200k New Money

205 replies [Last post]
Ron 14's picture
Offline
Joined: 2008-07-10

Client comes in sits at your desk. Tells you he just got 200k bonus and doesn't know what to do with it, but doesn't need the money for 10+ years. He is 42. Where do all of you gurus put it with Dow at 7000 ?

snaggletooth's picture
Offline
Joined: 2007-07-13

Muni bonds in the state of California.

Ron 14's picture
Offline
Joined: 2008-07-10

Already did that. It was initially 500k and I sold them all out for 40 cents on the dollar, thanks.

bspears's picture
Offline
Joined: 2006-11-08

Buy them back at 40 cents on the dollar...

Ron 14's picture
Offline
Joined: 2008-07-10

I was going to go 100% gold because the market will never rebound from this.

Sam Houston's picture
Offline
Joined: 2008-12-01

I still just don't understand where the 40% payout comes from. I work at EJ and if I do 20k gross I never receive more than 39.5% or $7900. Then they take out 400 for insurance and 700 for qualified expenses. That leaves me with $6800 net or less than 35%. The bottom line is unless you are grossing 25k all the time, which in my region takes usually 5 years, you are getting paid much less than 40%. Then it takes about 5 years beyond the initial 5 to earn back those monthly 5% figures that Jones takes just for you personally to break even at the 40% number you assumed when you started. So at 10 years you are looking great, but still getting killed overall compared to an INDY.   Ron 14

 
 
 
I would direct him to a smarter broker.

Ron 14's picture
Offline
Joined: 2008-07-10

I put him in to the market 100%. I want to hear the bright ideas from all of you gold/cash/"wait until things get better" idiots

snaggletooth's picture
Offline
Joined: 2007-07-13

Ron 14 wrote:Already did that. It was initially 500k and I sold them all out for 40 cents on the dollar, thanks.
 
Now you can tell him they are a good deal.  Just say that the first time you tried it, it didn't work out. 
 
 

Sam Houston's picture
Offline
Joined: 2008-12-01

So he just got this bonus of $200m, but it was $500m, which you had control over in order to sell out of muni's?  Bonuses are given in muni's?  You are a moron.  Work on your little lies next time before coming on this board so you can insult people.

Ron 14's picture
Offline
Joined: 2008-07-10

Sam, I was kidding about  putting him in Cal Muni's and then selling them out for 40 cents on the dollar. I was also kidding about the 100 percent gold comment. I was trying to find some honest answers to how people are allocating new money these days. I am going all in to the market, but most seem to think the sky is falling and wont get in.

anonymous's picture
Offline
Joined: 2005-09-29

Ron 14 wrote:
Client comes in sits at your desk. Tells you he just got 200k bonus and doesn't know what to do with it, but doesn't need the money for 10+ years. He is 42. Where do all of you gurus put it with Dow at 7000 ?
 
Ron, should all 42 year old clients with a 200K bonus and a 10 year time horizon invest in the same manner?

Doksee's picture
Offline
Joined: 2009-03-02

Yeah, what if he wants a bigger house and a (sale-priced) golf club membership. More cash, more insurance, more fun. Instead of throwing it into VTV.

Chuck's picture
Offline
Joined: 2007-06-22

50% in pimco total return and the rest split among 20 ind stocks, blue chips with killer div yields.

B24's picture
B24
Offline
Joined: 2008-07-08

Ron 14 wrote:
Client comes in sits at your desk. Tells you he just got 200k bonus and doesn't know what to do with it, but doesn't need the money for 10+ years. He is 42. Where do all of you gurus put it with Dow at 7000 ?
 
Tough to choose the asset allocation with limited data on the guy (net worth, lifestyle, etc), but I would definitely be DCA'ing into the market over the 12 months, not all at once.  That's too much money to risk in this market.  We know it will eventually go up from here, but the last thing you want is for the guy to go all-in the day before a 5% drop.  If you need the commission today, put it into short-duration funds and DCA into the market. 

anonymous's picture
Offline
Joined: 2005-09-29

If the market has a huge 50% return this year, how much has the guy lost by DCA into the market?  The right answer is only known in hindsite.  However, it seems to me that someone invests because they expect the market to go up more than it goes down.  With this being the case, DCA is more likely to hurt him than help him.  
 
 

Anonymous's picture
Anonymous

I agree.

Anonymous's picture
Anonymous

Split 50/50 between a good equity fund and some closed end insured CA muni bond fund. Bond funds have been hit hard, have the least exposure to default, and a nice tax free income. They will bounce back.

fritz's picture
Offline
Joined: 2006-01-12

Would say go to a single "0" roulette wheel in Vegas.  Put 99,000 on 1-12; put 99,000 on 13-24; if you win you make 50% on your money.  Much better odds than you will have in the market for the nrxt 5 years.  Less stress, its over in 30 seconds.  You have a 24 out of 37 chance to make 50%.  If you lose take the last 2K and go to gentlemens club and have a great couple hours.

Sam Houston's picture
Offline
Joined: 2008-12-01

1/2 into DOG.  1/2 into DOW.   Very limited downside risk.

buyandhold's picture
Offline
Joined: 2008-09-23

I would advise him to come work for Edward Jones. The 200k will cushion him in the early years.

gvf's picture
gvf
Offline
Joined: 2008-07-01

Put 50% into a good etf-based annuity.  Get one that guarantees to double in 10 years and take the payout.  Worried about beneficiaries? Put 50k into a SUL policy.  At his age, could probably buy 1-1.5mil.  If he doesn't have a pension, put 10-20% in one of those deferred payout annuities, make it start
at age 65-70, you can get a nice IRR depending on his longevity. Lots of ways to stay in the market and have some nice numbers for worst-case scenarios. 

OS's picture
OS
Offline
Joined: 2008-11-03

Two words: lap dances

Instant pleasure, and the karma from the contribution to his community by putting several MILFs through college (this should be a write off)

gvf's picture
gvf
Offline
Joined: 2008-07-01

OS wrote:Two words: lap dances

Instant pleasure, and the karma from the contribution to his community by putting several MILFs through college (this should be a write off)

I retract my previous statement.  Now that I've eaten dinner and had a beer, I'm thinking more clearly. 

OS's picture
OS
Offline
Joined: 2008-11-03

Or better yet. Buy 50 percent ownership I'm a "gentleman's club". Set up a buy/sell policy, go fishing together, come back alone. Now you've doubled his money and surrounded him with hoes. You don't have to be a rapper to like those results.

today1's picture
Offline
Joined: 2008-05-07

50% diversified commodities but with an oil emphasis.  50% diversified leveraged closed end funds.

today1's picture
Offline
Joined: 2008-05-07

or another idea if he is in a high tax bracket or expecting to be, and has beneficiaries slam him into a vul

now_indy's picture
Offline
Joined: 2006-07-28

Put him in a Lincoln ChoicePlus variable annuity. That way, he can take income before 59 1/2 using i4Life without the 10% penalty. The income is gauranteed for the rest of his life, and hopefully this market will rock over those 10 years and give him a mad fat payout.
 
Oh yeah, and pray that Lincoln stays in business...

Mike Damone's picture
Offline
Joined: 2004-12-01

OS wrote:Two words: lap dances Instant pleasure, and the karma from the contribution to his community by putting several MILFs through college (this should be a write off)
 
Ron, this is the best advice you're going to get.

2wheeledbeemer's picture
Offline
Joined: 2008-10-10

Grab a 10 year muni zero, showing right now at 60ish, so there's 120 spent which will guarantee his original 200 back in 10 years with none of the phantom income tax mess to deal with.  Take the other 80 and build whatever you want to with it, knowing you're bulletproof and can't loose a penny if he holds the zero to maturity.  I've used this for years, and I always look like a genius when I do.  AGE used to have an actual brochure on it called "Security Plus."  Why I didn't do it with EVERY body, I'll never know...

Anonymous's picture
Anonymous

Good advice 2wheel...I use that strategy with a couple of my more nervous clients. 
 
It's getting tough to do though with Q money.  Don't trust any corps to do the job, and strips are...tough. 

Borker Boy's picture
Offline
Joined: 2006-12-09

2wheeledbeemer wrote:Grab a 10 year muni zero, showing right now at 60ish, so there's 120 spent which will guarantee his original 200 back in 10 years with none of the phantom income tax mess to deal with.  Take the other 80 and build whatever you want to with it, knowing you're bulletproof and can't loose a penny if he holds the zero to maturity.  I've used this for years, and I always look like a genius when I do.  AGE used to have an actual brochure on it called "Security Plus."  Why I didn't do it with EVERY body, I'll never know...
 
 
 
Ahhh...the ethical, and far more tax efficient, alternative to the Equity Indexed Annuity.
 
 
But then there's that pesky commission issue.

Borker Boy's picture
Offline
Joined: 2006-12-09

anonymous wrote:If the market has a huge 50% return this year, how much has the guy lost by DCA into the market?  The right answer is only known in hindsite.  However, it seems to me that someone invests because they expect the market to go up more than it goes down.  With this being the case, DCA is more likely to hurt him than help him.  
 
 
 
So, ice and anonymous, neither of you beleive in DCAing, or just not right now?

buyandhold's picture
Offline
Joined: 2008-09-23

I like the insurance ideas listed above. Insure his life, disability and as much retirement income as possible.  ....  I might also keep 100k in short term CDs for emergency purposes, at least if it was me. I know he says his horizon is 10 years, but I've seen so many of my clients and prospects get laid off in the past two months without adequate reserves.

Anonymous's picture
Anonymous

Borker Boy wrote:anonymous wrote:If the market has a huge 50% return this year, how much has the guy lost by DCA into the market?  The right answer is only known in hindsite.  However, it seems to me that someone invests because they expect the market to go up more than it goes down.  With this being the case, DCA is more likely to hurt him than help him.  
 
 
 
So, ice and anonymous, neither of you beleive in DCAing, or just not right now?
 
Not for this situation.  DCA is fine for 401Ks, 403Bs, ROTH IRAs, etc.  DCA as a savings mechanism is great.  As an investment strategy, no.
 
If this were short term money (which, given that we don't have very much info here, so we'll go with the assumption that this guy is already protected properly, and has adequate reserves, and truly doesn't need the money for 10 years)...why would I DCA it?
 
I don't know what the market is going to do later today, tomorrow, next week, next month, or next year.  Clearly, we've drawn a line in the sand on this forum as to who believes they CAN and those who believe they CANNOT, and I'm in the latter group.
 
So, to recap - 10 year time horizon + I cannot tell when we will recover + we invest in the first place with the belief that our portfolios will INCREASE in value more often than not, and over time = invest the money NOW. 
 
Remember, if this guy said he may need this money to pay taxes next year, or for his daughter's wedding next year (year after), or for some other reason his time horizon was 3 years, or 5 years, my strategy would be different, as would my answer (although I still wouldn't DCA, I would just use a more conservative approach). 

anonymous's picture
Offline
Joined: 2005-09-29

Borker Boy wrote:anonymous wrote:If the market has a huge 50% return this year, how much has the guy lost by DCA into the market?  The right answer is only known in hindsite.  However, it seems to me that someone invests because they expect the market to go up more than it goes down.  With this being the case, DCA is more likely to hurt him than help him.  
 
 
 
So, ice and anonymous, neither of you beleive in DCAing, or just not right now?
 
It has nothing to do with believing or not believing in DCA.  I just believe that I can't time the market and it goes up more years than it goes down.  Therefore, the best time to invest money is when the person has it.  That being said, much of what one should be doing needs to be based upon their risk tolerance and comfort level.  For that reason, it is very possible that my advice to this prospect would be to DCA the money into the market.
 
I'm pretty surprised at this whole thread.  I think that one of the reasons why so many brokers are struggling right now is that they set themselves up for failure by focusing on picking good investments for their clients.   Using this thread as an example, notice that people are talking about what is best for the 200K in new money.  Thus, he is getting all sorts of investment advice.   How can we have any clue as to what to do with 200K without knowing what the client wants?

Ron 14's picture
Offline
Joined: 2008-07-10

The point of the initial question, without giving an essay on his entire financial situation, was just to see what advice people are giving on new money in which the only priority is growth. The guy is well to do, home paid off, plenty in bank for emergency, no kids, no wife,  great job. I understand the questions that need to be asked. I wanted to see how many guys actually think 100% equities at Dow 7000 is a good idea. The answer is very few, which makes me even more confident in buying now.

snaggletooth's picture
Offline
Joined: 2007-07-13

Ron 14 wrote:The point of the initial question, without giving an essay on his entire financial situation, was just to see what advice people are giving on new money in which the only priority is growth. The guy is well to do, home paid off, plenty in bank for emergency, no kids, no wife,  great job. I understand the questions that need to be asked. I wanted to see how many guys actually think 100% equities at Dow 7000 is a good idea. The answer is very few, which makes me even more confident in buying now.
 
Good luck if you go 100% equities.  Anymore it's all a crap shoot.  You may look good when the market rallies 20%, but it's like snow at 33 degrees...it just doesn't stick. 
 
With the Dow in the 6000's now, we haven't even seen the effect of commercial real estate's problems yet. 
 
I know the "market" is a forward indicator, but correct me if I'm wrong, based on "historical" P/E ratios, we aren't really that undervalued right now.
 
The Dow closed at 1251.52 on the day I was born.  This is nucking futs.
 
 

jkl1v1n6's picture
Offline
Joined: 2008-10-06

10 years from now if the broader market is still down that will be 22 years of a flat market.  I'm going to say it without doing the research but I'm not sure that happened even during The Great Depression.  So for me personally 10 year time horizon, already 12 years into this, yeah I'm going equities right now.  I might take a tad more conservative approach but I'd definately be all in within the next 2-4 months. 

anonymous's picture
Offline
Joined: 2005-09-29

Ron 14 wrote:The point of the initial question, without giving an essay on his entire financial situation, was just to see what advice people are giving on new money in which the only priority is growth. The guy is well to do, home paid off, plenty in bank for emergency, no kids, no wife,  great job. I understand the questions that need to be asked. I wanted to see how many guys actually think 100% equities at Dow 7000 is a good idea. The answer is very few, which makes me even more confident in buying now.
 
Ron, you forget to tell us in the initial question that growth was his only priority.  Does his risk tolerance allow him to try for growth or does he need guarantees?

Hey Kool-Aid's picture
Offline
Joined: 2008-03-30

Ron 14 wrote:The point of the initial question, without giving an essay on his entire financial situation, was just to see what advice people are giving on new money in which the only priority is growth. The guy is well to do, home paid off, plenty in bank for emergency, no kids, no wife,  great job. I understand the questions that need to be asked. I wanted to see how many guys actually think 100% equities at Dow 7000 is a good idea. The answer is very few, which makes me even more confident in buying now.
 
If he is interested in staying wealthy and keeping all of that money for the long haul...the best advice would be to stay single w/no kids

Anonymous's picture
Anonymous

I wouldn't be 100% equity for...anyone, let alone this guy. 

jkl1v1n6's picture
Offline
Joined: 2008-10-06

I meant all in with the equity portion.  My bad!

jkl1v1n6's picture
Offline
Joined: 2008-10-06

Coincidence?  I don't think so. 
 
I sh*t you not, I had a couple just leave my office and they had $200m and change.  Said they don't need it for 10 years but don't want to go into the market right now.  Too risky.  Then next breath talked about how he might want to start putting a little in to the market over time. 
 
 
We talked about muni's as they are in an high tax bracket for some, we talked about going into a couple of index funds over the next couple of months for what they want in the market.  We talked about short term cd's for some of it.  They were curious about various etf's.
 
 
Now to combine some other threads.
He believes buy and hold is dead!
I gues wind3457 was right about all the 200m accounts just lying around out there. 
He believes we're on our way to a Socialist state! 

snaggletooth's picture
Offline
Joined: 2007-07-13

jkl1v1n6 wrote:Coincidence?  I don't think so. 
 
I sh*t you not, I had a couple just leave my office and they had $200m and change.  Said they don't need it for 10 years but don't want to go into the market right now.  Too risky.  Then next breath talked about how he might want to start putting a little in to the market over time. 
 
 
We talked about muni's as they are in an high tax bracket for some, we talked about going into a couple of index funds over the next couple of months for what they want in the market.  We talked about short term cd's for some of it.  They were curious about various etf's.
 
 
Now to combine some other threads.
He believes buy and hold is dead!
I gues wind3457 was right about all the 200m accounts just lying around out there. 
He believes we're on our way to a Socialist state! 
 
For 200k, he could build himself a nice, fairly lavish bunker, lots of beans and rice, and acquire an extensive arsenal of weapons and ammo.
 
When did the Mayans predict the world would end?

Anonymous's picture
Anonymous

jkl1v1n6 wrote:Coincidence?  I don't think so. 
 
I sh*t you not, I had a couple just leave my office and they had $200m and change.  Said they don't need it for 10 years but don't want to go into the market right now.  Too risky.  Then next breath talked about how he might want to start putting a little in to the market over time. 
 
 
We talked about muni's as they are in an high tax bracket for some, we talked about going into a couple of index funds over the next couple of months for what they want in the market.  We talked about short term cd's for some of it.  They were curious about various etf's.
 
 
Now to combine some other threads.
He believes buy and hold is dead!
I gues wind3457 was right about all the 200m accounts just lying around out there. 
He believes we're on our way to a Socialist state! 
 
Why not try the zero coupon muni idea?  put the rest into a tax efficient equity portfolio.

jkl1v1n6's picture
Offline
Joined: 2008-10-06

I've done that before not muni's but some corps and like 2wheelbeemer said it worked out well.  Client was happy.  It's a good idea, we hadn't decided on anything yet, he wants to think about it, this is where wind3457's lie gets blown up, but I'm going to call my bond desk and find out what's available and see if he'd be interested. 
 
Thanks again Ice and Beemer

2wheeledbeemer's picture
Offline
Joined: 2008-10-10

De nada.
Use your power for good.

troll's picture
Offline
Joined: 2004-11-29

.

fritz's picture
Offline
Joined: 2006-01-12

gvf wrote:Put 50% into a good etf-based annuity.  Get one that guarantees to double in 10 years and take the payout.  Worried about beneficiaries? Put 50k into a SUL policy.  At his age, could probably buy 1-1.5mil.  If he doesn't have a pension, put 10-20% in one of those deferred payout annuities, make it start at age 65-70, you can get a nice IRR depending on his longevity. Lots of ways to stay in the market and have some nice numbers for worst-case scenarios. 

"Guarantees to double in 10 years"  WTF are you talking about? If Hartford were to go BK, annuity holders will get their investment value, not one penny of the guaranteees.  How do you think anything is guaranteed with equity annuities?  Because they told you so?

gvf's picture
gvf
Offline
Joined: 2008-07-01

Sorry to be fast and loose with my words fritz.I assumed people would interpret that as the "double the withdrawal value in 10 years" feature.  I do not use Hartford annuities.

Gaddock's picture
Offline
Joined: 2007-02-23

I got two account today, one 500 ish the other 200 ish, both in cash and both will be used to write cash secured puts.

Please or Register to post comments.

Industry Newsletters
Investment Category Sponsor Links

 

Sponsored Introduction Continue on to (or wait seconds) ×