than they will need in the last few years they have on this earth. 

Regardless, as with any risk taking no matter your age, not every one is so lucky as to build wealth, some in fact lose wealth when they take risks.  If you have less than $500k saved in your 80's and need at least $50k a year for assisted living, I think you are wise to avoid taking much risk.

chamois:

 

Those who unfortunately become disabled should have prearranged for someone competent to manage their affairs.  That was Riberta's point, I think, that the portfolio should be managed to produce the  needed return adjusted for risk.  That will likely not include  "stopping making informed decisions and instead settling on  fixed income."

I don't think that was Roberta's point.  As for my remark about informed choices, I was referring to my prior posts about market timing. 

chamois:

Obviously in a risk managed, well diversified portfolio, fined income has it's place; in mine it's 40%, much of which is in laddered state munis and national muni CEF.  But I also have funds in REITs, energy and pipeline MLPs, utilities, international equities, natural resources, etc etc, which provide additional  "safety" against rising rates and inflationary pressures. 

So in your 80's you don't have 70% in stocks as the OP said his dad's broker put his dad in.  Good for you, that is smart. 

Dear KCallie,

As Bobbie alluded to