Here’s the scenario. A valued client comes to you with a question:
Lewis, you’ve been helping me with my long-term retirement plan and that’s on track because we moved it mostly into bonds over the last five years. While the value’s been diminished somewhat, I trust that the market will come back over time. Besides, we’ve got a great annuity solution that kicks in two years from now when I start to phase into retirement.
I’m not too worried about the kids either because they’re finished with college and they have a trust that gives them an income stream. That’s sufficient for now.
I’ve paid off my mortgages and I’ve got no outstanding lines of credit.
Here’s the situation: I’ve just received a settlement from an estate from a distant aunt for $100,000–I know, I know, those who need the least have the most, right?
The thing is, while the markets have been hammered, I have long-term confidence in the nation’s and the globe’s economy. As bad as things are, I think everyone has overreacted.
I’ve got a five- to 10-year horizon at this point, so I’m looking for a long-term play. This is just fun money to me. I want to take a flyer– a smart bet, but a bet, nonetheless. I want to go for what Peter Lynch used to call a ten-bagger. I’m looking for a mega-return.
If it doesn’t work out, no problem. I’ll continue to live my lifestyle, which, due to a lifetime of financial prudence, is perfectly nice. But if this $100,000 turns into $1 million over the next five to 10 years, I’ll be able to go out in style and that sounds like fun, too. I’ll be able to give my kids a great headstart, I can fully fund my philanthropic plans, and maybe even take a trip around the world.
So my question is: Where should I put my $100,000?
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I would use The Investment Company of America. It’s been around for 70+ years. It’s success is largely on how it’s managed. It has gone from The Great Depression to our Current Depression and will continue to grow with dividends and share appreciation.
Given time this client could leave a legacey to his hiers and his philanthropic plans.
Well, if you could just find an investment with a long-term track record of success…. maybe something like 15 years or so of, oh, 15% ROR, VERY little volitity, no down years, if safe and secure (with guarantees), not correlated with the stock market…. Hmmmm, now THAT would be nice! Oh, and did I mention? I have one. If you’d like to learn about it just ask me: eddean@hotmail.com
Two things come to mind immediately. We could certainly put together a portfolio to your liking of aggressive individual stocks (S&P Research’s most aggressive 5 star picks) and ETFs (MOO, PIO, KWT, PBD, EWY, EWZ, etc. However, why risk those fine plans to leave money to the kids and take that trip around the world? The other option would be to look at funding an ILIT with premiums to either a single life policy or a second-to-die policy. The second-to-die policy would likely be lower cost and be viable even if one spouse was otherwise uninsurable. We should look at how much premium this would take to accomplish your funding goal. We should also look at just how much that around the world trip would cost. There is a good chance that you could make certain there is significant money to your children and philanthropic interests with no market risk, turn that dream trip into an actual trip, and still invest a much smaller amount in a few of those favorite stock picks. What do you think?
Assuming he has two years living expenses put away for emergencies, I would invest the $100K into a divesified portfolio of equiites at their current on-sale prices. I would certainly diversify among US & International large and Value, Big and Small, but almost impossible to go wrong for a long-term investor at these discount prices.
If indeed the client (and his advisor) are rational long-term investors, this is the only rational move one can make.
I definitely think the wrong place to put it is in an EIA unless I am completely selfish and looking out for my best interest and not the clients
Utilize a spread of tax free munis, high yield securities and cash – Trickle the money in on pullbacks over the next 12 months
anybody here know of a good site to find more info on world money invest? I’ve got this site bookmarked and im gonna keep checking it out, but i still would like to find a site that covers world money invest a little more thoroughly..thanks
Buy 25% Ford. 25% GM, 50% Sirius-XM. I think you will reach your goal in two years.
Investing in stocks is really risky unless they are big market cap companies that are near a one year low and are still profitable.
Bank of America which last year was under $5 and is now over $15.
I would wait until June to see if the market is near its one year low before investing any money. The reason being is because the stock market has risen over 30% since its March 09 low.
Energy stocks are great because they always fluctuate and come back to its original price.