Hi All,
My parents are middle-class, but recently came into a little bit of money ($100k). They are in their mid-50s and asked me what they should do with it. I'd really appreciate any ideas/insight from people to gather and share with them.
Thanks!
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Assuming they don’t know that much about investments and want something hands off, I’d recommend they put their money in a fixed income fund (if they want passive income now) or a target retirement fund (if they want to retire in 5-10 years). Just make sure the company is charging low fees.
If you want to do more research, YouTube is a really helpful source on this one. Look up “target retirement fund” or “index fund”. You’ll get a much better explanation than what I have here. Hope this is helpful!
Not to hijack this but I'm actually in a similar situation. Mine aren't investment-savvy at all and I'm trying to convince them to at the very least put it in a property, but no luck. OP, be glad your parents are open to the idea of investing it!
Honestly, it is based on your time horizon for when you need the money. IMO I would really recommend stable dividend paying companies like bank stocks, but you might have to weather the potential storm in the future by setting stop losses in case anything happens. Look up Dividend 15 Split Corp as I’ve heard it was really stable even during 08. If you do not want high risk, then bond Triple A bonds might be your best bet.
Biggest question is are their main needs already taken care of. Returns on the lowest risk assets are horrible these days thanks to a decade (and counting) of central bank money printing. So whatever you can afford to put at risk, you should because that’s the only way to make a real buck these days. Of course, basic needs always come first.
As far as fixed income vs quasi fixed income (banks, REITs etc) I like the latter a lot better because it’s effectively inflation protected. The “safe” bonds are safe in terms of payouts but come with significant price risk due to inflation risk.
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Thanks for the suggestion, but I don't think that answers my question, Lloyd.
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Vacation & then a passive fund or something. Why don't you manage it?
Would feel more pressure to not lose their money than I would for clients. Also, strongly dislike/stay away from the public markets.
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muni or credit rated strong corp bonds until the real estate market corrects itself (market dependent) mainly in multifamily and then invest in a condo or SFH for longterm growth potential and cash flow.
Muni is the absolute worst place right now unless you are in a ridiculous tax bracket & high tax state. Rates are stupid low. Better off putting under a mattress.
I actually have a friend in same situation but she can't get her parents to listen to her at all and she's a licensed professional.
Do they have debt? If so, probably better to just pay that off
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Do you they have debt to pay off? Doesn't make sense to talk about investing in muni-bonds if they have credit cards at 20% interest or auto loans at 6%.
Whether to pay off a mortgage is a trickier question, but in terms of safety, nothing better than knocking out high interest debt.
I believe the OP was asking for investment ideas not paying off credit card debt which seems orthogonal to the original post. I'll agree that muni bonds are a poor investment for yield purposes right now but my suggestion was to park the cash until RE asset prices re-balance (again market dependent) and then invest in RE asset that would imo would provide the best return on 100K. Another option if you want yield is investing in credit rated qualified dividend pref securities, that I will agree will have lower duration to muni bonds and a better return, albeit of course there is much higher risk of nonpayment of the coupon that would not trigger an EOD with these notes, but if it's credit rated then obvioulsy that risk is somewhat lower, not as low as munis though...
You would be shocked how many people make investments while simultaneously continuing to pay very high interest debt. Another common mistake is a preference to pay off your mortgage while still having other sizeable debts. So, it's not at all a given that they have no debt.
Paying off $50K on a credit card at a 20% APR is gonna beat any bond paying 3% for $50K. If you have that type of debt, you're really not going to find anything with the same risk/reward profile as paying it off.
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