Inheritance Investments

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happy1
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Inheritance Investments

Post by happy1 » Thu Mar 08, 2018 11:23 pm

Good problem I'm dealing with here - inherited funds. What timing to invest a large sum of money, some of which will be going into the stock market? Invest everything all at once in my desired allocation? Wait for the market to drop? Other wise plan?

One recipient is 5-10 years from retirement, one is 30-40 years from retirement, and one will be needing the funds in 5 years (if any of this matters.)

Thank you, from a newbie!

retiredjg
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Re: Inheritance Investments

Post by retiredjg » Fri Mar 09, 2018 10:01 am

In general, it is slightly better to invest the lump sum. If you cannot do it, invest a good chunk now (at least 1/3, maybe more) and make a plan to invest every week, 2 weeks, month (your choice) and stick to that plan. Get it all done in a year or less. Do not wait for a dip. It could be years away.

Here is more in depth information. https://www.bogleheads.org/wiki/Dollar_cost_averaging

The different time frame does not affect how fast you invest as much as how you invest. Especially for the person who is only 5 years out - money needed for a goal in 5 years should probably not be in stocks at all. Bonds, cash, CDs. etc. And I would put that money into your chosen investments now. Dollar cost averaging into bonds and cash doesn't make a lot of sense.

22twain
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Re: Inheritance Investments

Post by 22twain » Fri Mar 09, 2018 10:20 am

happy1 wrote:
Thu Mar 08, 2018 11:23 pm
one will be needing the funds in 5 years
Does this mean that this one is retiring is 5 years, or that some specific expense is looming, e.g. purchasing a house?

For each individual, how the money should be invested depends not only on timeline but also on the rest of his/her financial situation: IRA's, 401K's, other investments or cash on hand, property owned, expenses, etc. etc. See the "How to Ask Portfolio Questions" (or something like that) sticky post near the top of this forum.

When I inherited some money several years ago, CD's still had fairly decent interest rates, so I first put it all in CDs that matured about every three months over the span of about a year. After rates fell and I decided to invest in stock and bond mutual funds, I did it in parts as each CD matured. Then I learned about Bogleheads and ended up re-investing everything according to the "three fund portfolio" that you can see a sticky post for somewhere around here.

delamer
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Re: Inheritance Investments

Post by delamer » Fri Mar 09, 2018 11:14 am

Someone who needs the money in 5 years or less should not be investing in stocks, due to the volatility of that market. That money should be in cash equivalents or maybe short-term bonds.

Are each of them inheriting their money in a separate? Meaning it isn’t all going into one account, is it?
Last edited by delamer on Fri Mar 09, 2018 5:10 pm, edited 1 time in total.

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prudent
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Re: Inheritance Investments

Post by prudent » Fri Mar 09, 2018 3:59 pm

I'm having a little trouble understanding the situation. Are there three different people who inherited money but you are investing it for them?

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bertilak
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Re: Inheritance Investments

Post by bertilak » Fri Mar 09, 2018 4:03 pm

retiredjg wrote:
Fri Mar 09, 2018 10:01 am
Do not wait for a dip. It could be years away.
And by the time it happens, the "dip" could be higher than today's prices.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

mbasherp
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Re: Inheritance Investments

Post by mbasherp » Fri Mar 09, 2018 4:38 pm

Around here, the consensus seems to be to invest immediately according to your asset allocation, if it has already been determined thoughtfully. I was in this position just a couple months ago and am proud to say that's exactly what I did. I spent 5% on some longer term wants for the home, topped off some cash buckets for near/medium term spending and invested the rest according to my AA dispassionately. Statistically, it is the superior option.

What I didn't expect is that I have more fear of this inheritance going down in value than I do of my other prior and ongoing investments. I don't know why; maybe I have some sense of wanting to preserve it because of where it came from. I'm working through the psychology of this gradually, because a dollar is a dollar is a dollar and these are no different than the others I have. My AA is what I'm comfortable with, and I think I just need to get used to seeing my overall portfolio be larger (good) and move more dramatically over time (good/bad, depending). Over the long haul, I know I've made the best decision I can and I can live with that.

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Sandtrap
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Location: Hawaii😀 Northern AZ.😳

Re: Inheritance Investments

Post by Sandtrap » Fri Mar 09, 2018 5:26 pm

Welcome.
This may be helpful.

Read About Bob, The Worst Market Timer
What happens if you only invested at market highs?
http://awealthofcommonsense.com/2014/0 ... ket-timer/

Aloha
j :D

Dulocracy
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Location: Atlanta, GA

Re: Inheritance Investments

Post by Dulocracy » Fri Mar 09, 2018 6:02 pm

happy1 wrote:
Thu Mar 08, 2018 11:23 pm
Good problem I'm dealing with here - inherited funds. What timing to invest a large sum of money, some of which will be going into the stock market? Invest everything all at once in my desired allocation? Wait for the market to drop? Other wise plan?

One recipient is 5-10 years from retirement, one is 30-40 years from retirement, and one will be needing the funds in 5 years (if any of this matters.)

Thank you, from a newbie!

OP - please let us know the context. Are you an estate executor? Is this money in a trust and you are managing it? Does each person have their own set amount, or is the money in a pool for all? Is the money supposed to be held and invested for some period of time, and if so, what time? When does the money need to be paid out to the individuals, or is it to provide an income stream long term?
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

Grt2bOutdoors
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Re: Inheritance Investments

Post by Grt2bOutdoors » Fri Mar 09, 2018 6:09 pm

OP - ask your questions in the format shown for each of the “participants” next to my signature- Asking Portfolio Questions. Your statement is not specific enough to provide any meaningful advice.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

happy1
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Re: Inheritance Investments

Post by happy1 » Wed Mar 14, 2018 5:33 pm

A little clarification:

This is money coming directly out of an inheritance to:

1. Myself - I can wait on the money for 10-20 years as I look at the full situation

2. son - into a trust that will be available to him in 5 years. (to be kept in trust until age 35) I am the administrator of trust

3. Daughter - into a trust that will be available to him in 10 years (to be kept in trust until age 35) I am the administrator of trust


OP - please let us know the context. Are you an estate executor? Is this money in a trust and you are managing it? Does each person have their own set amount, or is the money in a pool for all? Is the money supposed to be held and invested for some period of time, and if so, what time? When does the money need to be paid out to the individuals, or is it to provide an income stream long term?

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prudent
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Re: Inheritance Investments

Post by prudent » Tue Mar 20, 2018 1:47 pm

So you'll have 3 different accounts, I assume. Each will have its own defined asset allocation. There's no one right answer but I'll offer what I would do if I was in your role.

The 5-year plan should be quite conservative with an emphasis on capital preservation, as I feel in the role as trustee the job is to invest with respect to the timeframe when you surrender control of the assets. When your son takes over, he can decide to do something differently, and probably will. I'd probably go 25% stocks/75% bonds.

The 10-year plan can be a little more aggressive, maybe 50/50. Again, when she takes control, she will probably do something different.

Your portion with a 10-20 year horizon is completely up to you and ought to be looked at in combination with your other investments and assets.

Others might feel the two trusts ought to be invested more aggressively given the ages of the beneficiaries, because they should be considered part of their long-term retirement assets and the "real" timeframe is much longer than 5 and 10 years. But if I am in the role of trustee, I would define the time horizon as the period of time I am responsible for managing the funds.

If it is decided to consider the trusts as part of a long-term retirement portfolio for the children, then given their ages it's realistically a 30-year-plus horizon and 80/20 would not be out of the question. I wouldn't argue with that mindset, it's just as defensible as what I said I would do IMHO.

Curious - do the children want to have any input into how the trusts are handled?

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