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If you had 1 or 2 or even 3 million in cash and wanted to invest it SAFELY (relatively) and live off 4% annual interest/dividends/capital gains from it. How would you invest it? Who would you hire to manage it? if anyone?

Assume you don't need to buy a home or any other asset, and you don't have any debt.

Well thats not fair that you have 1-3 million dollars and a house and no debt, when other people have no home and debt and no money. I think you should give it away to 1-3 million people. If you gave each of them $1 they could get some Reese's Cups.

TecsFanEE wrote:

Well thats not fair that you have 1-3 million dollars and a house and no debt, when other people have no home and debt and no money. I think you should give it away to 1-3 million people. If you gave each of them $1 they could get some Reese's Cups.

Only fair if I get one of the dollars (I love Reese's Cups).

Yeah me too, especially straight from the freezer. Yummy! I have often thought on the 7th day God did not really rest, he worked on the recipe for Reese's Cups.

I'd use Vanguard index funds.

I use PTTDX which is one class of Pimco's Total Return Fund. PTTDX has no front or back load and requires an initial investment of $1,000. With 1 to 3 $ million, I would use another class which requires a $1,000,000 minimum initial investment, but would have slightly lower management fees (PTTRX IIRC).

They are currently holding 23% of the fund in foreign debt which provides some protection against a falling US Dollar, but also are holding a lot in near cash in the form of 7 day T-Bills which are rolled over weekly. They have traditionally earned about 7% year in and year out, but returns are about half that currently out of caution.

Why not buy real estate that you could then rent out. You could use the 1-3 million as down payments and get 3-6 mill in real estate at bargain prices. With that amount of real estate you could contract out or hire someone to manage them for you. I know a guy who just bought 3 houses for $8000 total. They need a little work, so he is going to trade 1 house to a guy for him fixing up the other two. Its a win-win.

You cant really go wrong in investing in the basic needs of humans: food, shelter, clothing...

WalksOnDirt wrote:

I'd use Vanguard index funds.

thank you. can you expand on your asset class allocation choices?

TecsFanEE wrote:

Why not buy real estate that you could then rent out. You could use the 1-3 million as down payments and get 3-6 mill in real estate at bargain prices. With that amount of real estate you could contract out or hire someone to manage them for you. I know a guy who just bought 3 houses for $8000 total. They need a little work, so he is going to trade 1 house to a guy for him fixing up the other two. Its a win-win.

You cant really go wrong in investing in the basic needs of humans: food, shelter, clothing...

yes, some rental property does seem like a good idea. I have a condo for rent already.

TecsFanEE wrote:

Why not buy real estate that you could then rent out. You could use the 1-3 million as down payments and get 3-6 mill in real estate at bargain prices. With that amount of real estate you could contract out or hire someone to manage them for you. I know a guy who just bought 3 houses for $8000 total. They need a little work, so he is going to trade 1 house to a guy for him fixing up the other two. Its a win-win.

You cant really go wrong in investing in the basic needs of humans: food, shelter, clothing...

You can go wrong if the US monetizes (prints money) to deal with its uncontrolled addiction to debt. But, there are opportunities for people who enjoy fixing up places that need work. Dealing with bad tenants can be a nightmare if you are unlucky. That's why I only rent to international companies in Panamá who need apartments for their employees, but that means very high end properties which in my case are penthouses on top of very tall buildings.

wcushman wrote:

You can go wrong if the US monetizes (prints money) to deal with its uncontrolled addiction to debt. But, there are opportunities for people who enjoy fixing up places that need work. Dealing with bad tenants can be a nightmare if you are unlucky. That's why I only rent to international companies in Panamá who need apartments for their employees, but that means very high end properties which in my case are penthouses on top of very tall buildings.

Interesting, I see real estate and real income producing assets in general as a hedge against the inflation that debt monetization may cause. Maybe I am wrong though.

Loonie backed bonds. The inflationary outlook for Canada is much better than the US and Canada benefits largely from positive economy from the US. Our GDP growth will come back for a good few years before the oncoming inflation abates. Canada will get all the benefit without the inflation.

TecsFanEE wrote:

wcushman wrote:

You can go wrong if the US monetizes (prints money) to deal with its uncontrolled addiction to debt. But, there are opportunities for people who enjoy fixing up places that need work. Dealing with bad tenants can be a nightmare if you are unlucky. That's why I only rent to international companies in Panamá who need apartments for their employees, but that means very high end properties which in my case are penthouses on top of very tall buildings.

Interesting, I see real estate and real income producing assets in general as a hedge against the inflation that debt monetization may cause. Maybe I am wrong though.

It should give you protection against inflation, but not against a declining Dollar relative to other currencies. With today's housing market, I have doubt about how much protection it would provide against inflation, too.

The Dollar has declined so much over the past decade (about 40%) that Americans have difficulty affording trips to foreign countries. That makes the promotion of exports difficult. I went to a wedding recently on the island of Martinique which is a French state in the Caribbean. There were no hotels under $500 a night. Grizz's avatar is correct.

The good news is that a very weak Dollar makes it profitable to manufacture in the US again. There's a Korean immigrant who is shipping chopsticks made in the USA to China now where the market for chopsticks is 45,000,000,000 per year.

Last edited Wed, 10 Aug 2011, 4:04pm by wcushman

I'd find out what Goldman Sachs is investing in, and do the same. no matter what the economy does, they come out ahead...

Spread it around, whatever you do. That way, if there is a wipeout in bonds, you still have real estate, etc. It's hard to come by 1-3 million more than once in a lifetime.

Hi Fibb
shadowstats compute inflation according to the way it was done prior to 1978... and it is closer to 8% to 10%
So, you need a minimum of a few more percentage point above it... And this inflation, in my opinion, is only likely to increase with the economy diving more, tax income decreasing and the printing press going up further.
With about 30% of that cash, I would buy real estate with 70% debt to ratio with fixed interest rate and the rest in precious metals where I would put it later in stocks and real estate when they get undervalued compared to gold.
Dow gold ratio going to 1

Fibb, with the economy hanging by a hangnail, the world becoming more and more unstable, I'd lease a fleet of tour buses, rock star style, go to Vegas and hire some hookers on a percentage basis, and hit all the natural gas and tar sand plays with live entertainment. Don't forget one big ass security guy per bus. :) Oh yeah, don't forget the 50% interest rate for carrying the customer until payday. LOL. Oops, percentage of net.:) You can be the Mac Daddy, Fibb.

Well, ya could send it to me to take care of it for ya. Make the check out to the Texas Bear and I will invest it for ya! ;>)

Fibb wrote:

WalksOnDirt wrote:

I'd use Vanguard index funds.

thank you. can you expand on your asset class allocation choices?

WalksOnDirt wrote:

Fibb wrote:

WalksOnDirt wrote:

I'd use Vanguard index funds.

thank you. can you expand on your asset class allocation choices?

Probably about 40% US stocks, 30% Europe, 20% rest of world, and 10% REITs. No significant money in bonds. If the money gets inflated away most of the stock should remain.

Thanks, that kind of thing I can understand.

50% (of say $3m) would have to be put into the pre-clinical work on a potential rheumatoid arthritis cure (and other autoimmune disease cures) that looks promising.

But that would also need one or two more philanthropic investors to match it - any takers if EEStor comes good this side of the next century?

It's about the same level of risk that EEStor is, although the science results are available for examination that EEStor has not and will not publish.

The other 50% would be invested in government bonds to provide a hedge against inflation for the rest of my retirement.

OK. It's not all low risk, I know.

Regards,
Peter

Fibb wrote:

If you had 1 or 2 or even 3 million in cash and wanted to invest it SAFELY (relatively) and live off 4% annual interest/dividends/capital gains from it. How would you invest it? Who would you hire to manage it? if anyone?

Assume you don't need to buy a home or any other asset, and you don't have any debt.

Buy a farm. The economy is game over, you will soon need to grow your own food to survive.

With that kind of money, I would try to find a reputable financial advisor. Finding a really good FA might take a little time, but obviously you want the best. The FA needs to be
fee - based, i.e. charges you an amount for the time spent advising, NOT a percentage of your holdings,etc. As you can see from the above, there are so many opinions out there, plus the financial world is constantly changing in quick fashion.

I also feel you will do better if you are knowledgeable of whats happening in the financial/investing world, instead of being blindly ignorant. With three million, you can make it a hobbie to see that money grow.

Here is a website that is amazing. It's basically a bunch of financially conservative accounting types that seem to know everything about "passive investing," taxes, trusts, real estate, etc... Most of these retired folks are big tight wads and for someone fairly young, it might be too conservative investing advice. You want to capture some growth in your portfolio. http://www.bogleheads.org/

I also like Seekingalpha.com Lots of articles on what to invest in. A very wide range of quality, so always read the comments at the bottom of the article as a barometer of quality. Some amazing authors who I religiously follow. http://seekingalpha.com/

I have a diversified portfolio. It includes land investment, mutual funds of various kinds, GIC's, gold, stocks, T-bills.

I personally stay away from anything that would take up my time such as rental property or a business.

I've had the same financial adviser for about 25 years.

With 1 to 3 million you should get professional investment advice. Your tolerance to risk is a big factor in how you should invest.

buy farmland and 70's pickup trucks

If I were in the USA I would probably want to diversify and have 5% physical gold and silver for emergencies, 10% cash and deposits, 20% corporate bonds, 25% dividend yielding blue chip stocks, 45% real estate in good locations.

I would use the Graham/Buffett formulae for analysing stocks and I would spend most of my time researching real estate. That 65% of your portfolio would be buying counter-cyclically at depressed market prices, so it would give you a good hedge against inflation.

But keep your money close and don't take on leverage.

At least get quotes from financial advisers because you need ideas and structure for your portfolio.

Then of course, you need discipline.

Kind regards
ei

WalksOnDirt wrote:

Fibb wrote:

WalksOnDirt wrote:

I'd use Vanguard index funds.

thank you. can you expand on your asset class allocation choices?

Probably about 40% US stocks, 30% Europe, 20% rest of world, and 10% REITs. No significant money in bonds. If the money gets inflated away most of the stock should remain.

I think I will stick with Bill Gross's bond fund, Pimco Total Return Fund (PTTDX). Since July 22 the S&P 500 is down 16.67%, but PTTDX is up 0.63% including its monthly dividend, in spite of being out of US debt other than 7 day T-Bills which are as close to being cash as you can get without actually being cash. Cash has the problem of being protected up to only $250,000 in the event of a bank failure unlike T-Bills which are fully guaranteed by the US Government. US Debt has actually gone up in value since S&P declared that the US has a very strong capacity to meet its financial commitments (AA+, otherwise referred to as a downgrade). At my age of 70, I avoid financial risks. Bill Gross is my FA.

Partner with a 28 year old in Saskatchewan Canada who knows what he's doing and needs the money to start a farm. This is for 15% return above inflation (22% return) for the next 10 years. No returns for 5 years, then steep returns.