1 million cash - looking for low risk investment

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Topic Author
missedit
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1 million cash - looking for low risk investment

Post by missedit » Fri Jan 10, 2020 11:25 am

I have been out of market for nearly decade for my taxable portfolio (401k alone is in a mix of stocks and bonds) and all of it is in CDs and short term treasuries. As yields are shrinking rapidly I am looking for investments that will boost the yields slightly with a slight risk. My top priorities are 1) preservation of capital 2) minimize taxes as we are in high tax bracket. I am looking for low risk investments that yield qualified dividends. Any suggestions? background: getting ready to retire but still working. I wouldn't need an income stream from this right away but at the same time I don't want to lock it up for long periods (like the EE bonds I read in another thread - wish I knew about it 20-30 years ago)
Last edited by missedit on Fri Jan 10, 2020 11:29 am, edited 1 time in total.

FrugalConservative
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Re: 1 million cash - looking for low risk investment

Post by FrugalConservative » Fri Jan 10, 2020 11:26 am

High Yield online savings would be my option. Or short term tsy.

If you are a high income earner, why so risk averse. Sheesh, 10 years of being out of the market, that is painful considering the returns that have been earned.

jebmke
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Re: 1 million cash - looking for low risk investment

Post by jebmke » Fri Jan 10, 2020 11:28 am

Low risk and qualified dividends might be impossible to find.

A short-term muni fund would avoid the tax load.
When you discover that you are riding a dead horse, the best strategy is to dismount.

lakpr
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Re: 1 million cash - looking for low risk investment

Post by lakpr » Fri Jan 10, 2020 12:24 pm

I had posted this in a previous thread ... historically, a 20% allocation to stocks and 80% allocation to Intermediate Treasuries had beaten inflation and as safe as it comes. See the below portfolio visualizer link:

https://www.portfoliovisualizer.com/bac ... tion3_2=80

Note that whenever this portfolio did have a loss, the very next year it reported double digit gains (1994, 2008, 2018).

Note also in the graph that, during the Great Recession in 2008, if you use Total Bond Market index fund that includes Corporate bonds, the loss goes up to 7.7%, whereas with the Treasuries, the loss is only 3.5%. During recession, corporations might find it tough to repay debt holders, but Uncle Sam isn't going to default.

Edited to add disclaimer: Past performance is no guarantee of future results. But the theory for this combination comes from the Risk Efficient Frontier, which has a hockey-stick shaped curve of risk vs. reward, and the bend point where the risk is the lowest and return is the maximum possible, is a 20:80 allocation. The 20% allocation to stocks beats inflation, and the 80% allocation to US Treasuries provides the ultimate safety. A 100% allocation to bonds or cash or cash equivalents also has risk, inflation eats away at those returns.

snailderby
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Re: 1 million cash - looking for low risk investment

Post by snailderby » Fri Jan 10, 2020 12:36 pm

lakpr wrote:
Fri Jan 10, 2020 12:24 pm
I had posted this in a previous thread ... historically, a 20% allocation to stocks and 80% allocation to Intermediate Treasuries had beaten inflation and as safe as it comes. See the below portfolio visualizer link:

https://www.portfoliovisualizer.com/bac ... tion3_2=80

Note that whenever this portfolio did have a loss, the very next year it reported double digit gains (1994, 2008, 2018).

Note also in the graph that, during the Great Recession in 2008, if you use Total Bond Market index fund that includes Corporate bonds, the loss goes up to 7.7%, whereas with the Treasuries, the loss is only 3.5%. During recession, corporations might find it tough to repay debt holders, but Uncle Sam isn't going to default.

Edited to add disclaimer: Past performance is no guarantee of future results. But the theory for this combination comes from the Risk Efficient Frontier, which has a hockey-stick shaped curve of risk vs. reward, and the bend point where the risk is the lowest and return is the maximum possible, is a 20:80 allocation. The 20% allocation to stocks beats inflation, and the 80% allocation to US Treasuries provides the ultimate safety. A 100% allocation to bonds or cash or cash equivalents also has risk, inflation eats away at those returns.
+1. Here's a link that includes a comparison with 100% stocks (blue) and 100% cash (yellow). The red line is the 20/80 mix that lakpr recommended.

Topic Author
missedit
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Re: 1 million cash - looking for low risk investment

Post by missedit » Fri Jan 10, 2020 1:37 pm

thank you lakpr and snailderby - this is very good info for someone at my stage. I always suspected treasuries were better than bond funds. Are there any advantages (or disadvantages) to buying intermediate treasuries directly in fidelity brokerage vs buying VFITX?

lakpr
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Re: 1 million cash - looking for low risk investment

Post by lakpr » Fri Jan 10, 2020 1:39 pm

missedit wrote:
Fri Jan 10, 2020 1:37 pm
thank you lakpr and snailderby - this is very good info for someone at my stage. I always suspected treasuries were better than bond funds. Are there any advantages (or disadvantages) to buying intermediate treasuries directly in fidelity brokerage vs buying VFITX?
No difference! I just took Vanguard's funds in the portfolio visualizer, because of the long history. When I chose Fidelity's offerings, the history went back only as far as 2001. The principle remains that you invest in a 20% total stock market, and 80% in intermediate treasuries. Where you buy them does not matter at all.

Edit: I should have mentioned it, but the interest paid by treasuries is state-tax exempt as well (unlike corporate bonds). That's another plus that could reduce your taxes a fair bit.

minimalistmarc
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Re: 1 million cash - looking for low risk investment

Post by minimalistmarc » Fri Jan 10, 2020 1:43 pm

missedit wrote:
Fri Jan 10, 2020 1:37 pm
thank you lakpr and snailderby - this is very good info for someone at my stage. I always suspected treasuries were better than bond funds. Are there any advantages (or disadvantages) to buying intermediate treasuries directly in fidelity brokerage vs buying VFITX?


Unfortunately you have failed on your first priority to preserve capital by being in cash for 10 years. Your capital is now worth a lot less inflation adjusted.

If you want to preserve capital (real capital, not nominal) then you will need a little bit more stock, at least 20 - 30%.

WhiteMaxima
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Re: 1 million cash - looking for low risk investment

Post by WhiteMaxima » Fri Jan 10, 2020 2:27 pm

3 shares of BRKA. Done.

lakpr
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Re: 1 million cash - looking for low risk investment

Post by lakpr » Fri Jan 10, 2020 2:37 pm

WhiteMaxima wrote:
Fri Jan 10, 2020 2:27 pm
3 shares of BRKA. Done.
Certainly not a "low-risk" investment. It's a stock, all said and done. Diversified stock, but still a stock.

WhiteMaxima
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Re: 1 million cash - looking for low risk investment

Post by WhiteMaxima » Fri Jan 10, 2020 2:59 pm

lakpr wrote:
Fri Jan 10, 2020 2:37 pm
WhiteMaxima wrote:
Fri Jan 10, 2020 2:27 pm
3 shares of BRKA. Done.
Certainly not a "low-risk" investment. It's a stock, all said and done. Diversified stock, but still a stock.
Basically an insurance (GEICO), financial (BAC, Wellsfargo. AMEx), cosumer (KO, AAPL). It is safer than S&P500. Very tax efficient (no dividend , zero tax). And mostly a lot of cash (120 billion on the side). Safe or no safe?

Carol88888
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Re: 1 million cash - looking for low risk investment

Post by Carol88888 » Fri Jan 10, 2020 3:13 pm

Warren Buffett will tell you that Berkshire has gone down 50% three times during his investing career. The OP wants something safe. This does not qualify.

Topic Author
missedit
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Re: 1 million cash - looking for low risk investment

Post by missedit » Fri Jan 10, 2020 3:18 pm

lakpr wrote:
Fri Jan 10, 2020 1:39 pm
No difference! I just took Vanguard's funds in the portfolio visualizer, because of the long history. When I chose Fidelity's offerings, the history went back only as far as 2001. The principle remains that you invest in a 20% total stock market, and 80% in intermediate treasuries. Where you buy them does not matter at all.

Edit: I should have mentioned it, but the interest paid by treasuries is state-tax exempt as well (unlike corporate bonds). That's another plus that could reduce your taxes a fair bit.
I meant buying treasuries directly from Uncle Sam (through auctions) in brokerage account (as I have started doing ) vs buying the vanguard fund

WhiteMaxima
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Re: 1 million cash - looking for low risk investment

Post by WhiteMaxima » Fri Jan 10, 2020 3:23 pm

Carol88888 wrote:
Fri Jan 10, 2020 3:13 pm
Warren Buffett will tell you that Berkshire has gone down 50% three times during his investing career. The OP wants something safe. This does not qualify.
Inflation will erode 1million purchase everyday. Equity will beat inflation in the long run. And OP is also concern about tax. BRK.A/B are perfect for this kind of investor.

lakpr
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Re: 1 million cash - looking for low risk investment

Post by lakpr » Fri Jan 10, 2020 3:30 pm

missedit wrote:
Fri Jan 10, 2020 3:18 pm
lakpr wrote:
Fri Jan 10, 2020 1:39 pm
No difference! I just took Vanguard's funds in the portfolio visualizer, because of the long history. When I chose Fidelity's offerings, the history went back only as far as 2001. The principle remains that you invest in a 20% total stock market, and 80% in intermediate treasuries. Where you buy them does not matter at all.

Edit: I should have mentioned it, but the interest paid by treasuries is state-tax exempt as well (unlike corporate bonds). That's another plus that could reduce your taxes a fair bit.
I meant buying treasuries directly from Uncle Sam (through auctions) in brokerage account (as I have started doing ) vs buying the vanguard fund
Hmm ... I think you will miss the diversification benefit in that case. It's better to invest in a fund, which has been buying treasuries (presumably some of them are higher yielding ones than the new issues) in the past, and as a shareholder you partake in the returns from those past treasuries. You will not be able to buy them enough in bulk yourself. FUAMX is a reasonable substitution at Fidelity to VFITX

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Re: 1 million cash - looking for low risk investment

Post by wolf359 » Fri Jan 10, 2020 3:35 pm

minimalistmarc wrote:
Fri Jan 10, 2020 1:43 pm
missedit wrote:
Fri Jan 10, 2020 1:37 pm
thank you lakpr and snailderby - this is very good info for someone at my stage. I always suspected treasuries were better than bond funds. Are there any advantages (or disadvantages) to buying intermediate treasuries directly in fidelity brokerage vs buying VFITX?


Unfortunately you have failed on your first priority to preserve capital by being in cash for 10 years. Your capital is now worth a lot less inflation adjusted.

If you want to preserve capital (real capital, not nominal) then you will need a little bit more stock, at least 20 - 30%.
Let's quantify that. https://www.usinflationcalculator.com/

$1,000,000 in 2009 had the same buying power as $1,179,550.21 today. OP lost about $180K in buying power, although he probably earned some interest. Cumulative inflation was about 18%.

WhiteMaxima
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Re: 1 million cash - looking for low risk investment

Post by WhiteMaxima » Fri Jan 10, 2020 3:36 pm

If you put 100% BRK.A compare to Total Stock since 1985, you will know what I mean. Don't forget this is in a taxable account. BRK.A has no tax, Total stock has to pay dividend tax. As an investor don't be sacred by a down market. You should scared about wrong asset. CD,cash are for temp storage, not ideal investment. Equity (esp heavy discounted equity) is for investor. BRK.A/B is for value long-term investors.

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geerhardusvos
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Re: 1 million cash - looking for low risk investment

Post by geerhardusvos » Fri Jan 10, 2020 3:38 pm

I can hold onto it for you. :twisted: :wink:

I think the bond and money market or CD ladder options are all reasonable, but I would be tempted to put some/most of it in the market
VTSAX and chill

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Tamarind
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Re: 1 million cash - looking for low risk investment

Post by Tamarind » Fri Jan 10, 2020 3:40 pm

High yield savings, treasuries, perhaps individual TIPS?

Unfortunately, the safest investments are much less tax efficient than riskier ones like a stock fund. Muni funds would be more efficient but are lower yielding AND sightly riskier than treasuries. Individual munis are too risky for me on the bond side.

wolf359
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Re: 1 million cash - looking for low risk investment

Post by wolf359 » Fri Jan 10, 2020 3:50 pm

Have you paid off your house and all debts already? That is a great move that reduces risk as you're nearing retirement.

Also set aside amounts that you WILL need to keep in cash. For example, if you have any large purchases coming up in the next 5 years, such as a car, set the money aside for that and don't invest it.

sf_tech_saver
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Re: 1 million cash - looking for low risk investment

Post by sf_tech_saver » Fri Jan 10, 2020 3:51 pm

I think this is the wrong way of asking this question as you don't mention your overall AA/portfolio size. If you have $10M in equities vs. this $1M in cash etc.
VTI is a modern marvel

delamer
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Re: 1 million cash - looking for low risk investment

Post by delamer » Fri Jan 10, 2020 3:55 pm

lakpr wrote:
Fri Jan 10, 2020 12:24 pm
I had posted this in a previous thread ... historically, a 20% allocation to stocks and 80% allocation to Intermediate Treasuries had beaten inflation and as safe as it comes. See the below portfolio visualizer link:

https://www.portfoliovisualizer.com/bac ... tion3_2=80

Note that whenever this portfolio did have a loss, the very next year it reported double digit gains (1994, 2008, 2018).

Note also in the graph that, during the Great Recession in 2008, if you use Total Bond Market index fund that includes Corporate bonds, the loss goes up to 7.7%, whereas with the Treasuries, the loss is only 3.5%. During recession, corporations might find it tough to repay debt holders, but Uncle Sam isn't going to default.

Edited to add disclaimer: Past performance is no guarantee of future results. But the theory for this combination comes from the Risk Efficient Frontier, which has a hockey-stick shaped curve of risk vs. reward, and the bend point where the risk is the lowest and return is the maximum possible, is a 20:80 allocation. The 20% allocation to stocks beats inflation, and the 80% allocation to US Treasuries provides the ultimate safety. A 100% allocation to bonds or cash or cash equivalents also has risk, inflation eats away at those returns.
This is interesting. I can think of a couple people who might benefit from this portfolio.

And it reinforces my prejudice against corporate bonds. :wink:

What is the difference between “worst year” and “max. drawdown?” Does worst year reflect total returns, while max drawdown is based on price alone? (I don’t understand the notes.)

lakpr
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Re: 1 million cash - looking for low risk investment

Post by lakpr » Fri Jan 10, 2020 4:00 pm

"Worst Year" = Jan-1-xxxx to Dec-31-xxxx

"Max Draw Down" = maximum drop in the price, before rebounding, which can occur at any time during the year. So a "Sep-1-2008" to "Feb-29-2009" would be a max draw down during the Great Recession. After March 2009, stocks went on a tear.

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Re: 1 million cash - looking for low risk investment

Post by Wiggums » Fri Jan 10, 2020 4:07 pm

sf_tech_saver wrote:
Fri Jan 10, 2020 3:51 pm
I think this is the wrong way of asking this question as you don't mention your overall AA/portfolio size. If you have $10M in equities vs. this $1M in cash etc.
Asking portfolio questions may help add context to your question

viewtopic.php?f=1&t=6212

Topic Author
missedit
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Re: 1 million cash - looking for low risk investment

Post by missedit » Fri Jan 10, 2020 4:11 pm

is VTCLX good for the 20%? is there a fidelity equivalent for it?

found FTXMX by doing a search
Last edited by missedit on Fri Jan 10, 2020 4:15 pm, edited 1 time in total.

tvubpwcisla
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Re: 1 million cash - looking for low risk investment

Post by tvubpwcisla » Fri Jan 10, 2020 4:13 pm

What ticker symbols are recommended for both the 20 and 80 percent? Thanks!

HomeStretch
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Re: 1 million cash - looking for low risk investment

Post by HomeStretch » Fri Jan 10, 2020 4:15 pm

+1 on posting in the “Asking Portfolio Questions” format to get the best suggestions.

Are you (and spouse?) contributing to a Roth IRA either directly or via a backdoor Roth? Does your 401k allow a mega Backdoor? Both are ways to get savings into Roth accounts which grow tax free.
Last edited by HomeStretch on Fri Jan 10, 2020 4:16 pm, edited 1 time in total.

lakpr
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Re: 1 million cash - looking for low risk investment

Post by lakpr » Fri Jan 10, 2020 4:15 pm

missedit wrote:
Fri Jan 10, 2020 4:11 pm
is VTCLX good for the 20%? is there a fidelity equivalent for it?
I would recommend FSKAX at Fidelity for the 20% allocation { Fidelity Total Stock Market Index }

lakpr
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Re: 1 million cash - looking for low risk investment

Post by lakpr » Fri Jan 10, 2020 4:17 pm

tvubpwcisla wrote:
Fri Jan 10, 2020 4:13 pm
What ticker symbols are recommended for both the 20 and 80 percent? Thanks!
In the portfolio visualizer link I provided, I used VTSMX (investor version of total stock market fund at Vanguard) and VFITX (Vanguard Intermediate Treasury Index Fund). The investor class is closed now, but the Admiral version (VTSAX) is open with a $3000 minimum. VFITX is still available for investment for another $3000 minimum.

Really, though, you just need a Total Stock Market Index fund and an Intermediate Treasuries Index fund at any of the brokerage houses (Fidelity, Schwab, etc.)

delamer
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Re: 1 million cash - looking for low risk investment

Post by delamer » Fri Jan 10, 2020 4:20 pm

lakpr wrote:
Fri Jan 10, 2020 4:00 pm
"Worst Year" = Jan-1-xxxx to Dec-31-xxxx

"Max Draw Down" = maximum drop in the price, before rebounding, which can occur at any time during the year. So a "Sep-1-2008" to "Feb-29-2009" would be a max draw down during the Great Recession. After March 2009, stocks went on a tear.
Makes sense.

Thank you.

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missedit
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Re: 1 million cash - looking for low risk investment

Post by missedit » Fri Jan 10, 2020 4:20 pm

HomeStretch wrote:
Fri Jan 10, 2020 4:15 pm
+1 on posting in the “Asking Portfolio Questions” format to get the best suggestions.

Are you (and spouse?) contributing to a Roth IRA either directly or via a backdoor Roth? Does your 401k allow a mega Backdoor? Both are ways to get savings into Roth accounts which grow tax free.
we both have just regular 401K accounts (that has only before tax contributions) that has a a mix of everything that seem to have done very well in the last 10 years (hasn't every portfolio done very well?) we are getting queasy now and want to move them too to this same allocation but we don't have all these funds in the 401K selections.

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Re: 1 million cash - looking for low risk investment

Post by niceguy7376 » Fri Jan 10, 2020 4:26 pm

lakpr wrote:
Fri Jan 10, 2020 4:17 pm
Really, though, you just need a Total Stock Market Index fund and an Intermediate Treasuries Index fund at any of the brokerage houses (Fidelity, Schwab, etc.)
For bond portion of a 60 stock / 40 bond AA, what will be your thoughts of Total Bond Fund Vs Intermediate Treasuries in 401k/trad ira/simple ira ? (Discounting the state tax benefit)

Edit: Just after posting it here, I noticed there is another thread - viewtopic.php?p=4942626#p4942626
I will follow that.

HomeStretch
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Re: 1 million cash - looking for low risk investment

Post by HomeStretch » Fri Jan 10, 2020 4:35 pm

missedit wrote:
Fri Jan 10, 2020 4:20 pm
HomeStretch wrote:
Fri Jan 10, 2020 4:15 pm
+1 on posting in the “Asking Portfolio Questions” format to get the best suggestions.

Are you (and spouse?) contributing to a Roth IRA either directly or via a backdoor Roth? Does your 401k allow a mega Backdoor? Both are ways to get savings into Roth accounts which grow tax free.
we both have just regular 401K accounts (that has only before tax contributions) that has a a mix of everything that seem to have done very well in the last 10 years (hasn't every portfolio done very well?) we are getting queasy now and want to move them too to this same allocation but we don't have all these funds in the 401K selections.
Without your portfolio details, it’s hard to give you specific recommendations.

If you have any savings in Taxable accounts, consider using those funds to fund, if you can, Roth accounts. You do not pay taxes on income or growth in Roth accounts. This addresses your priority #2 to minimize taxes.

If your income is too high to contribute to a Roth IRA directly, here is a BH wiki page about Backdoor Roth:
https://www.bogleheads.org/wiki/Backdoor_Roth

BH wiki page about mega Backdoor for 401k plans:
https://www.bogleheads.org/wiki/After-tax_401(k)

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Re: 1 million cash - looking for low risk investment

Post by abuss368 » Fri Jan 10, 2020 4:55 pm

Welcome to the forum. With reward comes risk.

I would consider a money market or savings account. Perhaps a short term bond fund.
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Re: 1 million cash - looking for low risk investment

Post by hudson » Fri Jan 10, 2020 5:05 pm

missedit wrote:
Fri Jan 10, 2020 11:25 am
CDs and short term treasuries

As yields are shrinking rapidly I am looking for investments that will boost the yields slightly with a slight risk.

My top priorities are 1) preservation of capital 2) minimize taxes as we are in high tax bracket.

I am looking for low risk investments that yield qualified dividends. )
CDs are great...they can be had paying 3%.
Vanguards intermediate muni is paying out 2.56% federal tax free.
I wouldn't buy any fund that wasn't Vanguard Risk Potential 1 or 2.

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Re: 1 million cash - looking for low risk investment

Post by Blue456 » Fri Jan 10, 2020 5:27 pm

lakpr wrote:
Fri Jan 10, 2020 12:24 pm
I had posted this in a previous thread ... historically, a 20% allocation to stocks and 80% allocation to Intermediate Treasuries had beaten inflation and as safe as it comes. See the below portfolio visualizer link:

https://www.portfoliovisualizer.com/bac ... tion3_2=80

Note that whenever this portfolio did have a loss, the very next year it reported double digit gains (1994, 2008, 2018).

Note also in the graph that, during the Great Recession in 2008, if you use Total Bond Market index fund that includes Corporate bonds, the loss goes up to 7.7%, whereas with the Treasuries, the loss is only 3.5%. During recession, corporations might find it tough to repay debt holders, but Uncle Sam isn't going to default.

Edited to add disclaimer: Past performance is no guarantee of future results. But the theory for this combination comes from the Risk Efficient Frontier, which has a hockey-stick shaped curve of risk vs. reward, and the bend point where the risk is the lowest and return is the maximum possible, is a 20:80 allocation. The 20% allocation to stocks beats inflation, and the 80% allocation to US Treasuries provides the ultimate safety. A 100% allocation to bonds or cash or cash equivalents also has risk, inflation eats away at those returns.
++1. Can’t get anymore safe than that. Although during very high inflation it would not do as well as permanent portfolio.

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Re: 1 million cash - looking for low risk investment

Post by coffeeblack » Fri Jan 10, 2020 5:41 pm

If you run the number with the same fund using the monte carlo and use a 50 year retirement you get similar numbers. Using 3.7% SWR. The only issue is if you use a 10 year sequence of return risk you lose big.

If you you bootstarp (which I'm not sure what this actually means) you seem to do well. So if you retired today you could do well.

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Re: 1 million cash - looking for low risk investment

Post by Jnotsilver » Fri Jan 10, 2020 6:58 pm

Assemble a portfolio of bond funds or bond etfs. Keep your eye on overall ratings of the funds. 85% AAA-A juiced by 10% in a hi-yield. Check the annual income and check your blood pressure and adjust the composition accordingly.

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Re: 1 million cash - looking for low risk investment

Post by White Coat Investor » Fri Jan 10, 2020 7:35 pm

missedit wrote:
Fri Jan 10, 2020 11:25 am
I have been out of market for nearly decade for my taxable portfolio (401k alone is in a mix of stocks and bonds) and all of it is in CDs and short term treasuries. As yields are shrinking rapidly I am looking for investments that will boost the yields slightly with a slight risk. My top priorities are 1) preservation of capital 2) minimize taxes as we are in high tax bracket. I am looking for low risk investments that yield qualified dividends. Any suggestions? background: getting ready to retire but still working. I wouldn't need an income stream from this right away but at the same time I don't want to lock it up for long periods (like the EE bonds I read in another thread - wish I knew about it 20-30 years ago)
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Re: 1 million cash - looking for low risk investment

Post by smectym » Sat Jan 11, 2020 2:07 am

If your top priority is preservation of capital then put the $1M into Vanguard Treasury Money Market VUSSX.

If the reply to that is, well, yes that’s my TOP priority, but not my ONLY priority...I’d like to see a little growth too: then

(1) Put it into VUSXX, then

(2) transfer the amount you feel comfortable from VUSXX into a lower-risk vehicle such as Wellesley VWIAX https://investor.vanguard.com/mutual-fu ... view/vwiax , recommended above. You may want to consider dollar-cost-averaging into Wellesley or similar. Alternatives to Wellesley may include Lifestrategy Conservative Growth VSCGX https://investor.vanguard.com/mutual-fu ... fees/vscgx

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Re: 1 million cash - looking for low risk investment

Post by Dandy » Sat Jan 11, 2020 6:45 am

I would consider Ltd Term Tax exempt for a portion of the million. Maybe VG Treasury Money Market for some. Balanced Index fund for some. FDIC products and/or money market fund for some.

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Re: 1 million cash - looking for low risk investment

Post by minimalistmarc » Sat Jan 11, 2020 7:23 am

wolf359 wrote:
Fri Jan 10, 2020 3:35 pm
minimalistmarc wrote:
Fri Jan 10, 2020 1:43 pm
missedit wrote:
Fri Jan 10, 2020 1:37 pm
thank you lakpr and snailderby - this is very good info for someone at my stage. I always suspected treasuries were better than bond funds. Are there any advantages (or disadvantages) to buying intermediate treasuries directly in fidelity brokerage vs buying VFITX?


Unfortunately you have failed on your first priority to preserve capital by being in cash for 10 years. Your capital is now worth a lot less inflation adjusted.

If you want to preserve capital (real capital, not nominal) then you will need a little bit more stock, at least 20 - 30%.
Let's quantify that. https://www.usinflationcalculator.com/

$1,000,000 in 2009 had the same buying power as $1,179,550.21 today. OP lost about $180K in buying power, although he probably earned some interest. Cumulative inflation was about 18%.
Shouldn’t you also calculate the missed gains from a portion of the money that might have been invested?

Prudence
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Re: 1 million cash - looking for low risk investment

Post by Prudence » Sat Jan 11, 2020 8:48 am

For you, I endorse the 20/80 or 30/70 allocation suggested above. Personally, as a retiree of 3 1/2 years, my goal over the past few years has been to grow the portfolio, beating or keeping up with inflation. So, I have concentrated in several CDs earning 3% or more, a fund with a fixed rate of 4%, and various savings accounts and money markets. My portfolio is ultra conservative but I like the security.

Grt2bOutdoors
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Re: 1 million cash - looking for low risk investment

Post by Grt2bOutdoors » Sat Jan 11, 2020 8:59 am

FrugalConservative wrote:
Fri Jan 10, 2020 11:26 am


If you are a high income earner, why so risk averse. Sheesh, 10 years of being out of the market, that is painful considering the returns that have been earned.
It’s not painful if there is an end goal in mind for the OP and it permitted him to stay the course. Imagine a portfolio that is 50% bonds and 50% stock. Half of portfolio participated in the high returns, half permitted OP to sleep well at night. When the market dipped on 12/24/18, he did not panic, he stayed the course. Still arrived at his destination. Investing is not about obtaining the highest returns with disregard for risk. Risk can show up at any time. Time to be prepared is before you need it, not after. We saw that in 2008/2009. History may not repeat, but it has tendency to rhyme. If you don’t have stomach of cast iron steel, then emotions can be your greatest enemy.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

hudson
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Re: 1 million cash - looking for low risk investment

Post by hudson » Sat Jan 11, 2020 11:36 am

missedit,

You've probably read these books; if not consider it.
I'd start with Four Pillars...

https://www.bogleheads.org/wiki/Books:_ ... nd_reviews

JiggyWillis
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Re: 1 million cash - looking for low risk investment

Post by JiggyWillis » Sat Jan 11, 2020 4:39 pm

hudson wrote:
Fri Jan 10, 2020 5:05 pm
missedit wrote:
Fri Jan 10, 2020 11:25 am
CDs and short term treasuries

As yields are shrinking rapidly I am looking for investments that will boost the yields slightly with a slight risk.

My top priorities are 1) preservation of capital 2) minimize taxes as we are in high tax bracket.

I am looking for low risk investments that yield qualified dividends. )
CDs are great...they can be had paying 3%.
Vanguards intermediate muni is paying out 2.56% federal tax free.
I wouldn't buy any fund that wasn't Vanguard Risk Potential 1 or 2.
the SEC 30-day yield on the VG intermediate muni fund-admiral class is 1.54%. Just looked at it today as I am considering buying $100k of it in taxable.

hudson
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Re: 1 million cash - looking for low risk investment

Post by hudson » Sat Jan 11, 2020 5:12 pm

Reference: the contribution above....
JiggyWillis, I was quoting the current monthly distribution yield of VWIUX as of Jan. 2, 2020.

Consider looking at the distribution yields over the last year or so. https://investor.vanguard.com/mutual-fu ... view/vwiux

The 5th tab to the right is "Distributions". (You probably already know that...apologies.)

Some maintain that the distribution yield is not a good number; they say that the extra yield comes from buying the bonds at a discounted price....and that the profit that the bond fund makes on the discount is paid as interest/dividend. They say that the fund will eventually lose that money as the holdings mature. They are technically correct....but....

I believe that the distribution yield is a good number. Over the last few years, the NAV has risen....while the distribution yield has remained much higher than the SEC yield. The distribution yield is real; that's what you pay (state) taxes on. The SEC Yield is a great number to use when comparing bond funds...it's about the distant future...at least when discussing VWIUX.

There's a lot more to it; if interested, maybe look for discussions about SEC vs Distribution Yield.

The bottom line for me is that VWIUX is a good fund. It's not as safe as CD's but after taxes...at least at my tax rate, it beats 3+% CDs. VWIUX is a major holding of mine.

JiggyWillis
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Re: 1 million cash - looking for low risk investment

Post by JiggyWillis » Sat Jan 11, 2020 7:33 pm

hudson wrote:
Sat Jan 11, 2020 5:12 pm
Reference: the contribution above....
JiggyWillis, I was quoting the current monthly distribution yield of VWIUX as of Jan. 2, 2020.

Consider looking at the distribution yields over the last year or so. https://investor.vanguard.com/mutual-fu ... view/vwiux

The 5th tab to the right is "Distributions". (You probably already know that...apologies.)

Some maintain that the distribution yield is not a good number; they say that the extra yield comes from buying the bonds at a discounted price....and that the profit that the bond fund makes on the discount is paid as interest/dividend. They say that the fund will eventually lose that money as the holdings mature. They are technically correct....but....

I believe that the distribution yield is a good number. Over the last few years, the NAV has risen....while the distribution yield has remained much higher than the SEC yield. The distribution yield is real; that's what you pay (state) taxes on. The SEC Yield is a great number to use when comparing bond funds...it's about the distant future...at least when discussing VWIUX.

There's a lot more to it; if interested, maybe look for discussions about SEC vs Distribution Yield.

The bottom line for me is that VWIUX is a good fund. It's not as safe as CD's but after taxes...at least at my tax rate, it beats 3+% CDs. VWIUX is a major holding of mine.
Thanks for the education, Hudson! My ignorance did not prevent me from buying a bunch of it today. Assuming my business continues to perform (and generate a large tax liability), I anticipate buying much more over the next decade before retirement. I like the flexibility of having it available in taxable to re-balance as well as for any capital expenses that may come up.

hudson
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Re: 1 million cash - looking for low risk investment

Post by hudson » Sat Jan 11, 2020 8:59 pm

JiggyWillis wrote:
Sat Jan 11, 2020 7:33 pm

Thanks for the education, Hudson! My ignorance did not prevent me from buying a bunch of it today. Assuming my business continues to perform (and generate a large tax liability), I anticipate buying much more over the next decade before retirement. I like the flexibility of having it available in taxable to re-balance as well as for any capital expenses that may come up.
JiggyWillis,
It's good to keep your eye on the ball...or the yields. I'm always ready to jump ship if I can find something better....but I've been with VWIUX for around 10 years.
Baird's intermediate muni is a good fund...higher ER...lower distribution...but no muni fund safer....at least that I've heard of. BMBIX is almost up there with treasuries....safety wise.

Turn62yearsold
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Re: 1 million cash - looking for low risk investment

Post by Turn62yearsold » Sun Jan 12, 2020 12:04 am

lakpr wrote:
Fri Jan 10, 2020 4:15 pm
missedit wrote:
Fri Jan 10, 2020 4:11 pm
is VTCLX good for the 20%? is there a fidelity equivalent for it?
I would recommend FSKAX at Fidelity for the 20% allocation { Fidelity Total Stock Market Index }
One of my non tax deferred brokerage accounts is with Vanguard, with just VTCLX and Money Market. Why do you prefer the Fidelity FSKAX?

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