What is the best way to invest a lump sum of 500,000 for reitrement..i,m retiring in a month?

The proper investment strategy depends somewhat on the amount of annual income you will require from the $500,000. I have to assume that it is not more than about $20,000.

$100,000 in t-bills will currently yield about $5,000 annually and they provide a certain degree of safety and liquidity. It would be better to reduce the amount to aout $50,000 but lets go with $100k.

$50,000 in bank stocks because they pay good dividend and have a solid record of raising their dividends. This can be accomplished by buying the stocks directly or by buying a bank index fund. BAC, BBT, UBS, C all pay over 4% except for C which is 3.9% and they should all keep their dividends ahead of inflation. An index fund is IYF which pays 2.25%, IAT which pays 2.0%, or IXG with which pays 1.3% but includes foreign holdings which adds diversity. Assuming $50,000 invested in 4% yielding bank stocks yields you $2000 annually.

Now you have a problem called inflation which must be addressed unless you do not plan to survive more than 5 years. That prevents you from selecting a conservative investment program consisting of a bunch of bonds. In fact bonds are the pits. The current return on them is negative after inflation and taxes. They do however offer stability in the face of a stock market crash and do offer a pittenence of income.

To stay ahead of inflation you will have to assume some risk. Therefore about $50,000 invested in Chinese and Indian stocks. Those two countries are growing 3x faster than the U S and the potential to stay ahead of inflation is much greater there. Mutual funds specializing in those two countries are the best way to invest there. CHN and TDF are two options for China. IIFand IFN are two options for India. All 4 are currently selling at very healthy discounts. This money however is subject to some risk.

The other $300,000 should be allocated to provide both income and growth. There are several index funds and mutual funds you can choose from. It should be allocated among about 6 to 10 different funds with different styles of investment. Let's assume $50,000 increments.

Pennx $50,000 a solid small cap fund with an excellent long term record.

FIGRX $50,000 a solid foreign developed markets fund to protect agains the falling dollar.

RSP $50,000 an index fund of equal weighting of the S&P 500 yielding about 0.73% for $365

IXC or XOP $50,000 an index fund investing in energy stocks yielding about 1.5% for $750. You could improve your yield a little here by just investing in XOM, COP, CVX, etc. It is my opinion that investors who do not own oil stocks will be missing the boat. Besides as the price of gasoline increases you will not feel so bad knowing that your energy stocks are going up too.

The last 100k presents somewhat of a quandry. The need for yield means that it should be invested in income producing stocks but the need for staying ahead of inflation means it should be invested in stocks that have growth prospects.

I am not entirely satisfied with the compromise that needs to be arrived at here.

$50,000 in DOL. This is an international index fund of 100 large companies that pay dividends. Yield is 3.48% for income of $1750

$50,000 in IJH a mid cap index fund yielding about 1.8% for income of $900

Your total income would be at least $15,000 annually in income and over a long period of time stay ahead of inflation and return about a real 3% annually in capital appreciation and increased income.

3 words: Not enough information.
Do you have any other sources of income besides, I assume, social security? What are your goals for this money? Do you want to buy a second "vacation/retirement" house after a few years of looking around? or not touch this money and just live off the income? I assume you are in your 60's so you just may have 40 years of money use left so don't put it all in CD's bond's, money market etc unless you have other "growth" investments to keep up with inflation. Do you have long term care insurance? What are your risk tolerances? Can you sleep at night with stocks and corporate bonds or do you need FDIC insurance and/or insurance company's annuity "guarantees?"
You need to find a hourly fee financial advisor.

I'm not a financial expert but I would say that since you are retiring you don't want to take too big a risk with your money at this point. But most in low risk like bonds, cds and money market.

Whatever you do, take your time. Park the money in a money market or short-term bond fund until you have a good handle on things. But this is what I would do:

Pay off all debt.
Of the remainder, I would put 25% in a money market account, 15% in an international stock index fund, and 60% in a domestic stock index fund.

From the money market fund I would eventually take $50-100,000 and buy something like JRO or EVV, but I wouldn't do it now. They are essentially variable-rate bond funds that yield 8-8.5%. I wouldn't do it now because the prices for these issues are high now and they usually go down toward the end of the year.

I wouldn't put it in stock because thats a risk of losing it all put it all in cds.

Look into something like mutual funds.

Investing $500,000 on your own this close to retirement is a risky proposition. You should find a fee-only financial advisor in your area and first ask them to prepare a retirement plan for you.

How much will you need to live annually? What are your income projections? How long do you think you will live? Do you want to leave an estate or die broke? What other sources of income will you have? etc. Many of these things will dictate the types of investments you need to own and the weightings in different asset classes (stocks, bonds, etc.)

A good financial advisor can prepare not only an investment plan for you but also a retirement and distribution plan that is tax efficient and can maximize your chances of reaching your retirement goals.

not in 1 basket
diversify

6 or 7 mutual funds
a few Cd's that come due at different times
maybe a couple stocks
a house or two in a lake community that is just taking off and has potential to grow fast. As it fills prices will increase rapidly

talk to your bank manager or investment banker or portfolio handler.They'll ve the best idea. But have yo considered going into small business? The best way to start is to luk around you to find a need in your immediate environment and try to meet it. goodluck.

Two words: Mutual Funds

Thats a tricky question as "the best" always differes from person to person (because different people are willing to take different risks) and because of the financial climate, different things to invest in become popular at different times.

A wise person said to me.. don;t put all your eggs in one basket as you might loose it all in case it fails. Five areas with 20% in each may work well for you. Also.. you can get higher rates of interest if you don;t need to withdraw the money for a while.

Lots to think about! Best of luck with it all.

Good luck in retirement, I am sure it is a great feeling. I think you need to provide more information here so we can assist you (like your age, sources on income etc...) In the meantime since you will be retiring in a month or so you should park this money in a money market mutual fund (i.e. Vanguard, which at last check was earning approximately 5.2%). Then you need to sit down and figure out what your income sources are (i.e. social security, pension, IRA required distributions) and develop a budget for your expenses. After that you can then develop a plan that will incorporate the level of risk you are willing to take with the money you will have available to invest. Please make sure you diversify your investments.

Two other suggestions:

1. Before you retire, consider getting a line of credit at your bank while you are still employed. This will enable you to get a larger available line of credit while you are employed. You should not use this unless it is an emergency but it is nice to have available.
2. Set aside an emergency fund for 6 months to one year of living expenses that you park in a money market mutual fund.

Best of luck.

I know of an excellent financial planner who has many years of experience in preparing people for retirement. He currently lives in the Chicago area.

$500,000 is not a small amount...it's good that you've taken the time to find answers to your questions!

My mom is currently working with this same financial planner and she has assets somewhere near $1.2 mil., and so far, everything's gone really smooth. He's done a lot to help her out. I've come to really trust him.

If you'd like, e-mail me at sjlykowski@yahoo.com and I can give you more information.

Stock Market (With the help of a Portfolio Manager like myself)

Enter Your Message or Comment

User Name:
User Email:
Post a comment:

Archive: Forum -Forum -Finance - Links - 1 - 2 - RSS - All RSS Feeds
The Causes and the Results. 0.024
Copyright (c) 2011 Financial Crisis Monday, May 28, 2012 - Terms of use - Privacy Policy