Advice to a Widow,

F

flytiger

.......and I don't mean, "stay single." Although, that's probably pretty good advice.

I have people who come to me asking questions about investing, and I'm really afraid to talk to them, because they fall for some line from an Insurance guy, or a guy hawking MF's at church. That being said, what would you tell someone like that? Where would you send them so they wouldn't get screwed? Send them to the bank, they'll end up in some lousy fund with a lot of fees. What would you do?

That being said, some of you young guns with computer skills, what would happen to 100,000 dollars in Vanguards' S&Pindex funds, if you bought as the 50 day simple crossed the 200, and went to cash when it broke it?

Remember - 45 years to say, 70. A hundred or more to put someplace, and a plan they could follow w/o a lot of difficulty. Because remember. People like that will sell on Big down days, and buy on big up days. It has to be something to keep the average Jane out of trouble.

By the way. What do you tell your significant other, should you pull a Heath Ledger. It's an important topic. It 's a bitch to leave early, b ut worse to leave somebody a mess.

Moderator - maybe Chit Chat, but I'm not so sure. It's a problem we all have, being arrogant and hard headed and not trusting anyone but ourselves.
 
If you're pulling a Heath Ledger, it's VERY often because of the misery a significant other puts you through. It's not very often about P&Ls because money is gained and lost all the time. The misery a wife can put you through, on the other hand, is a stinging pain felt more acutely than money lost on the market. Unfortunately, spousal harrassment and money lost are very strongly correlated (p-value < .01) and I can tell you with 99 perent confidence that single guys don't off themselves after losing money quite the way married guys do when they buy the farm (long AAPL for example)
If I would pull a Heath Ledger, and I was chained to a wifey of some sort or another, I'd leave a hand drawn note of a drawing of a middle finger.
 
One of those annuitys where you particiapte partially in market returns but can never lose your principal. Forget what they are called but if you search my name I asked about them and someone came up with what they were. Not good for a trader but good for a widow that needs growth but cap preservation above all.

As far as any staright correlated market fund like vanguard 500 that is totally out. As Buffet says, if you can stand losing 50% of your capital at one time or another you have no business being in the market.
 
Equity-indexed annuity. (EIA)

Your money is invested in a fixed account and you may earn additional interest based on the performance of a particular stock index, such as the Standard & Poor's 500 Index, the Dow Jones Industrial Average, the NASDAQ Composite Index, or the Russell 2000 Index.
With an EIA you get the best of both worlds — the opportunity to earn money from stocks and the stability of a fixed account with guaranteed preservation of principal-an especially appealing factor to anyone who is averse to market losses.
The only downside is that the gains you can make in the contract due to the performance of the stock index will not equal the "full" appreciation of market increase.
Example: You may have an EIA that is paying a minimum guaranteed 8%. The S&P Index rises, increasing interest returns to 14%. Your EIA might then adjust to 12%, but not 14%. Why is this? The 2% spread between the market and your rate is the "cost" of having had the security against loss in any market drop. Another plus with the EIA is that once your interest rate is re-set..in this case to 12%, it can't go back down no matter what happens to the market.

On the flip side, if you were in an indexed annuity at 8% and the market dropped severely to a 2 or 3% level, then you suffer no loss on accumulated value (principal and interest) and your interest rate does not go below 8%. The guarantees in an EIA would hold your accumulated principal and earnings and you would suffer no market losses.

EIAs offers a great deal of security for investors who wish to avoid market downside fluctuations and be assured of a minimum return.

As with all annuity products, your money grows tax-deferred.
 
Mvic has given you some good ideas, and he definitely know his insurance products.

If were go give you my two cents, I would first say be very, very careful about advising other people on what to do with their money. There's no real upside and plentfy of downside to the matter. Now, having gotten that out of the way, and if they want to go with straight index funds sans the complexities of an insurance vehicle, I would highly recommend the Couch Potato Portfolio strategy for investing.

Basically, they put 50% in the S&P500, 50% in a medium-term taxable bond fund, and rebalance it every year.

It's a very popular concept, can be implemented with the Vanguard Fund products, and is very, very easy to self-manage. Here's some more info:

Couch Potato Porftolio ... and of course, if you "google it" you will find a ton of more information.
 
I would pick all 5 star funds. I would buy a financial fund since they are crashed right now. I would buy maybe 2 preferred stock funds. I would get a growth fund and whatever else you feel is good. I would take well diversified funds and roll the dice. I would only buy 10% at a time though over a period of a year.

I don’t think you can get 8% on a annuity but if you can I would take that too.
 
Quote from brokerboy:

I would pick all 5 star funds. I would buy a financial fund since they are crashed right now. I would buy maybe 2 preferred stock funds. I would get a growth fund and whatever else you feel is good. I would take well diversified funds and roll the dice. I would only buy 10% at a time though over a period of a year.

I don’t think you can get 8% on a annuity but if you can I would take that too.
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You just recommend an 80% stock growth portfolio for a widow who needs to self-manager her investments?

Not a good idea ...
 
As one of those mutual fund sales guys in a previous life, here's my suggestions:

1) AVOID annuities. They are so incredibly costly. While the 'guarantee' looks nice, there is typically so much fine print it's not even funny. I used to sell one where the fees were at least double of mutual funds and with the 'guarantee' the most you could take out was 7% per year. Cross over that mark and all bets are off. In other words, they keep you in the product for at least 14 YEARS. Of course, odds are that the market will go up over a 14 yr period and they know this.

2) Mutual funds suck as well. Most typically lag the overall market.

3) My best solution for this question, b/c I get it A LOT, is to suggest learning about ETF's. You do not need to know a lot - just build a diversified basket and leave them be. We know that over time, the market goes up. If time is not an issue, this can be a simple solution to staying in the markets w/o getting taken for a ride with fees.

And that's it. Just buy a few ETF's and let them go. Maybe you could find a few good sites that recommend ETF's and direct your spouse there for help and guidance.

Now if he/she is not going to be willing to do some work, some sort of fund of funds through a Fidelity or Vanguard could work.
 
How do you know she will follow ANY "system", even one that only requires 20 minutes per year like "Dogs Of The Dow"? In my experience, people lose interest and lose motivation and quit doing their part. They quit following the system. Many of them quit opening the envelopes containing their statements, too ... until income tax time the following April.

A managed account has pros and cons; one of the pros is that the manager WILL follow the system. The client, left to herself, won't.
 
Quote from MGJ:

How do you know she will follow ANY "system", even one that only requires 20 minutes per year like "Dogs Of The Dow"? In my experience, people lose interest and lose motivation and quit doing their part. They quit following the system. Many of them quit opening the envelopes containing their statements, too ... until income tax time the following April.

A managed account has pros and cons; one of the pros is that the manager WILL follow the system. The client, left to herself, won't.
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No doubt.

There needs to be an active, WILLING participant for this to work.

If not, off to Smith Barney, Merrill or Morgan Stanley she goes.
 
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