Need advice on how to invest!

jockewingJune 15, 2013

My grandmother passed 3 years ago and left me a very generous and much appreciated inheritance.

The inheritance included her Edward Jones portfolio. Hers was set up for income as she was risk averse and also deducted a certain amount of the interest income each month. I have pretty much left the account as is because I am deathly afraid of messing anything up. The first two years the account was returning a nice 6%, but this year it has done virtually nothing. I am paying income taxes on this interest income that I really do nothing with, so it's almost like a penalty to me with no benefit. I also have almost 50,000 in cash that has accumulated that is just sitting there. Obviously I know that I need to do something.

It is about $300,000 and I also have more in cash from the sale of her home that I don't know what to do with. Right now the account is set up as follows:

About 50K in cash from all the interest and dividend payments that are just sitting there doing nothing.

2 corporate bonds with So Ca Edison and Select Notes Trust Securities at about 20K maturity value. They are currently both worth more than the maturity value. Maturities in the 2030s.

5 Asset/Mortgage Backed Securities about 100K. These are with FHLMC, Fannie Mae, and Ginnie Mae, all earning 5.5%. The value on these has remained pretty constant and they are all worth more than the principal. Maturities are in the 2030s.

1 Unit trust with GNMA. Value seems to be way down on this one. Only about 5K invested, but worth only 3K right now.

2 mutual funds--about 100K combined, about half in Bond Fund of America and the other half in Capital World Bond Fund.

The value of the total account has increased every single month since I acquired it, on average by about 1K a month, until this month when it decreased by about 2K. The drop has been in the bond mutual funds and the 2 straight bonds mentioned above.

Here is what advisor wants me to do---

Sell off everything except the existing bond mutual funds. Invest about 3/4 of the total into 2 mutual funds: half into American Funds and the other half into MFS (Massachusetts) Funds. There would be about 10 different funds within each group, with a mix of income, growth, and aggressive growth--most in the growth category. The remaining 1/4 into Invesco Unit Trust Global 45 Dividend Strategy.

He said it's better to have 2 funds with different managers for diversification, but of course that means my "breakpoint" will be 3.5% instead of the 2.5% if I used only 1 fund group. He really didn't offer any other suggestions which made me feel like this was really kind of cookie cutter advice. These are class A funds so I would have to pay between 5 to 8K (depending on whether I go with one or two fund groups) right off the top, which I really don't like.

I asked about other classes of funds, which he really discouraged. He said for Class C there is no up-front load, but the yearly "expense" percentage is something like 1.4 percent instead of .7 percent for class A. Also if you withdraw from Class C before the year is up, there is a penalty. Since I definitely plan to keep for at least a year, I don't think that is a concern. I'm not sure if the math really works this way, but he said Class A is better in the long term because the higher yearly expense works out to be more even with no upfront load. But wouldn't your money also grow faster with no upfront load?

I have a degree in Accounting and a Master's in Business, so I know how this stuff works in principal, but I really don't know all the angles and want to educate myself to make sure I am not making stupid mistakes with this amazing gift that many people are never fortunate enough to get.

Can anybody here tell me their experience with places like Edward Jones? I know you can't tell me exactly what to do, but I would like your opinions. Also please direct me to some books that I might read to expand my knowledge. Due to my job I unfortunately don't have a ton of free time, but I need to do what I can to become informed.

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I have no experience with Edward Jones, but have read their people are more salesmen than financial advisors. How true this might be and if they have a portfolio of "product" they steer clients toward, I can't say. But if you have reservations about EJ, you can always investigate another brokerage where you feel your interests are best looked after. After all - it's your money.

Just last week, my broker (who is a manager and not a sales person) told me this isn't a bad time to be holding on to cash, even though it's essentially doing nothing for you sitting in a money market (it'll be there when things shake out and you might want to invest in something) - the stock market's a bit volatile and with the small rise in the interest rate, the bond yields have gone down.

Like you, I've inherited as well as saved, invested, accumulated on my own and I've juggled all these disparate accounts into a well positioned diversified portfolio - municipal bonds, stock (all dividend paying) limited partnerships, and cash. I'm retired, but don't use any of this to live on.

Things depend on your age, risk tolerance, how much effort you want to put into it. I'm sure there are some good books out there, but I'm of the mind everybody's got a theory, everybody's an expert and sometimes it's hard to wade through all the theory and rhetoric. (And posters who may follow me will surely be at odds with what I've said.)

Money and what to do with it that makes good financial sense is a personal thing.

    Bookmark   June 16, 2013 at 12:28PM
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If you went to graduate school certainly there must be someone in your class that studied this kind of stuff and with a bit of luck (and all due respect) are smarter than you are.

Frankly, I don't see much sense in paying someone to invest in mutual funds. Plenty of good ones out there that you can invest in directly. Plenty of sources for mutual fund performance reviews. Makes a lot of sense to diversify as well, including some international stuff. I'm assuming you're looking at the long term and don't need any income.

Watch the fees, they can quickly eat up any gains. But I suspect you know that.

    Bookmark   June 16, 2013 at 8:52PM
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Wow, Mike - no need to be insulting. This is not a matter of intelligence but experience and research in the specific area which not all of us have the time for.

My husband and I paid a financial consultant - a certified financial planner not associated with any products - to help us set up our very meagre investments/retirement funds. I recommend a CFP for you, you can find one on the website below.

Don't use a free planner, they are always working on commission to sell a product. A free initial consultation is fine. But you want to pay them - you want them working for you.

Here is a link that might be useful: CFP

    Bookmark   June 17, 2013 at 12:13AM
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Here's my reply to the other identical thread on the subject in another forum.

Here is a link that might be useful: duplicate post with my reply

    Bookmark   June 17, 2013 at 12:17AM
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Ok, I had a long post almost set and my battery died. And I have to sleep. Here's a reply to a similar question, my appologies it's not 100% tailored to this post.

"Ok, first things first. You need to decide roughly how much risk you are willing to take. This would be based on your age/closeness to retirement, what percentage of your savings this money represents, your risk tolerance, etc.
Then you have to decide if this is as good time to jump in. You don't have to wait for an ideal time, but if you think we are due for another "adjustment" in the economy in the next year or less, you would want to wait for the adjustment to occur then get in. If you think we are going to continue to head upward, then by all means the sooner the better. Now this is not on a day to day or even week to week basis, but overall trending. Nobody knows the answer to this, this is where even the most conservative investors have to gamble, especially when investing a lump sum. When you buy a little at a time, like paycheck deferral, you get "dollar cost averaging" where you are buying shares regularly as the price goes up and down, so some shares you own you bought a lot cheap and some you paid more for a few.

If you just want to toss the money in someplace relatively safe-ish and leave it there, the Vanguard Total Market Index is a great choice. Leave it there for a while while you educate yourself on financial matters.

You don't need to agree with them, but listen to Ric Edelman, Bob Brinker, or Dave Ramsey on the radio for a while. Listen to the way they think about things, the lingo, the thought processes. You will pick up a lot. At the very least, you will know enough to ask good questions if you seek professional assistance, what to look for in professional assistance, and much more.

If this money is all your savings, I'd keep at least $1k easily accessible in a bank as an emergency fund, for actual emergencies. Then most advocate for 3-6 months living expenses in a safe investment. Then anything left you can take enough risk to grow and invest somewhere based on your risk tolerance."

-----the important points here are to not rush into anything. Your not losing ground, so either leave things alone for a little longer or dump the gains into a Vangaurd total market index while you figure something else out. Spend time listening to the people mentioned above. You will pick up a ton of stuff. Maybe enough to pick some funds on your own, but certainly enough to understand most of what an advisor will tell you and ask good questions. And definitely see an independent fee for service advisor. This is a serious chunk of change, and you need to make sure you understand the tax stuff a bit as well as make sure you avoid any hidden penalties, or loopholes, or whatever else might be a problem. Sadly, regular people trying to be smart and save their money get hit with a lot of obstacles.

    Bookmark   June 24, 2013 at 1:42AM
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I recall you posting about this back then when your relative first passed.

Many people (including myself) gave you lots of good info, links, books to read, etc.

You didn't have much to say about the feedback you got then.

With a degree in Accounting and Master's in Business, I'm surprised you weren't able to get better advice.

Perhaps you could look at the old thread and see if any of it still makes sense.

Good luck.

    Bookmark   June 30, 2013 at 7:56PM
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"Here is what advisor wants me to do---
Sell off everything EXCEPT the existing bond mutual funds. "

I'm going to give it to you very simply in a way you can understand. You need a new advisor.

A link that might be useful:

    Bookmark   July 3, 2013 at 10:38AM
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jockewing seems to have no "investment" in his/her original post this time around

With no feedback or involvement, I see little point in adding to this incarnation of the thread. Drive-bys seem to be endemic on so many of the GW forums.

Although the point that others besides the OP read through threads for whatever takeaway there might be is not lost on me.

Here is a link that might be useful: Original post/same subject

This post was edited by duluthinbloomz4 on Wed, Jul 3, 13 at 16:03

    Bookmark   July 3, 2013 at 11:21AM
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Duluthinbloomz4, thanks for posting the older link.

There were many useful comments.

I'm sure somebody will find them to be helpful one day.

    Bookmark   July 14, 2013 at 12:41PM
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I would suggest checking out website for Scott Burns--
he was investment analyst/writer at the Dallas Morning News for decades who went national with his column before being downsized...
how has an investment company in Austin but lot of free advice on his website and blogs...
he would say you don't need an advisor to manage your money
decide how much you want to "risk"
the portfolios they have design cover various packages of risk choice
surely something will fit your attitude and agenda...
But you don't have to do this with his firm--you can get almost the same portfolio choices through Schaub or Fidelity or Vanguard...
and basically manage it yourself

make your choice and invest for the long term and try to choose vehicles with as little overhead as possible so that any profit is yours and not a fee for an advisor who probably isn't giving you enough good advice to justify his fee

Here is a link that might be useful: Scott Burns

    Bookmark   August 27, 2013 at 2:23PM
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In this situation ...

... do you figure that it may be a case of "drive by" ... or maybe a "drive thru" ... in which case maybe the original poster ended up with a coffee ... or a taco or a subway, to keep him happy?

o j

    Bookmark   November 30, 2013 at 1:57PM
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