Retired With 100% Invested In Cash. Should I Diversify With Index Funds? How Safe?

Spring
  |     |   21 posts since 2013

With low interest rates I thought I would put some in another investment such as index funds. At age 70 is that a wise idea? Also, not a home owner I thought I would pick up a low cost condo paying all cash?

Any ideas on this?



Answers
deplorable_1
  |     |   188 posts since 2020
While diversification is always a good idea I don't think jumping into the stock market at 70 with the market currently near all time highs is a good move. For one thing we have a election coming up in a few short weeks and the market doesn't like any type of uncertainty. I have a strong feeling that we are going to have some election issues this year with massive mail in voting. I would hold off investing until this all shakes out. You may well get a better entry point for index funds in a month or two.

In the meantime there are plenty of opportunities for liquid cash with bank bonuses with 0% risk. Ken has a short list here:
https://www.depositaccounts.com/savings/best-savings-checking-account-bonus-offers/
DoC has a more extensive list here:
https://www.doctorofcredit.com/best-bank-account-bonuses/
Here is a list of bonuses without a direct deposit requirement:
https://www.hustlermoneyblog.com/best-bank-bonuses-without-direct-deposit/

Disclaimer: If you have never done bank bonuses before make sure to read all the fine print as some are easier than others and some have a much better return. If you have any questions or are not sure about something call the bank and ask the CSR's.
Spring
  |     |   21 posts since 2013
Thanks for your reply and the stock market information. I have never liked, however, bonuses but did check it out. Thanks again.
deplorable_1
  |     |   188 posts since 2020
It's not a bad idea for a newcomer to invest in index funds. If you asked this same exact question just a few months ago when the DOW was near 18,000 I would have said yes but to diversify in a variety of funds like a total stock market index, S&P 500, utilities index and maybe a REIT index and maybe one that focuses on dividends. This way you would be fairly diversified and you would be getting in at lower prices.
me1004
  |     |   991 posts since 2010
Index funds are no safer than the index.
Choice
  |     |   251 posts since 2020
Look at today’s WSJ B8 article “Want to keep your cash safe? It’s OK to be a zero”
Spring
  |     |   21 posts since 2013
Thanks. Couldn't get the article as I am a non subscriber but saw another one saying stay safe with money even with very low interest rates as risk will not solve the problem for that portion of your portfolio where you need low risk with cds.
Choice
  |     |   251 posts since 2020
Message delete by poster...that’s a new one. :-)
Spring
  |     |   21 posts since 2013
Did a message get deleted?
deplorable_1
  |     |   188 posts since 2020
It's never OK to be at 0% because you lose out to inflation and there is always a way to beat 0%. This entire site is dedicated to that end.
Choice
  |     |   251 posts since 2020
Never say never...zero is more than negative
Spring
  |     |   21 posts since 2013
You are entirely correct. The famous mutual fund manager, Peter Lynch, (Fidelity Magellan) said when the market goes down significantly it may take several years to recover your money which would definitely depress your portfolio more than cds at zero. The stock market has no guarantees and past performance may mean nothing...and that is why I am 100% in cds currently.
Spring
  |     |   21 posts since 2013
Using this site, however, I have always done better than zero...hopefully it won't ever come to zero.
JeffinEasternFL
  |     |   70 posts since 2020
Your question looks of "apples and well, not oranges but, maybe nuts" :)  Hire a qualified financial advisor, in fact talk to at least two; pay them "by the hour" for the advice, see if the relationship is there. Only contract with a "fiduciary". Don't do this on your own as more "do it yourselfers" have crashed and burned their finances over "saving a few dollars in expenses" than I can remember. I am a retired Financial Advisor/Agent/Principal and acted as a fiduciary for my business/firm. You'll learn a lot and may get some ideas for your financial security. G'Luck!
Spring
  |     |   21 posts since 2013
With a financial advisor most all investments will not be FDIC backed and therefore risky. Also, having a great relationship with a financial advisor as you suggest doesn't appear to guarantee much of anything. I am sure I would learn something, however, if I met with two of them by the hour as you suggest. I have always stayed away from them as I like the security of fdic backed cds. If you have any information since you were a financial advisor on what I might learn that would be helpful. Thanks for your reply!
JeffinEasternFL
  |     |   70 posts since 2020
It wouldn't hurt you to chat, there ARE alternatives for safety other than CDs for SOME of your monies, depending on what it is you want your dollars to accomplish. A good advisor can also help with that. I think risk/reward and a basic how stocks, bonds, alternative "hybrid" instruments work would be a good lesson primer for you!
Spring
  |     |   21 posts since 2013
I do like exposure to new ideas with hopefully valuable information so I might consider doing this at some point. Thanks again!
Robb
  |     |   79 posts since 2018
Slightly off topic...but I trade SPY often with the brokerage portion of my portfolio based on specific RSI parameters. Many online brokerages have gone to 0 commissions in recent years which has been a boon for trading. My concern going forward is one party has been pushing a financial transaction tax on stock/mutual fund trades of .2% (google "financial transaction tax").  The tax for SPY which is currently trading near $347 on a buy/sell of 100 shares comes to approximately $139 which for me would make trading more or less prohibitive.  Although, the buzz is that any legislation would only apply to those above a certain income level...stay tuned.
Choice
  |     |   251 posts since 2020
It’s coming... if one wants lower capital gains tax rates than the tax rates on labor...time to pay piper...to some, it’s overdue! The only open question is the rate
deplorable_1
  |     |   188 posts since 2020
@Choice: The reason for the tax break on qualified dividends and long term capital gains is to encourage investment and compensate for risk. I wouldn't be invested at all if those tax breaks were not involved. When you work a job there is 0% risk on earned income and if it wasn't for Social security and medicare tax you would actually get to keep most of your paycheck. Throw in higher tax brackets and a higher corporate tax along with this pandemic keeping things shut down and it's 1929 again. In short be careful what you wish for you just might get it.


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