50 yrs old couple -please advise on my investment

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Topic Author
suming
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50 yrs old couple -please advise on my investment

Post by suming »

Hi, I am pretty new to the forum. Reading some financial magazine in my son’s orthodontics office while waiting, I wrote down the website name and started my learning journey about a year ago. This is the first post that I try to use the format. Please let me know if I need to provide more info and your reply is highly appreciated.

Emergency funds: Three months of expenses
Debt: (home mortgage) balance $164,000 will be totally paid off in 8 years. Interest rate 2.875% and monthly payment $1515 plus 7.5k property tax per year.
Tax Filing Status: Married Filing Jointly
Tax Rate: 15%(maybe?) Federal, 5% State
State of Residence: IL
Age: 50 and DH 52
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 5% of stocks

Size of my current total portfolio: mid six-figures.

Current retirement assets

Taxable
0
His 401k at Hewitt
37.3% company stock
4.0% Small US Equity
1.30% Bond
0.9% Int’l Equity
0.4% Large US Equity

Company match? Yes

His 401k at Fidelity (from prior employment – employee saving account)
1.6% company stock (IR)
3.1% Vanguard Target 2025
0.2% Fid Low Priced Stock K

His 401k at JP Morgan (from prior employment – employee saving account)
15.6% company stock (GDI)
1.7% Ameican Century – stock
1.5% Smart Retire 2030 (JPMCB)

Her 401k at Fidelity
15.0% PIMCO TOT RETURN bond (PTRAX) (expense 0.71%)
1.2% Small Cap (AUSAX) (expense 1.05%)

Company match? yes

Her 401k at Fidelity (from prior employment – employee saving account)
2.0% company stock (FBHS) (expense $0.029 per share)
4.2% BTC LIFEPATH 2030 (??) (expense ratio 0.17%)
1.9% (FSEVX) (expense ratio 0.07%)

Her Rollover IRA at Fidelity
4.1% Fidelity Freedom 2025 (FFTWX)
3.9% Fidelity select medical delivery (FSHCX)

Her Roth IRA at Fidelity
0.1% stock (GE)


Contributions

New annual Contributions
$23000 his 401k (plus employer matching contributions 4k per year)
$23000 her 401k (plus employer matching contributions 4k per year )
$6000 his IRA/Roth IRA for year 2012
$5000 her IRA/Roth IRA for year 2012

Available funds ??
Funds available in his 401(k) ?? His small pension current value $70k – available yr. 2023.
Funds available in her 401(k) ??

Questions:

0. What do you think about our overall asset allocation?

1. What to do with DH one-single company stock allocation of 37%? He insists the company stock is going to be higher and will split in the future (he is an engineer and doesn't want to be bothered for any complicated financial issue). Current price is $88 per share. It was split about 5 years ago. The accumulation is because he used to contribute almost 100% on company stock for the past 7 year. It rose to $93 last year, then dropped to $75. I have persuaded him not to contribute to it since October last year. Now He wants to switch back to buying his company stock again since the market is much better. He has more than 2000 shares total now.


2. We have 3 children: 21 years old, a college senior, 17 years old, a high school senior, and 15 years old, a high school freshman. My middle one will be out to college this coming summer, and the youngest might go to a public boarding school too. If the housing market is in a better shape, I’d like to down-size in the summer, meaning to sell and rent an apartment. However, I could also wait until the market comes back more. What is your suggestion regarding the timing to sell the house?


3. We also have two rentals which can make even by themselves. Mortgage balance are 165K (15 years to go – fixed rate 3.125%) and 126K (13 years to go – fixed rate 3.5%) respectively. We used to be able to claim ‘passive loss’ on federal income tax return until 4 year ago when our salary combined became too high. When DH is working part-time or both of us are retired, we might be able to claim the deductable.

4. We plan (or I plan and he is still thinking) to retire in 7 years when our youngest one graduates from college. DH will be 59 and I will be 57. Then we will move to his home town in Taiwan. We don’t need to buy a house or a car. The medical insurance provided by the government is very affordable. DH has diabetics and early retirement will benefit his health. However, he cannot handle staying home by himself – having nothing to do. Staying in Taiwan more means we could travel in Asia and Australia easily as well as we can enjoy the low living standard there. Do you think this plan is doable?

5. We will stay in the US more when we are older and might have some grandkids to spend time with in the States. That way, we could travel in the America and Europe. My plan is to live on ‘our retirement fund’, rental income, and social security for the long run. Any comments? Do I miss anything?

a hard-working wife
Suming
Grt2bOutdoors
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Re: 50 yrs old couple -please advise on my investment

Post by Grt2bOutdoors »

Hello and welcome to the forum!

1) On you DH's employee stock - too much information - I've already identified the company. It's your call but in my opinion it's too much undiversified risk - most would say to lighten up on it - good quarter BTW!

All the other accounts also hold stock - again adds uncompensated risk to portfolio.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Postmon
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Re: 50 yrs old couple -please advise on my investment

Post by Postmon »

suming wrote: 37.3% company stock
15.6% company stock (GDI)
You have over 50% in two individual company stocks. This is way too risky! What would happen if something unforeseen happened at his present employer? Is it possible your husband could lose his job and the stock loses it's value? Too many eggs in one basket! It's too risky to have a significant portion in individual stocks.
suming wrote: he is an engineer and doesn't want to be bothered for any complicated financial issue
As an engineer, I'm sure he'd appreciate the simplicity of something like the 3-fund portfolio. :happy
suming wrote:He wants to switch back to buying his company stock again since the market is much better.
What does better mean? Won't it have been better to buy when the market was bad?
JW-Retired
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Re: 50 yrs old couple -please advise on my investment

Post by JW-Retired »

You are saving a lot of money.....very good. Mid 6-figures invesments good. Total madness that at age 50 you have half your savings in just two stocks.

What else is there to say?
JW
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fh2000
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Re: 50 yrs old couple -please advise on my investment

Post by fh2000 »

Suming,

You don't mention kids' education fund, or if you have equity on those 2 rental properties. Unless your properties have large equity, or DH has inheritance coming from back home, with mid 6 figure (600K?) funds, you might need few more years to build up more retirement funds if you wish to withdraw no more than 4% annually.

Like other posters, I think you have too much on one or 2 stocks, and may not be a good idea for your DH to participate again on ESPP.

We are also from the same country like your DH as a dual citizens now, so I think your plan to retire back home to enjoy near free universal health care is a good one. My wife and I plan to do just that in 2-3 years when we early retire. This could reduce our annual health care budget by nearly $20,000.
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

Thanks for everyone's reply. I've always learn so much from this forum.

Regarding my DH company stock issue, I guess I need to find a better way to convince him. Especially when the stock market is rising, he simply wishes that he had not listened to me for the last 4 months. That way, he would have had a lot more 401k accumulated by now. I am wondering anyone here has real cases to share. It doesn't need to be your own story - it could be someone you know or heard about who have to delay their retirement or will never be able to retire because they put most eggs in one basket. The problem here is just he won't listen to me and it's his 401k account. He might listen to real experience from others.

fh2000,
We don't have separate education fund, we do have some equity on those 2 rental properties. That's why I need advice on when to sell our main residence. If anyone here has similar situation, how do you make your decision.
JW-Retired
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Re: 50 yrs old couple -please advise on my investment

Post by JW-Retired »

suming wrote:Thanks for everyone's reply. I've always learn so much from this forum.

Regarding my DH company stock issue, I guess I need to find a better way to convince him. Especially when the stock market is rising, he simply wishes that he had not listened to me for the last 4 months. That way, he would have had a lot more 401k accumulated by now. I am wondering anyone here has real cases to share. It doesn't need to be your own story - it could be someone you know or heard about who have to delay their retirement or will never be able to retire because they put most eggs in one basket. The problem here is just he won't listen to me and it's his 401k account. He might listen to real experience from others.

fh2000,
We don't have separate education fund, we do have some equity on those 2 rental properties. That's why I need advice on when to sell our main residence. If anyone here has similar situation, how do you make your decision.
If you can't get him to part with his current company stock, you might try to agree to sell all the company stocks you are both holding in your old 401ks. Those add up to about 19% so it would fix 1/3rd of the individual stock risk problem. Start with your own FBHS to set a good example.
JW
Retired at Last
Grt2bOutdoors
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Re: 50 yrs old couple -please advise on my investment

Post by Grt2bOutdoors »

It's likely the conglomerate your husband works for is a real, viable entity. In fact, I can say it is - it makes real things, has real products, diversified industry, been around along time. The comparisons are not the same - Enron, Worldcom.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Aptenodytes
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Re: 50 yrs old couple -please advise on my investment

Post by Aptenodytes »

suming wrote:Thanks for everyone's reply. I've always learn so much from this forum.

Regarding my DH company stock issue, I guess I need to find a better way to convince him. Especially when the stock market is rising, he simply wishes that he had not listened to me for the last 4 months. That way, he would have had a lot more 401k accumulated by now. I am wondering anyone here has real cases to share. It doesn't need to be your own story - it could be someone you know or heard about who have to delay their retirement or will never be able to retire because they put most eggs in one basket. The problem here is just he won't listen to me and it's his 401k account. He might listen to real experience from others.
What kind of engineer is he? Would he be persuaded by graphs, equations, tables, monte carlo simulations, and so on?

Is he someone who is logical in all aspects of his life except this one thing, or does he fall prey to magical thinking as a general matter?

If he is reasonable on everything but this, then the trick is probably to find a way to convey the information in way that fits into the way he processes information.

Dan Ariely has a series of videos that does a good job at explaining pitfalls people fall prey to systematically. http://danariely.com/videos/. The Duke Basketball one is an eye opener if you are new to this stuff. Your husband's company stock is analogous to the tickets held by the lottery winners. His mental accounting is overvaluing the stock by a huge amount, and this is a well-known MISTAKE. Maybe seeing the issue as a broader scientific phenomenon that has been proven with experiments and measurements and published in scientific journals, even triggering a Nobel prize, might help him understand.
Topic Author
suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

JW, I've just spoken to him and the answer is ' no. they are all good companies and their stock are all rising now'.

grt2bOutdoors,my DH will totally agree with you. Honestly, I do too. However, it's not Apple or Microsoft. It (37%) just not a good thing.

Aptenodytes, I will show the link to my DH tonight. He is actually the best aerospace mechanical engineer I've ever known. His math skill is excellent. He is a PhD and PE with many papers published and patents under his belt. However, the complicated finance world of stock, bond, tax efficiency, student financial aide, retirement, and social security is way too foreign to him. That's why I think some true story might help him to understand.
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Watty
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Re: 50 yrs old couple -please advise on my investment

Post by Watty »

Desired Asset allocation: 70% stocks / 30% bonds
That is very high in stock for someone that is in their 50's and looking at retiring in 7 years.
Then we will move to his home town in Taiwan.
There are all sorts of tax issues with retiring outside the US since there can be and exit tax to tak your money out of the country, large estate taxes if you die while living outside the US(If you have funds in the US and you are not a US citizen), and you may still need to pay US taxes if you are a US citizen. The state you are living in now may still try to tax you too if you don't do your move right.

You can find out some more information by Googleing or searching these boards for;
"exit tax IRA"
"estate tax non-resident alien"
Topic Author
suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

Watty,
We both are US citizens and plan on 'paying tax in US'. We will come to visit our children each year. Does that consider we are living in the US and traveling in other countries?

Regarding the allocation %, what is your suggestion? My goal is to accumulate to 'two comma' by year 2021.
Grt2bOutdoors
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Re: 50 yrs old couple -please advise on my investment

Post by Grt2bOutdoors »

Here is one example - well known, publicly traded company, been in business for over 150 years in one form or another, large employee insider ownership. About ten years ago, hit a rough patch, most of the employees had nearly all of their retirement savings in the stock, the stock got cut in half - that's right a 50% decline and has not yet recovered (ten years later :oops: ) - those people never recovered from the decline, got frustrated and sold - that is a permanent erasure of monies. That is what can happen - doesn't matter how long the company has been in business, doesn't matter how well known it is, doesn't matter that the company is a profitable company. BTW, this is just one example, here is another: Ask the folks at GE, how their retirement is coming along?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

grt2bOutdoors,
Thanks for the examples. I will call couple of our friends who are still working at GE tonight. How about the 150 years old company? Do we allow to say that company name here? Please forgive me if the answer is no.
BuckyBadger
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Re: 50 yrs old couple -please advise on my investment

Post by BuckyBadger »

Maybe I'm being too negative here, but it seems like complete folly to have a "two comma" goal when 50% of your assets could get completely wiped out overnight and never rebound. An index fund can always recover, so staying the course and riding it out until the market turns around is a reasonable plan. But on the other hand, it's totally possible for an individual stock to reach near zero and never come back up.

Sure, it's no Enron. But neither was Kodak. Kodak was a good, established company that made real tangable things that everyone needed. If the OP's husband isn't willing to sell when the stock is doing well, when IS he willing to sell? I find it totally possible that he could ride ~50% of his assets all the way down to zero -- where they could stay.
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

BuckyBadger,
You are not negative at all. This is the reason that I can't sleep well and the reason why I posted it here. Many earlier posters also point it out and I knew it. I just don't know how to solve it. That's why I need some real examples instead of some hypothesis. For example, he refused to take medicine or follow doctor's order until I pointed out his health situation was similar to his mom's around couple of years before she died. He saw it and believed it.
BuckyBadger
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Re: 50 yrs old couple -please advise on my investment

Post by BuckyBadger »

suming wrote:BuckyBadger,
You are not negative at all. This is the reason that I can't sleep well and the reason why I posted it here. Many earlier posters also point it out and I knew it. I just don't know how to solve it. That's why I need some real examples instead of some hypothesis. For example, he refused to take medicine or follow doctor's order until I pointed out his health situation was similar to his mom's around couple of years before she died. He saw it and believed it.
Can he come and poke around on these boards? The knowledgable posters here can throw some cold water on him pretty quickly!

If he insists on keeping the stock I think that YOU should insist on leaving it completely out of your retirement calculations. Ignore it completely. Tell him that you guys can't count on it so you're going to pretend that it's not even there. Tell him that if you pretend it doesn't exist, you won't be screwed if it tanks and you lose all the money that's there. Maybe that will get the severity through to him.

If he doesn't listen to his doctor about health matters, I can see why he won't listen to you about investing...
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Re: 50 yrs old couple -please advise on my investment

Post by JW-Retired »

suming wrote:JW, I've just spoken to him and the answer is ' no. they are all good companies and their stock are all rising now'.

He is actually the best aerospace mechanical engineer I've ever known. His math skill is excellent. He is a PhD and PE with many papers published and patents under his belt. However, the complicated finance world of stock, bond, tax efficiency, student financial aide, retirement, and social security is way too foreign to him.
The answer to the first comment is you will immediately replace them with a diversified group of good companies with rising stock. Like US total stock market. It is fairly ridiculous to think that the stocks of the 4 companies you happended to have worked for are all good picks. Even if they really are good companies that is already priced in.

To the other comment..... that describes me at his age with near perfection. I can attest it is possible for an aerospace ME to learn about these things. Hopefully without the near total wipeouts in two individual "good company" stocks that were rising like I had. Mine was a fairly cheap early lesson since they were not anything like such a monster percentage of my portfolio as your company stock situation.
JW
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Peter Foley
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Re: 50 yrs old couple -please advise on my investment

Post by Peter Foley »

He might want to take a look at the Callan table of investment returns. It provides a visual impression of how different asset classes rank year after year. An indivual stock is not unlike one of those asset classes except that it is likely to be even more volatile.
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

Peter Foley
Where do I find the Callan table?
Topic Author
suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

This is Sumnig - the OP. I am wondering if my bond fund investment and contribution on PIMCO is too way too high. There is another post : Moving from Total Bond to Short Term Investment Grade. And the more I read it, the more I want to move toward that direction. Please help me, bond experts here.
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Aptenodytes
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Re: 50 yrs old couple -please advise on my investment

Post by Aptenodytes »

suming wrote:JW, I've just spoken to him and the answer is ' no. they are all good companies and their stock are all rising now'.
If the stock has been generally rising then I doubt there's anything you can do to convince him this is a bad move. The superstitious thinking he is exhibiting is extremely common. When things are going well and we don't understand the underlying theories, we latch on to magical thinking. Baseball players are especially vulnerable to this -- when they start hitting well, they attribute their success to all kinds of wacky things. Your husband thinks the growth in his portfolio is attributable to him making a smart choice sticking with the company stock, when exactly the opposite is true -- he made a very bad choice and just got very lucky. Unlearning such a wrong lesson is VERY hard for our brains.

I still think your best shot, however small, is to appeal to his engineer's mentality. Designing a portfolio should be like designing an airplane wing. You use verified principles, you don't just trust your intuition. There seems to be a scholarly literature that seeks to quantify the effect of overinvesting in your company's stock. Here's one paper that estimates the gross loss across all such investors to be 42% of their stock value (that is, by sticking with their company stock, they are losing 42% of what they would have earned diversified). http://papers.ssrn.com/sol3/papers.cfm? ... _id=303782. I just clicked on that at random after doing a simple search. Peer-reviewed publications using data, supported by theory, ought to convince an engineer (though this one seems like a tough nut -- he seems to like doing his own medical diagnoses too).

Another option might be to get him to agree to a standing stop-loss order on the stock, so that if it does start to fall, you might have a shot at limiting your losses. This isn't a smart way to invest, but it may be less bad than just letting it ride wherever it goes.
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

Thanks for the info, Aptenodytes. I will share it with him tonight. Another strong arguement he has is 'he is waiting for the split so he will be having more than 4000 shares over night'. Is there any theory as far as how to predict some stocks will split or will never split? This sounds a very funny question, but I just won't be able to poke his dream if I can't at least provide some reasonings.
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Peter Foley
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Re: 50 yrs old couple -please advise on my investment

Post by Peter Foley »

There was a recent post about the table being updated. See below with a comment from Taylor Larimore:

"Own the haystack"

by Taylor Larimore » Thu Jan 17, 2013 11:41 am

runner26 wrote:The Callan Periodic Table of Investment Returns has been updated with 2012 data. It can be accessed here:
http://www.callan.com/research/download ... %2f655.pdf

Runner26:

Thank you for the update. The Callan Periodic Table is my favorite.

The CPT demonstrates the futility of trying to time the market. It also demonstrates the benefit of investing in the total market.

Mr. Bogle likes to say: "Don't search for a needle in the haystack. Own the haystack."

Best wishes
Taylor
The Majesty of Simplicity
fh2000
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Re: 50 yrs old couple -please advise on my investment

Post by fh2000 »

Suming,

I am not even qualified for any investment recommendations, but a simple explanation for stock split is to look at a pizza. If you cut the pizza in half, you have 2 pieces, but the total volume (value) is still the same. This is the same as stock split. The value of each share is cut in half, and now you have twice as many shares as before. So, 2000 shares for $80 each has the same total value as 4000 shares of $40 each.
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

Hi, fh2000
My DH and I have numerous discussions on this. He is expecting the stock price will go up again...
JW-Retired
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Re: 50 yrs old couple -please advise on my investment

Post by JW-Retired »

suming wrote:Thanks for the info, Aptenodytes. I will share it with him tonight. Another strong arguement he has is 'he is waiting for the split so he will be having more than 4000 shares over night'. Is there any theory as far as how to predict some stocks will split or will never split? This sounds a very funny question, but I just won't be able to poke his dream if I can't at least provide some reasonings.
A stock split is an illusionary change in anything real. Companies do it for some hoped for tiny benefit in the stock's attractiveness due to investor psychology. Suggest you read up on it here.

http://www.investopedia.com/articles/01 ... z2J0d4k6JI

It does seem to work well on your DH.

I do fear your husband is just in love with his company stocks. If you refute one argument for them he will invent others. I think this is all too common and dangereous.

Lots of old "good" companies have have had their stocks more or less drop to zero, or low enough for it to be a disaster for those holding it. Just off the top of my head: Eastman Kodak, Texaco, GE, GM, Chrysler, Lucent, Polaroid, Enron, Washington Mutual, Lehman Bros. ...... I imagine they all had plenty of employees who had been in love with the company stock and got wiped out.

I'm sure others here can add more examples.
JW
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

I was smiling while reading your post, JW. My DH is 'in love' with his company stock. He has experienced 'splits' twice, one with his current company and the other with prior employer. At this point in time, he did gain profits $$ 'on paper' on both cases.

Like you've said, hopefully others here will kindly add more examples on this type of 'love story'. Please!!
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blacktupelo
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Re: 50 yrs old couple -please advise on my investment

Post by blacktupelo »

Company stock, esp. if the company kicking in shares, is a great way to get wealthy, but only if you are lucky.

One stock or even 4 or 5 is what is called uncompensated risk. You have to hold many stocks in many categories to avoid the risk of an individual stock.

I was convinced to stop my risky way of investing back in 1997 after reading Frank Armstrong's web published book "Investment Strategies for the 21st Century" at http://www.investorsolutions.com/invest ... ury-ebook/. It shows (free download) the process for creating a asset allocation plan that includes bonds and stock mutual funds and why it is superior to owning individual stocks.

I'd recommend your husband read the very convincing book by Larry Swedroe, which you can probably find in your public library, "Winning Investment Strategy": http://www.amazon.com/Guide-Winning-Inv ... ry+swedroe , it leads you through the evidenced based reasons why investing in individual stocks is a losers game.
Larry
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

Thanks, Larry. I am getting the books for my husband tonight. Hopefully he will be willing to read them. I will read them for sure.
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

I am posting this one to thank everyone of you - My DH finally agreed on selling half of his current company stock (19%) and all of the other prior employer stock (15.6%) last Thurday. Grt2bQutdoors, Postmon, JW Nearly Retired, fh2000, Aptenodytes, Watty, Buckybadger, Peter Foley, and Blacktupelo: You are all so awesome!! We have replaced these two stock with some Index funds, target fund, bond funds, and international equity. Currently our goal is to reach AA stock/bond 60/40. Do you guys think this is a good target? Or I should move to 50/50 instead?

I am still watching my old prior-employer stock and his old stock to sell them all. As far as the other half stock shares of his current employer, I am still working on it. Over the weekend, I borrowed the "Enron" DVD - The Smartest Guys in the Room to watch with him. That's a very shocking moment for him to watch those numbers on the screen. However, he still complains to me everyday because that stock price is moving higher and higher since.
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blacktupelo
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Re: 50 yrs old couple -please advise on my investment

Post by blacktupelo »

Suming, Glad my post was of some help. Besides the reading recommendations, I'd also suggest looking these Vanguard web pages. They are succinct and very informative.

Vanguard's "Investing Truth about risk: How Asset Mix Historically affected Volatility" to get an interactive view of the impact historically of different allocations to stocks, bonds, cash.

And Vanguard's comparison portfolio allocation models (100% bonds, to 100% stocks) and the historical risk and returns for each (9 models shown).

Going into 2007-2009 we were at a 60/40 (stocks/bonds+cash) and that episode drove home that we didn't really want to have so much risk now that we are retired. Now at 70/30 (bonds+cash/stocks) plus our retirement pensions and social security, so there's no need or willingness to take more risk.

I'll also comment that sticking to our stock asset class diversification has recovered to its prior level. It was a benefit of 'staying the course' through our financial advisory/management relationship with Investor Solutions. There's other firms who can do equally well in guiding you if you need the support.
Larry
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

THERE MUST BE SOMETHING WRONG WITH MY CURRENT EMPLOYMENT 401K -
PERSONAL RATE OF RETURN FROM 01/01/2013 to today IS 2.6% ONLY
PERSONAL RATE OF RETURN FROM 01/01/2012 to 04/05/2012 was 5.5%.


First of all, I don't know if I need to continue this post because my info has been posted in the beginning, or I should have posted this question as another thread.

My AA must be out of whack so now I have this result?? Please help me for I am so confused. :confused
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blacktupelo
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Re: 50 yrs old couple -please advise on my investment

Post by blacktupelo »

Doesn't match your time periods exactly but for the last 12 months since April 2012 our performance has been 5.8% with a 70/30 bonds to stock allocation, after taxes. Bonds are mostly intermediate duration, and our stocks are a widely diversified asset class mix.

For the whole year, 2012 our return was +6.8%, including overpayment of estimated taxes was refunded in April 2013.

For 2013 year to date through 4-17-2013 we are +2.8% from end of 2012 after taxes.

I'm satisfied with these returns and asset allocation.

What's your 401k asset allocation currently? What's the diversification of the assets? What do you think you 'should' be getting?
Last edited by blacktupelo on Thu Apr 18, 2013 3:47 pm, edited 1 time in total.
Larry
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Aptenodytes
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Re: 50 yrs old couple -please advise on my investment

Post by Aptenodytes »

suming wrote:THERE MUST BE SOMETHING WRONG WITH MY CURRENT EMPLOYMENT 401K -
PERSONAL RATE OF RETURN FROM 01/01/2013 to today IS 2.6% ONLY
PERSONAL RATE OF RETURN FROM 01/01/2012 to 04/05/2012 was 5.5%.


First of all, I don't know if I need to continue this post because my info has been posted in the beginning, or I should have posted this question as another thread.

My AA must be out of whack so now I have this result?? Please help me for I am so confused. :confused
You don't switch AAs just because you don't like a 4-month return. You choose your AA for the long term, taking into account expected enduring relationships between risk and return. In the long run, your portfolio return is a function of the long-run behavior of your asset categories plus a random error factor which is far from trivial. In the short run, it is all random error. Your 4-month return has almost nothing to do with your expected long-term return, so you should be ignoring it almost completely.
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blacktupelo
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Re: 50 yrs old couple -please advise on my investment

Post by blacktupelo »

And I ditto what Aptenodytes replied to you.
Larry
letsgobobby
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Re: 50 yrs old couple -please advise on my investment

Post by letsgobobby »

blacktupelo wrote:Doesn't match your time periods exactly but for the last 12 months since April 2012 our performance has been 5.8% with a 70/30 bonds to stock allocation, after taxes. Bonds are mostly intermediate duration, and our stocks are a widely diversified asset class mix.

For the whole year, 2012 our return was +6.8%, including overpayment of estimated taxes was refunded in April 2013.

For 2013 year to date through 4-17-2013 we are +2.8% from end of 2012 after taxes.

I'm satisfied with these returns and asset allocation.

What's your 401k asset allocation currently? What's the diversification of the assets? What do you think you 'should' be getting?
It does sound like something is wrong though. There was a large thread about 2012 returns and for a 70/30 mix they were quite a bit higher. Are these XIRR returns? Do they account for new money?

I am 60/40 and my XIRR was 13.6% for calendar year 2012 and was not out of the ordinary per that thread, so 6.8% for 70/30 sounds awfully low.
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suming
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Re: 50 yrs old couple -please advise on my investment

Post by suming »

But, but
Every single fund I have has at least 9% YTD return except the bond fund which is 1.2%.

Oh, I remember now - I traded 83% of this 401K from the bond fund to another stock index fund on 2/4/2013. Do you think that's why?
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blacktupelo
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Re: 50 yrs old couple -please advise on my investment

Post by blacktupelo »

letsgobobby,

All I track at the total portfolio level is the year to date and full prior year change in total net worth. So my percentages do take into account spending, taxes paid, gifts, dividends, interest, capital gains, NAV changes.

The 30% in stock funds had a time weighted return for 2012 of 15.45%.

The 70% in bonds, bond funds had a change for 2012 of 3.6% gain in total value, including interest/dividends paid.
Larry
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Re: 50 yrs old couple -please advise on my investment

Post by Savvy »

If someone gave you $100,000 cash, would you use it all to buy his company's stock?

That is effectively what you have done. That's not what I would do with $100,000 or $200,000. Scary.
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InvestorNewb
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Re: 50 yrs old couple -please advise on my investment

Post by InvestorNewb »

Remember Nortel, the big Canadian company?

Someone lost their full inheritance (200k) investing in the one stock.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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