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Suggested Investment Of Dormant $150K For Uninformed Investor.

Thursday, October 31, 2013 - 7:54 PM
Thought this suggestion from AssetBuilder (edited) might be of use,
interest:

     Q. I have had about $150,000 from an inheritance sitting in a savings
        account for the last two years. I’m trying to figure out what to do
        with it. I am collecting my public school retirement and am working
        part-time. My husband is an academic and has no plans to retire for
        the next few years. We have no consumer debt. We are on track to pay
        off our home mortgage in the next few years. Is there a better option
        for the money in the bank?  —G.H., by email

     A. At some point you need to make a plan for how your inheritance will
        be invested for the long-term. And since you're not being paid
        anything for money sitting in a savings account, you might as well
        focus on that long-term plan today.

        The most basic and simple portfolio that you could have would be very
        much like my Couch Potato portfolio. You would invest half your money
        in a low-cost Treasury Inflation Protected Securities (TIPs) Fund and
        the other half in a U.S. Total Stock Market Index fund. Since many
        people are worried about rising interest rates and their impact on
        TIPS, you could invest in one of the TIPs funds that invest in shorter
        term securities. Because they are shorter term, they are less vulnerable
        to loss.

        At Fidelity you could do this, commission free, by investing 50/50 in
        Barclays 0-5 Year TIPS Bond ETF (ticker: STIP) and Core S&P Total U.S.
        Stock Market ETF (ticker: ITOT).

        At Schwab you could do this, commission free, by investing 50/50 in
        Schwab U.S. TIPS ETF (ticker: SCHP) and Schwab Multi-Cap Core ETF
        (ticker: SCHB). (Note: This TIPS fund is longer term (and therefore
        somewhat more risky) than the Barclays 0-5 Year TIPS Bond fund)

        At Vanguard you could do this, commission free, by investing 50/50 in
        Vanguard Short-Term Inflation-Protected Securities ETF (ticker: VTIP)
        and Vanguard Total Stock Market ETF (ticker: VTI).

        Yes, this portfolio will rise and fall in value, but it will likely
        provide a long-term return that is much higher than you'll earn in cash,
        savings, or certificates of deposit and there is a high probability that
        its long-term return will be greater than the rate of inflation. The
        return on your  savings account is less than the rate of inflation.

Read more:
6
cumuluscumulus364 posts since
Jan 16, 2010
Rep Points: 1,703
1. Thursday, October 31, 2013 - 9:16 PM
I don't have anywhere near that much, but if I had $150K, I would put part of it in a CD and the rest in an internet savings account or checking account.  Definitely not the market.
5
mustsavemoremustsavemore49 posts since
Jun 26, 2013
Rep Points: 152
2. Thursday, October 31, 2013 - 11:00 PM
Well, I would not be so quick to give advice like 50% index funds without knowing at least (1) her time horizon, (2) risk tolerance.  People give advice like one size fits all.  How about her financial situation such as emergency fund and other retirement investment?  Anyhow, one should not take advice blindly without thoroughly examining one's portfolio and financial situation.  One should not give universal advice (e.g., asset allocation, index funds) without considering other's complete financial picture.
9
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
3. Friday, November 1, 2013 - 9:08 AM
Provided they will have a comfortable retirement ahead including a long-term health care policy in place, and this inheritance is just extra money, perhaps travel and enjoyment of life are in order in this situation. Better now before age related health consequences rear their ugly heads.
7
ShorebreakShorebreak2,696 posts since
Apr 6, 2010
Rep Points: 14,620
4. Friday, November 1, 2013 - 1:22 PM
"Better now before age related health consequences rear their ugly heads."

#3  We found out the hard way how true these words are.  I once had a travel agent tell me that people should see Europe before they are in their 60's since it is more strenuous to do than a lot of travel on this side of the Atlantic.  Unfortunately, I had us complete all our trips in the States, Hawaii, Carribean etc and left Europe for last.  We were in our 60's and it almost did me in!  I had no idea how much historical places there were to see and how much walking it took to see them!  If we had to do it all over again, I would do Europe first and plan the others for more liesurely trips in the States and other places.  Those transatlantic plane trips are "not" for seniors, imo.  My icebag became my favorite traveling companion next to my heating pad!  :)  My favorite companion on those trips was not DP but another lady in her 60's who kept me company while we iced our knees when DP who thought he was "invincible" got to see all the sights and took photos I could look at later.  Travel when you are young and healthy but unfortunately not everyone who is young has the money to travel these days.
8
paoli2paoli21,406 posts since
Aug 10, 2011
Rep Points: 6,152
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