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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sushipup1

Edward Jones was perfect for someone like your grandmother. They will do hand-holding and charge for it. Only time we lost money was thru that company.

Talk to Schwab and Vanguard. For books, I'll recommend anything on Bob Brinker's reading list. And I'll recommend his show, too.

Just a word to you, tho. "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. " You are talking about a LOT of money. Take the time to do it right, because it might not be possible to accumulate such a lump sum again. Take good care of it and it will take care of it. It's worth the time.

Here is a link that might be useful: Bob Brinker's reading list

    Bookmark   June 15, 2013 at 1:37PM
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kellygreen216

Expenses cost you money, even small percentages. There are also hidden fees. Go to bogleheads.org , read and learn, I did, many Vanguard people. Vanguard has the lowest fees. Wellesley and Wellington are excellent Vanguard mutual funds with very long track records.
Good Luck !!!

    Bookmark   July 2, 2013 at 8:09AM
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Ray1000

The best advice I can give is to listen to absolutely no financial adviser at any time. Ask them one question:

How much of your income last year was derived from your practicing the advice you just provided me versus your fees for your advice to me and others.?

1) Avoid front end loads!!!
2) Avoid mutual funds as they will do ok when the market also does. You won't get rich buying these funds.
3) Learn to trade yourself using Optionsexpress or other like websites with a small fee per trade. Learn how to research the stocks you purchase.
4) You don't need a diversified portfolio to make money. I'm not interested in a few losers and a few winners. I prefer winners.
5) If you want long term ownership of stocks, choose those with high dividends that will provide long term returns.
6) If you want to avoid taxes, buy AA or AAA municipal bonds (utility, etc.) Avoid corporate bonds as they may prove risky.
6) By all means read, read and read some more. However, Set uo an account with Optionsexpress at no cost to you. You can virtual trade for free with no risk. Once you have learned the market to a comfortable level, TRADE !!!!! Learn to deal with the fear of trading and avoid greed. In other words be happy making $500 versus holding a stock to make $1000. Don't worry about what you could have made: be happy with the $500 you did make.

You will make little by relying on advisers that thrive on their clients versus the opportunity in trading yourself.

Yes, I practice daily the advice I offer you. I only wish I knew as much abut the stock market at age 25 as I know now. Of course, I learn more each day too.

The adviser knows one thing which is to take your money, charge a fee and put the money in some security or bond fund. When you call him, he may even give you some more advice as to how he can charge you more. Keep in mind that he will make money when you do not!!! Advisers will either charge a front load, price per trade, an annual 1 to 2.5 % of the principal or various other methods to put money in their pocket, not your pocket.

Learn to manage your own money!!!!!!!!!!!!!!!!!!!!!!!!

    Bookmark   August 31, 2013 at 11:26AM
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