| Client Login |
 |  |
|
 |
|
 |
 |
|
|
|
|
|
|
 Neal Frankle, Founder |
|
 Mary is a single woman 62 years young. She has $30,000 in a savings account for emergencies. She also has $350,000 in savings & investments and another $450,000 in her IRA for a total value of $800,000. She has another $20,000 that she would like to put away for her granddaughter's retirement who is only 11 years old. Mary owns her home and has no mortgage. She just bought a new car so doesn't need to worry about buying a new one for several years. Her children are self-supporting so she only needs to support herself. She is in a low tax bracket. She is retired and has social security benefits but she needs to draw $1,500 from her investments each month to make ends meet. Mary is understandably risk averse and would like as much safety as possible. She also understands that she is only 62 and needs to grow at least a portion of her money in order to allow for an increase in her cost of living in the years to come. Here is how we could use the portfolios listed above to solve her needs. First, keep the $30,000 in the bank for emergencies. This could be in money market or short-term CD's. She may not earn much interest on this account but that is okay. The interest she could earn on this money is less important than the fact that she has the money available in case of emergency. Since Mary is risk averse, the $350,000 from savings and investments should be invested for income (60% bonds) and growth (40%). This would provide a great deal of safety, good steady income and some growth as a hedge against inflation. Mary would have to understand that the bonds or bond funds will fluctuate in value. If interest rates go up, the value of the bonds may decrease. Mary would also have to understand that the 40% invested for growth would also fluctuate in value. That money invested for growth would almost always be invested in some area of the market. It won't always be invested in the same fund, but it will be in the market almost all the time. As a result, it will fluctuate in value. Moreover, sometimes, over a short period of time, a few months for example, that 40% of the portfolio might fluctuate more than the overall market. Since the equity portion of this portfolio is only 40%, Mary feels she can live with this. Mary's IRA is longer term money but because she would rather avoid risk if possible. Working together, Mary and I agreed that she should use the income and growth portfolio for that money as well. She realized that she could possibly make more money by investing a higher percentage in equity, but she does not feel comfortable with the fluctuations. After looking at the numbers I determine that Mary will be able to receive her $1,500 monthly income from her accounts and grow a portion of her assets to potentially offset inflation. She doesn't need to take on any more risk than this so we implement this strategy. As for the money set aside for the granddaughter, Mary understands that this is very long term money. She doesn't even want her granddaughter to touch this money for at least 20 years. Mary wants this money to grow. In this case, the growth portfolio is most appropriate and Mary agrees. Again, she understands that the values will fluctuate in value and sometimes more than the overall market. In summary, Mary uses different portfolio strategies for different buckets of money depending on her financial needs and comfort level. Put our experience to work for you; get your free phone consultation now. |
|
|
|
|
Wealth Resources Group | 28348 Roadside Drive, Suite 102B | Agoura Hills, CA 91301 | 818.889.6700 | Driving Map | Investment Blog |
|
|
||
|
|
|
|
© 2008 — All Rights Reserved. Web Services by The Chiron Group |
|