Where would you park $800k?

Discussion in 'Risk Management' started by zghorner, Nov 22, 2021.

  1. zghorner

    zghorner

    looking for some suggestions for an older friend on some places to park $800k. Must be low risk, Must be fairly simple and must provide a better return than CDs (currently averaging around 0.5% APY). Simply putting it in the SP500 is completely out of the question for him...he is in his 60's and extremely risk averse with this money.

    Does anything like this even exist? even 2-3% would be acceptable to this guy.
     
  2. thecoder

    thecoder

    I can try to make 25% p.a. profit with it, by risking not more than 5%, tell him this... :)
     
    zghorner likes this.
  3. Time horizon?
     
    murray t turtle and zghorner like this.
  4. SunTrader

    SunTrader

    There likely isn't an acceptable option for your friend.
     
    cobco, murray t turtle and zghorner like this.
  5. May consider if longerterm muni's (>7yr) may be a fit? -- I no longer hold them, but may serve this purpose.
     
    zghorner likes this.
  6. CALLumbus

    CALLumbus

    In my garage.
     
  7. zghorner

    zghorner

    He’s not that concerned with duration but I’m going to say since he is in his 60s 10yrs would be tops.
     
  8. upload_2021-11-22_11-13-9.png

    I'd suggest a laddered bond portfolio, he can talk to a fixed income specialist at his broker to set one up. Idea is to limit duration in the portfolio with the assumption that interest rates will be higher in the future.

    Basic idea is that you take money and split it up across various years (e.g matures in 1yr, 2yr, 3yr, 4yr, etc.) so that once the bonds mature, you can roll it up into a higher rate. By doing this you can participate in higher rates (if this happens) while still generating a modest yield in the interim through the blend of different tenors.
     
    cobco, Chuck Krug, Nobert and 5 others like this.
  9. zghorner

    zghorner

    Nice, thank you.
     
    longandshort likes this.
  10. screenshot shows the average "yield to worst" ("YTW") of each type of credit rating (from AAA to BAA), excluding high yield/distressed. Should give you and your friend a sense as to what rates look like and what to expect from a laddered bond portfolio from a credit risk standpoint.
     
    #10     Nov 22, 2021
    MACD and zghorner like this.