Forums (http://www.elitetrader.com/vb/index.php)
- Journals (http://www.elitetrader.com/vb/forumdisplay.php?forumid=29)
-- My Grandma's portfolio. (http://www.elitetrader.com/vb/showthread.php?threadid=235165)

Posted by Debaser82 on 01-22-12 10:24 AM:

My Grandma's portfolio.

My grandma sold her appartment as she is in a retirement home now.

After putting away some cash for covering expenses the next years (her pension only covers 1/2 of her expenses) and cash to pay for inheritance rights (it's a reality...) she has about 100K USD coming available to invest.

I was thinking about employing it the following way. The goal is to support her day to day expenses somewhat and not lose to much of the principal but I guess everyone wants that...

- 10K in the Nikkei. (I see there are small cap Japanese indexes too?). Nikkei has been dead for 20 years, if the Yen rises we do good, if the Yen tanks stocks could compensate for it.)

- 10K in a broad emerging market index.

- 10K in a emerging market of choice (Vietnam, India, Egypt?).

- 10K in the S&P.

- 10K in a local telephone company that pays a great dividend

- 10 K in a foreign corporate bond (but what currency the Euro tanked against most of them (like AUD)

- 20 K in rocksolid companies like Nestle or Roche or Total or utilities...

- 10K in a short instrument maybe best on emerging markets since they get hit worst when liquidity retreats.

- 10K in GDXJ (couldnt resist... )

What say you guys, would you leave your own grandma with such an alocation...

Cheers.

Posted by hkrahra on 01-22-12 10:46 AM:

Maybe start a bakery?you'd have a fresh bread on a daily basis for your grandma.



Wish you and you grandma good health and prosperity!

Posted by pupu on 01-22-12 11:04 AM:

I wouldn't put anything in Egypt unless you expect the newly elected radical islamists to lead the country to economic prosperity

Posted by Lucias on 01-22-12 11:05 AM:

Re: My Grandma's portfolio.

Not an investment adviser but it sounds like no investment other then savings/bonds/cash would be appropriate. If anything happens in stocks/etc it can take 10-20 years to work off.

If it were me.. I'm not sure what I'd do but I'd look to invest the majority of it in treasury bonds with only perhaps a small portion invested in non us treasury bonds/currencies for currency risk.

You may also want to think about estate planning. Outside my domain, as well.

Quote from Debaser82:

My grandma sold her appartment as she is in a retirement home now.

After putting away some cash for covering expenses the next years (her pension only covers 1/2 of her expenses) and cash to pay for inheritance rights (it's a reality...) she has about 100K USD coming available to invest.

I was thinking about employing it the following way. The goal is to support her day to day expenses somewhat and not lose to much of the principal but I guess everyone wants that...

- 10K in the Nikkei. (I see there are small cap Japanese indexes too?). Nikkei has been dead for 20 years, if the Yen rises we do good, if the Yen tanks stocks could compensate for it.)

- 10K in a broad emerging market index.

- 10K in a emerging market of choice (Vietnam, India, Egypt?).

- 10K in the S&P.

- 10K in a local telephone company that pays a great dividend

- 10 K in a foreign corporate bond (but what currency the Euro tanked against most of them (like AUD)

- 20 K in rocksolid companies like Nestle or Roche or Total or utilities...

- 10K in a short instrument maybe best on emerging markets since they get hit worst when liquidity retreats.

- 10K in GDXJ (couldnt resist... )

What say you guys, would you leave your own grandma with such an alocation...

Cheers.

Posted by Debaser82 on 01-22-12 11:13 AM:

Re: Re: My Grandma's portfolio.

Quote from pupu:

I would put anything in Egypt unless you expect the newly elected radical islamists to lead the country to economic prosperity


Yeah, I do think Africa is one of the true contrarian investments left but maybe Egypt is a tad out there... The likes of Vietnam or India also have a lot of problems so I guess to some extend it is also a liquidity play.


Quote from Lucias:

Not an investment adviser but it sounds like no investment other then savings/bonds/cash would be appropriate. If anything happens in stocks/etc it can take 10-20 years to work off.

If it were me.. I'm not sure what I'd do but I'd look to invest the majority of it in treasury bonds with only perhaps a small portion invested in non us treasury bonds/currencies for currency risk.

You may also want to think about estate planning. Outside my domain, as well.


I am European so putting it all in Treasury bonds seems like a bit risky no, just for the currency risk alone, and if not I am betting the house for the USD to apreciate...

So what is the alternative? Put it all in Bunds? They are quite expensive obviously and the Euro crisis could play out in many ways.

On the matter of estate planning you pay 3% on everything below 300K USD if it is straight line family so that takes care of itself I imagine...

Posted by rmorse on 01-22-12 12:33 PM:

Re: My Grandma's portfolio.

Quote from Debaser82:

My grandma sold her appartment as she is in a retirement home now.

After putting away some cash for covering expenses the next years (her pension only covers 1/2 of her expenses) and cash to pay for inheritance rights (it's a reality...) she has about 100K USD coming available to invest.

I was thinking about employing it the following way. The goal is to support her day to day expenses somewhat and not lose to much of the principal but I guess everyone wants that...

- 10K in the Nikkei. (I see there are small cap Japanese indexes too?). Nikkei has been dead for 20 years, if the Yen rises we do good, if the Yen tanks stocks could compensate for it.)

- 10K in a broad emerging market index.

- 10K in a emerging market of choice (Vietnam, India, Egypt?).

- 10K in the S&P.

- 10K in a local telephone company that pays a great dividend

- 10 K in a foreign corporate bond (but what currency the Euro tanked against most of them (like AUD)

- 20 K in rocksolid companies like Nestle or Roche or Total or utilities...

- 10K in a short instrument maybe best on emerging markets since they get hit worst when liquidity retreats.

- 10K in GDXJ (couldnt resist... )

What say you guys, would you leave your own grandma with such an alocation...

Cheers.


Many of these assets are highly correlated. It looks like at portfolio for someone looking for risk that might have higher returns during a time of a bull market. How will she handle the months where she is down 5%? 10%? Anything more than 20% - 25% in equities sounds too risky for most people in her position.

__________________
Robert L. Morse
Business Development

VICTOR SECURITIES
285 Grand Avenue
Englewood, NJ 07631
rmorse@victorsecurities.com
office: 646-545-3860
www.linkedin.com/pub/robert-morse/6/8a7/617
__________________

Posted by Debaser82 on 01-22-12 12:44 PM:

Re: Re: My Grandma's portfolio.

Quote from rmorse:

Many of these assets are highly correlated. It looks like at portfolio for someone looking for risk that might have higher returns during a time of a bull market. How will she handle the months where she is down 5%? 10%? Anything more than 20% - 25% in equities sounds too risky for most people in her position.


They are correlated but perhaps less so then people might suspect in my view.

Look at 2008 where US markets collaped 50% but emerging markets like China or Russia 70% or more.

Or look at 2011 where the US ended flat but emerging markets tanked 20% with on top the currency dropping 20% as wel.

I try to reduce risk as well by chosing primarely index investing also and through the diversification in different currencies as wel. The dividents should account for some risk hedging as well.



But anyway, thanks for the post I wil certainly take it into consideration as the large exposure to equities was clear to me to.

Posted by nutmeg on 01-22-12 01:28 PM:

Just yakking, but I would look into some insurance products,not very sexy but too many unknown variables to lose your money regarding Grandma's future health (re assets, old age care, medical benefits etc. - at least here in the US).

If I was goin to inherit the remainder of Grandma's 100k @ some point in time and still provide her with coverage of day to day expenses probably I would look into some type of paid up whole life insurance.

Secondly, although annuities are notorious for poor returns, I still would investigate an immediate annuiity to provide a monthly check with survivors benefits.

(split up, maybe 50k 50k)

The goal would be to make Grandma's 100k untouchable by the powers that be, in the event of catostropihic health expenses.

I don't know for sure but if you purchased a paid up whole life policy, you could probably borrow against it and take the proceeds and invest in the market.

Also you could take the monthly check from the annuity and add to an investment account. So all is not lost with liquidity for future investments, but Grandma's money would be almost untouchable.

Posted by Trader666 on 01-22-12 02:30 PM:

Re: Re: Re: My Grandma's portfolio.

In your view? How about figuring out the correlations instead of guessing? You can start by doing a portfolio xray in Morningstar. It isn't perfect but better than guessing and you can improve on it with a little effort. Also, I'd put more in bonds and unless you know more about them than someone like Gundlach, put that part in a few good bond funds.

Quote from Debaser82:

They are correlated but perhaps less so then people might suspect in my view.

Posted by Debaser82 on 01-22-12 03:11 PM:

Quote from nutmeg:

Just yakking, but I would look into some insurance products,not very sexy but too many unknown variables to lose your money regarding Grandma's future health (re assets, old age care, medical benefits etc. - at least here in the US).

If I was goin to inherit the remainder of Grandma's 100k @ some point in time and still provide her with coverage of day to day expenses probably I would look into some type of paid up whole life insurance.

Secondly, although annuities are notorious for poor returns, I still would investigate an immediate annuiity to provide a monthly check with survivors benefits.

(split up, maybe 50k 50k)

The goal would be to make Grandma's 100k untouchable by the powers that be, in the event of catostropihic health expenses.

I don't know for sure but if you purchased a paid up whole life policy, you could probably borrow against it and take the proceeds and invest in the market.

Also you could take the monthly check from the annuity and add to an investment account. So all is not lost with liquidity for future investments, but Grandma's money would be almost untouchable.


The most popular insurance products here are 100% guaranteed by the government (it's not like there is no risk there right) and are looking at a 1.3% return in 2012 because they say the world is very unstable and they don't want to gamble with their clients money.

I'd might come of cocky or ignorant but that return is just too little really and I don't feel one would have to settle for that.

I must add the catastrophical health expenses isnt really an issue, she just spend 1 month in the hospital and the bill was 2000 USD so that's overseeable right...

The biggest unkown is how long she will live, she is 86 and could live another 10 years or could die next week so I take it it would be wise to find a middle ground in the aproach.

The inheritance issue is also there since my mother will be the only beneficiary and I would like for here to inherit a long term portfolio that will need only modest changes should she become owner of it.

So there are many angles to it you see...

Posted by Debaser82 on 01-22-12 03:14 PM:

Re: Re: Re: Re: My Grandma's portfolio.

Quote from Trader666:

In your view? How about figuring out the correlations instead of guessing? You can start by doing a portfolio xray in Morningstar. It isn't perfect but better than guessing and you can improve on it with a little effort. Also, I'd put more in bonds and unless you know more about them than someone like Gundlach, put that part in a few good bond funds.


Past Performance is No Guarantee of Future Results...

A lot more smarter men then me sit at NBC all day discussing whether correlations between a wide variety of assets will continue or breakdown.

I'd like to be prepared for them to remain in place or not.

Anyway, thanks for the morningstar advice and I will certainly look into what bond funds have to offer these days.

Posted by bwolinsky on 01-22-12 04:29 PM:

Re: My Grandma's portfolio.

Quote from Debaser82:

My grandma sold her appartment as she is in a retirement home now.

After putting away some cash for covering expenses the next years (her pension only covers 1/2 of her expenses) and cash to pay for inheritance rights (it's a reality...) she has about 100K USD coming available to invest.

I was thinking about employing it the following way. The goal is to support her day to day expenses somewhat and not lose to much of the principal but I guess everyone wants that...

- 10K in the Nikkei. (I see there are small cap Japanese indexes too?). Nikkei has been dead for 20 years, if the Yen rises we do good, if the Yen tanks stocks could compensate for it.)

- 10K in a broad emerging market index.

- 10K in a emerging market of choice (Vietnam, India, Egypt?).

- 10K in the S&P.

- 10K in a local telephone company that pays a great dividend

- 10 K in a foreign corporate bond (but what currency the Euro tanked against most of them (like AUD)

- 20 K in rocksolid companies like Nestle or Roche or Total or utilities...

- 10K in a short instrument maybe best on emerging markets since they get hit worst when liquidity retreats.

- 10K in GDXJ (couldnt resist... )

What say you guys, would you leave your own grandma with such an alocation...

Cheers.


This allocation is not efficient. You'd need Macroaxis and more suitable investments to do a real portfolio. Every investment in this is too aggressive, and that's coming from an IA/CTA.

__________________
HOW MUCH IS ENOUGH?

Bud Fox

Wall Street

Posted by anglagard on 01-22-12 04:56 PM:

Wait til April, then short XLF.

Cover half at 10%, then one quarter at 15% rest at 20% close by October, whatever comes first.

Then reverse long but only with the gains all the way til March.

Keep cash in CD until it's time to short.

Joe

__________________
Anglagard

Posted by Mercor on 01-22-12 05:14 PM:

The goal should be Capital preservation along with tax avoidance.
I would look at guaranteed tax free instruments, Muni-Bonds.

Posted by Debaser82 on 01-22-12 05:19 PM:

Quote from Mercor:

The goal should be Capital preservation along with tax avoidance.
I would look at guaranteed tax free instruments, Muni-Bonds.


All capital apreciation is tax free here, interests get taxed 20%, stock dividends get taxed 25% national, 50% international.

Posted by Debaser82 on 01-22-12 06:44 PM:

I believe seniors (and people in general) who got hit hardest these last few years have been hit because:

- Too much exposure to individual stocks or companies. I'm sure everyone knows someone who had 90% of their money in say C bonds or stock.

- Too little diversification in regions, currencies, sectors. People used to think owning Meryl, BAC and JPM was being diversified.

- Little to no exposure to any upside making any rebound in risk assets of no influence to them. It's classic mom and pop to sell after a 50% loss and see the rebound go past you.

What am I missing...

Posted by Debaser82 on 02-10-12 07:19 PM:

I have given it a couple of weeks and have come to the decision that I will try and pursue a 25% cash 25% gold 25% stocks 25% bonds alocation for my mother and grandmother's savings combined.

I believe this is a smart way to limit risk, with upside potential in place while drops in the one could be countered by a rise in the other.

The cash amount will probably be higher then 25% since there will also be some of the money used for day to day expenses.

They already own all 4 of these assets, so adjustments will be smaller then just putting in all the money in at one time.

I will take the time to come to think about the allocation of the individual categories. For sure index investing will be the largest chunk of the stock part, since that as well lowers the risk.

All times are GMT. The time now is 10:52 AM.

Copyright © 2012 Elite Trader.