How to invest $300,000

I'll get straight to the point: a family tragedy has left me with a sizable piggy bank, roughly $300K. As far as investing goes, I am pretty clueless. I am meeting with my boss's financial advisor and accountant later in the week, but I would prefer to invest my own money myself rather than pay someone else to do something I could probably figure out on my own.

My goal is to earn a modest and reasonable risk-adjusted return on my portfolio. I am willing to forego a +20% return for a safety net.

So far, I am thinking about investing in mutuals funds in the following sectors:

*Emerging markets
*Natural resources
*REITs
*Healthcare
*Maybe commodities, precious metals and agriculture

Any of you guys have any ideas? Can you recommend any resources for a novice invetor like myself?

 
mxc:
Buy the S&P and bonds.

No. The bond market has had a 30 year bull run. Interest rates are at historic lows.

Feel the financial advisor out. There is real value in a money manager who can manage your funds in a risk averse fashion. If this guy is going to plug you into the system and buy a bunch of random mutual funds to get nailed on then you're right, you could do it yourself. But if you can find a person you are comfortable with who can mitigate risk and limit your downside, then it's worth paying for.

Do you do your own dental work? No, you pay someone who knows it better. Don't just pay any old guy to do it, but find someone who you can trust.

 
mxc:
Buy the S&P and bonds.

I think this is a joke, right?...

if you want to be mediocre, invest in the S&P - look for interesting opportuni

if you want to invest in the bond bubble, be careful - debt markets are very frothy right now

and if you think the S&P is fairly valued, I would venture to say it is at least 30% overvalued...looking at the Schiller historical PE ratio

http://www.multpl.com/

while inflation will push things up and in my view will reach levels we have not seen in the past couple decades, for now I would not buy the S&P for that reason

 

I mean emerging markets might not be a great bet right now as inflation is a pretty valid concern (personally, I'm betting on EM, but a lot aren't out of inflationary concerns).

300K is a sizable chunk, literally 25x what I'm playing with so not sure my advice is valid but look at foreign govt. bonds. Interest rates are pretty high in a lot of LATAM and Colombia just had their bonds upgraded to investment grade.

You might want to look into real estate as interest rates are lowest they'll be in a long time once QE2 ends. You could put 150 down on a 300K pad and pay jack shit in interest.

 
dt18:
You might want to look into real estate as interest rates are lowest they'll be in a long time once QE2 ends. You could put 150 down on a 300K pad and pay jack shit in interest.

Already have a RE venture on the side. It is a time consuming pain in the ass and too risky. Also have a internet venture on the side. Wouldn't want to start or invest in another business, mostly because its too time consuming and risky but also because I would like my funds to be relatively liquid and convenient.

No significant debts on my balance sheet.

--- man made the money, money never made the man
 

i have my cash at UBS and have a very internationally/alternative exposed portfolio

tactical income funds, global expansion funds, commodity fund thru highbridge, fund of funds through first eagle and ivy, some S&P structured products and some SPY that im going to sell off in a month once i have long term gains and diversify, some high income funds, i had bought preferred stock at distressed prices but sold out i think... commodity producing countries like norway brazil canada new zealand shorting the US dollar...

all depends on your style nad your investment 'story'. i like macro themes

 
shorttheworld:
i have my cash at UBS and have a very internationally/alternative exposed portfolio

tactical income funds, global expansion funds, commodity fund thru highbridge, fund of funds through first eagle and ivy, some S&P structured products and some SPY that im going to sell off in a month once i have long term gains and diversify, some high income funds, i had bought preferred stock at distressed prices but sold out i think... commodity producing countries like norway brazil canada new zealand shorting the US dollar...

all depends on your style nad your investment 'story'. i like macro themes

Nice, that's exactly what I am talking about. I want to go with an international/alternative deal, as well.

Got any good resources/research/reading material you can toss my way?

--- man made the money, money never made the man
 
mr1234:
shorttheworld:
i have my cash at UBS and have a very internationally/alternative exposed portfolio

tactical income funds, global expansion funds, commodity fund thru highbridge, fund of funds through first eagle and ivy, some S&P structured products and some SPY that im going to sell off in a month once i have long term gains and diversify, some high income funds, i had bought preferred stock at distressed prices but sold out i think... commodity producing countries like norway brazil canada new zealand shorting the US dollar...

all depends on your style nad your investment 'story'. i like macro themes

Nice, that's exactly what I am talking about. I want to go with an international/alternative deal, as well.

Got any good resources/research/reading material you can toss my way?

suze orman

 

While I think inflation is a very valid long-term concern and am worried about it, I would have a hard time arguing that any asset class is not overvalued right now, including the S&P 500. You'd have to be insane to buy most bonds right now with rates where they are. I would keep a large amount of your money in cash, be patient, and wait for valuations to come down. Diversification doesn't matter if everything you're buying is overvalued.

There are times when it makes sense to be fully invested (early 2009), but I do not think that now is the time.

 
mr1234:
My goal is to earn a modest and reasonable risk-adjusted return on my portfolio. I am willing to forego a +20% return for a safety net.

You need to set a realistic goal, saying that you will forgo a 20% return for safety means nothing. I assume you are relatively young (just a complete guess) so your investment horizon (assuming you don't need the money for anything now) should be relatively long. Consider this, compound annual returns for small cap stocks were 11.9% from 1926-2009, large cap stocks 9.8%, government bonds 5.4%, T-Bills 3.7% and inflation 3%. If you had a portfolio of 75% stocks/25% bonds from 1926-2009 your average return was 9.1%. (source Ibbotson, SBBI 3/31/10) After you've come back down to reality, if I were you, I would at least talk to the advisor and if you do not like what he has to say then talk to someone else or do your own thing. Also, financial advisors can vary widely, so do your homework and consider talking to a few.

 
Chicago85:
mr1234:
My goal is to earn a modest and reasonable risk-adjusted return on my portfolio. I am willing to forego a +20% return for a safety net.

You need to set a realistic goal, saying that you will forgo a 20% return for safety means nothing. I assume you are relatively young (just a complete guess) so your investment horizon (assuming you don't need the money for anything now) should be relatively long. Consider this, compound annual returns for small cap stocks were 11.9% from 1926-2009, large cap stocks 9.8%, government bonds 5.4%, T-Bills 3.7% and inflation 3%. If you had a portfolio of 75% stocks/25% bonds from 1926-2009 your average return was 9.1%. (source Ibbotson, SBBI 3/31/10) After you've come back down to reality, if I were you, I would at least talk to the advisor and if you do not like what he has to say then talk to someone else or do your own thing. Also, financial advisors can vary widely, so do your homework and consider talking to a few.

I do intend to invest with a long-term perspective (I am in my mid 20s), but I wont keep my port static over an 80-year time horizon. I will most likely reallocate my money over time, and what I allocate to will depend on the economy at the time. I would be more specific with my goals, its just that this whole situation just kind of dropped into my lap all of a sudden. I got a lot on my plate.

If you could help me out, what kind of return should I reasonably expect? 5%? 10%?

I would be happy with at least 8%.

--- man made the money, money never made the man
 
mr1234:
Chicago85:
mr1234:
My goal is to earn a modest and reasonable risk-adjusted return on my portfolio. I am willing to forego a +20% return for a safety net.

You need to set a realistic goal, saying that you will forgo a 20% return for safety means nothing. I assume you are relatively young (just a complete guess) so your investment horizon (assuming you don't need the money for anything now) should be relatively long. Consider this, compound annual returns for small cap stocks were 11.9% from 1926-2009, large cap stocks 9.8%, government bonds 5.4%, T-Bills 3.7% and inflation 3%. If you had a portfolio of 75% stocks/25% bonds from 1926-2009 your average return was 9.1%. (source Ibbotson, SBBI 3/31/10) After you've come back down to reality, if I were you, I would at least talk to the advisor and if you do not like what he has to say then talk to someone else or do your own thing. Also, financial advisors can vary widely, so do your homework and consider talking to a few.

I do intend to invest with a long-term perspective (I am in my mid 20s), but I wont keep my port static over an 80-year time horizon. I will most likely reallocate my money over time, and what I allocate to will depend on the economy at the time. I would be more specific with my goals, its just that this whole situation just kind of dropped into my lap all of a sudden. I got a lot on my plate.

If you could help me out, what kind of return should I reasonably expect? 5%? 10%?

I would be happy with at least 8%.

If I were you, I would be in CASH right now for a little bit.

 

real estate - buy distressed props from banks, foreclosures, forced sellers below assessment. take out a mortgage. get a home equity loan on the assessment value to cover the down payment and give you excess cash. rent it out. clear your mortage+expenses with rental income. use the excess cash from the HEL to cover the down payment on another property. rinse, repeat.

 
Frank Slaughtery:
real estate - buy distressed props from banks, foreclosures, forced sellers below assessment. take out a mortgage. get a home equity loan on the assessment value to cover the down payment and give you excess cash. rent it out. clear your mortage+expenses with rental income. use the excess cash from the HEL to cover the down payment on another property. rinse, repeat.

Good idea, but 2 problems:

1) Too time consuming...like really time consuming.

2) I work in RE for a living. I strongly believe SFR values will drop or at least stay stagnant over a verrrry long time.

--- man made the money, money never made the man
 
mr1234:
Frank Slaughtery:
real estate - buy distressed props from banks, foreclosures, forced sellers below assessment. take out a mortgage. get a home equity loan on the assessment value to cover the down payment and give you excess cash. rent it out. clear your mortage+expenses with rental income. use the excess cash from the HEL to cover the down payment on another property. rinse, repeat.

Good idea, but 2 problems:

1) Too time consuming...like really time consuming.

2) I work in RE for a living. I strongly believe SFR values will drop or at least stay stagnant over a verrrry long time.

definitely time consuming, you cant get this done without tons of research, visiting props, etc. ive modeled out a bunch of properties ive found and if you buy at the right price you can still clear an 8% hurdle rate even assuming the property is worthless once the mortgage is paid off (as in worth $0)

 

Sell out the money options on futures/commodities for forward months against the market direction. Do not hold until expiration, buy'em back on spikes. Let me add writing naked options is only for the brave. Get a demo account FIRST and test my idea in grains and currencies.

Please don't make me talk to you like an asshole...
 
Bravo:
Sell out the money options on futures/commodities for forward months against the market direction. Do not hold until expiration, buy'em back on spikes. Let me add writing naked options is only for the brave. Get a demo account FIRST and test my idea in grains and currencies.

Hmm, you might as well be speaking in Chinese, I didnt undertsand a thing you just said. I would like to emphasize that I dont know jack-shit about sophisticated financial products, like managed futures or naked options.

--- man made the money, money never made the man
 

Based on not knowing you at all, here is a good asset allocation to start with (you can work on selecting the investments, you have to expect to do some work if you want everything for free), I assume you are a non-accredited investor which is why I did not put any hedge funds or PE: U.S. Large Cap - 38.00% U.S. Mid Cap - 6.00% U.S. Small Cap - 4.00% International - Developed - 17.00% Emerging Markets - 8.00% Investment Grade Tax Exempt - 14.00% International Developed Bonds - 1.00% U.S. High Yield Tax Exempt - 2.00% Real Estate - 6.00% Tangible Assets - 4.00%

Now $300,000 is a good size portfolio for being in your mid-20's but this asset allocation is geared more towards a high net worth individual (north of $ 10 million) so you may choose to be in fewer asset classes to reduce your fees. You could expect a hypothetical return of between 8-8.5% pre-tax with a standard deviation of between 13-13.25%. Now obviously, this is dependent upon the investments you select, but again you want everything for free so this is all you are going to get.

 
Chicago85:
Based on not knowing you at all, here is a good asset allocation to start with (you can work on selecting the investments, you have to expect to do some work if you want everything for free), I assume you are a non-accredited investor which is why I did not put any hedge funds or PE: U.S. Large Cap - 38.00% U.S. Mid Cap - 6.00% U.S. Small Cap - 4.00% International - Developed - 17.00% Emerging Markets - 8.00% Investment Grade Tax Exempt - 14.00% International Developed Bonds - 1.00% U.S. High Yield Tax Exempt - 2.00% Real Estate - 6.00% Tangible Assets - 4.00%

Now $300,000 is a good size portfolio for being in your mid-20's but this asset allocation is geared more towards a high net worth individual (north of $ 10 million) so you may choose to be in fewer asset classes to reduce your fees. You could expect a hypothetical return of between 8-8.5% pre-tax with a standard deviation of between 13-13.25%. Now obviously, this is dependent upon the investments you select, but again you want everything for free so this is all you are going to get.

Not really expecting anythng for free, just looking for some direction on something I know nothing about.

Got any good resources/research/reading material you can toss my way? I'd like to figure out on my own on how you got to those allocations.

--- man made the money, money never made the man
 

Investopedia.com has some good material if you need the basics and gists. I personally would say gold (price per oz has almost doubled in recent years, while the dollar is under heavy inflation) but I'm no expert. Good luck

I didn't say it was your fault, I said I was blaming you.
 

Do you have a brokerage account set-up yet? If not, set one up. With your account you will have access to a lot of free research that you can read to help you establish some fundamentals. You also may try signing up for a free trial for Morningstar, they publish a lot of good research. Using your free-trial, I would suggest researching 5-8 ETF's that cover different sectors/geography and pick one or two that you like the best in each. You can follow the asset allocation I provided as a baseline, or establish your own and go from there.

 

Right. I was on Investopedia all night last night, its actually pretty good. I also signed up for Morningstar a looong time ago, will check it out again. Thanks!

--- man made the money, money never made the man
 

I would suggest to stick with a 50/50 split between bonds & large cap U.S stocks for 2-3 years.

During this 2-3 year period, read up on everything about investing/portfolio management (investing books - think Warren Buffet, Peter Lynch, and portfolio management - think following what other portfolio managers are doing, reading what the banks asset managers are doing).

Once you have a good idea of how capital markets is working, your ready to invest on your own, until then, stick with U.S large caps and U.S Corporate Bonds (best bonds that protect against inflation).

Also, I wouldn't trust any advisor who doesn't have a CFA.

..

Like you, I inherited a large sum of money at age 16, and started to invest at 18. A mistake I wish I can go back in time, since I had no clue what the stock market was. If I can go back in time I'd invest in bonds/large cap stocks UNTIL I knew what the f*** was going on.. Don't make the same mistake as me.. LEARN the market for a couple of years then invest in risky business.. until then.. stay away from complicated products.. stay away from leverage/short/margin/options/derivatives and STAY WITH CASH/BONDS/LARGE CAPS.

Also I'd say to avoic the Tech/Bio Tech/Commodities sectors all-together.

 

Honestly RE investment is the best bet for long term wealth growth. The things it has going for it are amazing at the moment. Such as dirt cheap money, cheap properties, soon to be rising rent rates, the best part of all is that other people are growing your net worth. Yes it takes work, but if you do it right and you are smart about it, you have a cash stream that requires drasticly less effort than IB, and lets be honest you are here with 500+ posts because you want to be in IB or you are all ready there.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

If you want stocks and bonds you ought to do it in futures (because you have the money to deal with the large notional size of the contracts) and then you can lever up the bonds to contribute an equal amount of risk to you portfolio.

I also like AQR's risk parity fund(ticker AQRNX) (prospectus page 32: http://www.aqrfunds.com/resources/docs/PDF/Prospectuses/Prospectus_N.pd…). The only problem is that they engineer towards a target vol of 10%, even if you assume they can achieve a return to risk ratio of .65, you have to pay 120bps in fees and are only getting 5% per year (which might be fine given your appetite for risk).

 

There are some decent suggestions on this site but I highly suggest you read through these sites before you make any big decisions:

http://www.telusplanet.net/public/kbetty/contents.htm

and

http://www.retailinvestor.org/

The first site covers most any basic topic while the second site has some more advanced content if you wish to delve a bit more deeply. Let me know if you have questions about either sites or particular investment schemes in general.

 

as for stuff to invest in:

  • stocks that will do well when housing recovers (certain building products companies)
  • short LinkedIn (my price target around $20)
  • other ideas I am incubating: Google, AIG
  • short china all the way down
  • education stocks (despite the huge gains the other day)
  • thrift conversions - a lot of these are going on right now and trading at great p/tangible book multiples
  • a few net nets look interesting right now
 
MittRomney:
as for stuff to invest in:
  • stocks that will do well when housing recovers (certain building products companies)
  • short LinkedIn (my price target around $20)
  • other ideas I am incubating: Google, AIG
  • short china all the way down
  • education stocks (despite the huge gains the other day)
  • thrift conversions - a lot of these are going on right now and trading at great p/tangible book multiples
  • a few net nets look interesting right now

ouch

I hate victims who respect their executioners
 
MittRomney:
oh, and farmland would be a great play - just not sure how to do it with only $300,000 and what to invest in within the farmland realm
45 minutes outside of Albany, you can buy 100+ acres of land for $100K. Just a thought......
Get busy living
 
UFOinsider:
MittRomney:
oh, and farmland would be a great play - just not sure how to do it with only $300,000 and what to invest in within the farmland realm
45 minutes outside of Albany, you can buy 100+ acres of land for $100K. Just a thought......

who would EVER want to invest in 100 acres of land 45 minutes outside Albany?? The guy's trying to make money, not grow corn.

 

i invest in growth oriented mutual funds, high yield mutual funds and have a small investment portfolio of stocks i own. additionally, i invest in series EE bonds that you can buy from the retail banks and in 13 month CDs.

Not as liquid as cash in the bank but liquid enough to collateralize if need be.

given what i've seen over the last few years, its always smart to keep about one year's living expenses liquid.

------------ I'm making it up as I go along.
 

Can anyone recommend how to invest once u start earning as an analyst? How much do u keep readily available in ur bank account and how much do u put away and where? do you hire an advisor?

========================================= We are excited to formally extend to you an offer to join Bank of Ameria
 

12 months savings is definitely the first thing to work on. Doesn't matter much what it's invested in - a bunch of CDs that expire every month or every other month is a good idea - just as long as a) you'll have the cash when you need it and b) it's risk free aka FDIC insured. Don't fuck with your safety net. In terms of investment strategy beyond that, best not to stress too much until you really start to accumulate more than about 50K (over and above your savings). Think about it, a full percentage point on 50K is only $500 annually so mistakes aren't that costly - all the brain damage you'd incur choosing the perfect strategy just doesn't move the meter enough at low levels.

 

Going to take this opportunity to share a website I've contributed to, it has a guide to investing that's relevant to students and young professionals:

Wall Street leaders now understand that they made a mistake, one born of their innocent and trusting nature. They trusted ordinary Americans to behave more responsibly than they themselves ever would, and these ordinary Americans betrayed their trust.
 

I rarely keep more than 10k in my checking account at any given time (for mortgage payments, bills and general necess.). I keep around 20K in ING to cover emergencies and I keep the bulk of my wealth in my PA.

Futuramo, you should buy A Random Walk Down Wall Street, it has a good section about short term liquid investing based on your tax bracket and liquidity needs.

Needless to say, I think 1 year of living expenses in an account earning at or below the rate of inflation is a waste of time and money. There is no reason why you couldnt liquidate equity holdings in the event of a layoff or emergency. You are young, be aggressive.

 

So, if you want at least a 20%-30% return over a 16 month period, that equates to annual returns of 14.65%-21.75%. That is a pretty healthy return at the bottom of the range, as I'm assuming you're talking about returns net of fees. Two things confuse me though, if you're concerned about the lack of earnings over the period, shouldn't you have high liquidity needs? Additionally, "risk-averse" means that when you're faced with two investment options with similar expected returns, you'll take the one with the lower risk. Are you saying you're not interested in taking on risk?

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
 
mikesswimn:
So, if you want at least a 20%-30% return over a 16 month period, that equates to annual returns of 14.65%-21.75%. That is a pretty healthy return at the bottom of the range, as I'm assuming you're talking about returns net of fees. Two things confuse me though, if you're concerned about the lack of earnings over the period, shouldn't you have high liquidity needs? Additionally, "risk-averse" means that when you're faced with two investment options with similar expected returns, you'll take the one with the lower risk. Are you saying you're not interested in taking on risk?

Thanks for pointing out. Interested in taking on risk. 'Risk-adverse' maybe misleading here. Liquidity is low because these funds will not be used to meet my living expenses.

The Auto Show
 
Best Response
huanleshalemei:
mikesswimn:
So, if you want at least a 20%-30% return over a 16 month period, that equates to annual returns of 14.65%-21.75%. That is a pretty healthy return at the bottom of the range, as I'm assuming you're talking about returns net of fees. Two things confuse me though, if you're concerned about the lack of earnings over the period, shouldn't you have high liquidity needs? Additionally, "risk-averse" means that when you're faced with two investment options with similar expected returns, you'll take the one with the lower risk. Are you saying you're not interested in taking on risk?

Thanks for pointing out. Interested in taking on risk. 'Risk-adverse' maybe misleading here. Liquidity is low because these funds will not be used to meet my living expenses.

Thanks. Based on what you've said, I'd say it's highly unlikely that you will achieve that return through traditional investing, and you lack the necessary capital to enter into, or diversify, most alternative strategies (assuming you could achieve such a return for that matter).

Are you handy? If so, buy a shitty foreclosure and over the course of 16 months, rebuild it, then at the end of business school, sell it. If you can do all the work yourself (or, at least 90% of it) you won't have any trouble hitting your return target. Plus, you can live in it. If you're not handy to the extent that you can nearly rebuild a house, I'd lower your expectations to about half of what you're looking for. That'd be more realistic.

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
 
trazer985:
Don't buy what you don't understand

"I plan to invest around 100k and aim for at least 20-30% return during this period. Low liquity needs but risk-adverse. "

You don't understand investing.

Dont buy investments.

I can't edit the post (delete 'risk-adverse') on my bb :(

The Auto Show
 

Are you doing this for the money or the experience? If the experience, I would work on a 6-8 name long equity portfolio and 3-4 shorts (ideally synthetically constructed via options positions, you can split strikes to reduce risk somewhat, targeting ~60k net market exposure (which you can move around if you develop a macro view). Realize most people aren't good stockpickers and in expectation you will likely lose money doing this, but the upside of a AM/HF job if you succeed is likely worth it, given you are already spending a lot on bschool. It will also focus you on the financials and business models of the companies in your portfolio, and should make getting a IB or consulting job pretty easy if you are at a semi-target at least.

If in it for the money, the foreclosure idea is pretty good, but you'd be better off spending the time networking, since that is what you are there for.

 
meabric:
(ideally synthetically constructed via options positions, you can split strikes to reduce risk somewhat,

Can you/someone explain this in more detail maybe with an example? What does it mean to split strikes? Are you saying that you could purchase liquid call/put options with high delta to synthetically hold a position?

If looking at small cap names, I assume the bid ask spread on the options could be a concern and make this more difficult?

 
yeahright:
Give the 100k to Fidelity and make like 10%. Less risk than you doing it yourself, based on your intellect shown in this thread.

I was gonna throw you ms, but on a second thought, 'maybe this guy just had a bad day, the one as bad as mine'. I am not an investment expert and sorry if I didn't do enough homework before asking each and every question.

The Auto Show
 
BlackHat:
Just go with some ETFs that track the market and hope that this year is as amazing as David Tepper says it's gonna be.

Thanks, Blackhat! I hate to follow the market though... Unless it's real estate. Do you like REITs? P.S. Hello to your tats.

The Auto Show
 
whatwhatwhat:
if your definition of low liquidity fits my definition of low liquidity you can throw your 100k my way and i will get you 20-30%

Before or after fees :)?

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
 

Wait, you said you're back to b-school... as in you've already been to b-school... what. the. fuck.

"You stop being an asshole when it sucks to be you." -IlliniProgrammer "Your grammar made me wish I'd been aborted." -happypantsmcgee
 

Cool. Lots of good advice and good ideas, some not so god ideas and some downright idiiotic comments. For now, I am going to go with my boss's financial advisor. I met with him a couple of times and he seems to know his shit.

Thanks.

--- man made the money, money never made the man
 

mr1234:

Some well-intentioned advice in this thread but I think you are doing the right thing by going with the professional here. If I am a betting man, I would assume that your boss' financial advisor is going to put you in a managed mutual fund program for a fixed all-inclusive fee of 1.25% (which, btw, doesn't include the actual fund maintenance costs).

For some in your situation, you definitely want mutual funds since they 1.) Are actively-managed, 2.) Well-diversified, and 3.) Can lower costs through economies of scale. Ultimately, the biggest value for someone like you isn't yet the return but rather the ride. Use this as a learning opportunity to figure out the markets as investing will be a life skill. Many brilliant people are clueless about managing their own assets so it is great that you can start now and start early. I truly think the markets are moving sideways for the next few years so be very realistic in your expectations. If you can make 1-2% (net of fees) annually for the next few years, I think you will have done well.

If I were you, I would go with about eight mutual funds. Try to take advantage of the global growth story in international funds like TGVAX or SGENX as well as hedge your portfolio through a small (no more than 10%) allocation in commodities (given that all the major world currencies came under pressure in recent years and that the fundamental outlook is still weak). Nonetheless, at the end of the day, you still need to anchor your portfolio with US large-cap stocks (at least 40% of your allocation) so find some strong managers in the domestic large-cap space. If you want real estate, also look into Cohen & Steers as they are the best fund managers out there in the REIT business and the undisputed champs in that space. If I were you, I would look into some corporate bond funds...

 

Have you considered investing in crowd funding portals? If you consider yourself to be a fairly sophisticated investor many people are turning to P2P and Small Business lending as an alternative to investing in the stock market.

You can invest your funds by lending to individuals, small businesses, or investing in real estate developments. There are a wide range of diverse platforms which offer an attractive mix of risk and return.

In case you are unfamiliar with crowd funding I’ll give you a quick overview below:

Debt-based crowd funding: Commonly referred to as P2P lending and can also take the form of small business lending. Essentially borrowers are connected with lenders (investors such as yourself) who provide funds to borrowers in need for a fixed percentage (basically a loan). Once the borrower has the funds he or she needs they will make monthly payments to you with the portal sometimes taking a small cut. Most P2P loans are short term.

Examples of P2P lending include Lending Club (recently went through a successful IPO), Prosper, SoFi.

Equity-based crowd funding: Recently there has been a rise in crowd funding efforts to help developers attain the capital they need for their real estate developments. These can take the shape of different forms but usually investors invest in real estate projects for a fixed percentage return. The big difference between equity-based and debt-based is that in equity-based investments you are investing in a tangible asset that can be captured, renovated, developed, and sold in case of developer defaulting on their obligations.

I actually attended a conference regarding P2P lending and crowd funding and met the CTO of REAMERGE who has recently launched his portal which connects small business owners with investors (lenders).

They have some blog posts which introduces crowd funding and has a blog which compares crowd funding investments with stocks, bonds, and other investments. Here’s the link for the blog:

http://blog.reamerge.com/

Let me know if you have any questions!

 

I didn't read the whole thread, but I definitely saw some recommendations for Vanguard, and that's the way to go. I have about $300k myself, spread across 6-8 funds at any given time. You get the benefit of professional management from the fund managers - all you need to do is ballpark allocations across fund types, i.e. pick a mix of bond fund, blue chip stock fund, small / mid cap stock fund, emerging market fund, maybe a specialty fund or two (energy, health care, metals, REIT, etc).

 

An effiecient way, if you want to manage the money by yourself, is to recognize different stages of economic cycles ( and respective monetary policies ) and adjust your strategy from stage to stage. It is not easily done, but I'm sure the residing professionals can help you with this.

 

ETFs are prob the way to go. For your equity exposure ("growth engine"), the MSCI ACWI would be fine. If you want some tactical tilts, buy R3000, MSCI EAFE, and MSCI EM etfs, and choose weightings accordingly. Do not put all your equity eggs in the S&P 500 basket. For equity exposure, 60-70% is probably about right, though the asset class as a whole is pretty expensive right now. Add commodities as an inflation hedge, and fixed income as a deflation hedge. Before you go and add a bunch of other things (EM debt, REITs, etc.) make sure you consider how these would fit in the context of your portfolio. You can get a solid amount of diversification through 6-8 ETFs, and I think Vanguard is the best (cheapest) option. Make sure you average in (maybe over the next year or two). You don't want to put all your money to work in the next month and then have the double dip recession scenario play out.

If you want the risk-adjusted returns, diversification is key. Do not put all your money in RE or managed futures or options as some have suggested. You could potentially crush it doing this, but you could also fall flat on your face very quickly.

Recommend reading Pioneering Portfolio Management by Swensen. Obviously you can't go the HF and PE/VC route yet, but still a great read for a solid grasp on port mgmt.

 
Chicago85:
shera:
If a financial advisor was any good at what he did, he wouldn't be working as a financial advisor.

Do explain your logic...

I'll explain his logic for him. Financial advisors are leeches that just make their money off the management fee and do cookie cutter portfolios that just diversify for the sake of diversifying. Mindless, shitty portfolios with no chance of ever having exemplary risk-return profiles. Anyone who's truly talented at investment management runs their own hedge fund. There are some financial advisors that are worth their salt, but you really have to do your homework to find them, and often, they cater to ultra high net worth individuals (and I'm not talking about the private banking groups at places like JPM and GS, those guys don't impress me at all).

To the OP: My condolences for your loss. Feel free to PM me if you wish to get a second opinion on the financial advisor's recommendations (I have my own fund and on top of that manage the majority of my family's money).

 

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