100 year investment

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soccerdad12
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100 year investment

Post by soccerdad12 » Wed Feb 08, 2012 8:32 pm

What would the best investment for a good amount of money that isn't meant to be spent for 100 years? It is a trust fund meant to build family wealth. Obviously since it isn't to be touched for a very long time it presents an unusual circumstance. Any thoughts are appreciated. Thanks.

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Liquid
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Re: 100 year investment

Post by Liquid » Wed Feb 08, 2012 8:34 pm

Total world stock fund.

Random Poster
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Re: 100 year investment

Post by Random Poster » Wed Feb 08, 2012 8:42 pm

Wouldn't you want some type of investment portfolio that is modeled on, or similar to, endowment holdings?

soccerdad12
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Re: 100 year investment

Post by soccerdad12 » Wed Feb 08, 2012 8:42 pm

I was thinking of something with higher expected returns because I am not concerned at all about market swings. Vanguard small cap growth fund was my original thought.

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G-Money
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Re: 100 year investment

Post by G-Money » Wed Feb 08, 2012 8:46 pm

You're essentially investing like a university foundation from a time horizon perspective, but with the same limitations retail investors have (lack of access to top-flight hedge funds and private equity). I'd recommend using David Swensen's recommended AA from his book Unconventional Success, although perhaps with a smaller allocation to REITs and with a small-value tilt.
Don't assume I know what I'm talking about.

Risk seeker
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Re: 100 year investment

Post by Risk seeker » Wed Feb 08, 2012 8:47 pm

This same theme was discussed on the following thread regarding retail funds with the highest expected return:

http://www.bogleheads.org/forum/viewtopic.php?t=40891

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Liquid
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Re: 100 year investment

Post by Liquid » Wed Feb 08, 2012 9:25 pm

soccerdad12 wrote:I was thinking of something with higher expected returns because I am not concerned at all about market swings. Vanguard small cap growth fund was my original thought.
Lowest expected return.

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Liquid
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Re: 100 year investment

Post by Liquid » Wed Feb 08, 2012 9:26 pm

G-Money wrote:You're essentially investing like a university foundation from a time horizon perspective, but with the same limitations retail investors have (lack of access to top-flight hedge funds and private equity). I'd recommend using David Swensen's recommended AA from his book Unconventional Success, although perhaps with a smaller allocation to REITs and with a small-value tilt.
This portfolio was simply a guideline for the retail investor, not a recommendation for a 100yr portfolio or institutional portfolio.

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Liquid
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Re: 100 year investment

Post by Liquid » Wed Feb 08, 2012 9:29 pm

Risk seeker wrote:This same theme was discussed on the following thread regarding retail funds with the highest expected return:

http://www.bogleheads.org/forum/viewtopic.php?t=40891
Conclusion... global small-cap value.

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G-Money
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Re: 100 year investment

Post by G-Money » Thu Feb 09, 2012 5:25 am

Remember, just because the money isn't needs for 100 years doesn't mean no one will look at the portfolio between now and then. Especially since the OP was considering small growth, which I assume was among last year's top performers, a little diversification goes a long way. I'm not aware of any institutional investor that is 100% stocks. Even over 100 years, it is possible that stocks underperform bonds.
Don't assume I know what I'm talking about.

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Re: 100 year investment

Post by fredflinstone » Thu Feb 09, 2012 7:11 am

if you are investing a lot of money and you don't intend to fine-tune the portfolio (for example, through rebalancing) and you don't care about simplicity (why should this matter if you won't be fine-tuning the portfolio), you may as well buy individual stocks rather than a fund. You'll reduce your administrative expenses and you will be able to target the highest-risk, highest-return stocks (i.e. deep value micro-cap) much better than any fund can. (Funds often cannot buy the tiniest micro-caps because these stocks are illiquid.)

If you're investing $1,000,000, you might invest $5,000 each in 200 different micro-cap value stocks. Assume you pay $2 per trade to buy -- that's $400 -- plus another $2 per trade to sell. Amortized over the lifespan of the investments, that's $8 per year in expenses. That is an expense ratio of 0.0008 percent to start, but your expense ratio will drop as your portfolio grows. I challenge anyone to find a fund with a lower expense ratio.

You don't need any stock-picking skill. In fact, trying to pick stocks you think will outperform is likely to be counter-productive. Just use Google's stock screener to find micro-cap stocks (market cap less than $100 million) with "valuey" characteristics: low P/E ratios, low P/S ratios, high dividend yields. Then pick 200 stocks at random.

Assume $1 million invested with a total return, after costs, of 10 percent. That portfolio will grow to $12.5 billion in 100 years. By comparison, the same investment with a return of 8 percent would grow to "just" $2.0 billion.

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Re: 100 year investment

Post by dailybagel » Thu Feb 09, 2012 7:59 am

Benjamin Franklin bequeathed money to Boston and Philadelphia over 100- and 200-year timespans. His will specified thy the money be invested in micro loans to working people in those cities.

My two cents: I think total world stock market plus total world bond market in an aggressive combination is et. Say 85/15 to achieve modest anti-correlation benefits while achieving high expected returns.

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Re: 100 year investment

Post by YDNAL » Thu Feb 09, 2012 9:09 am

soccerdad12 wrote:What would the best investment for a good amount of money that isn't meant to be spent for 100 years? It is a trust fund meant to build family wealth. Obviously since it isn't to be touched for a very long time it presents an unusual circumstance. Any thoughts are appreciated. Thanks.
soccerdad12 wrote:I was thinking of something with higher expected returns because I am not concerned at all about market swings. Vanguard small cap growth fund was my original thought.
Look at the table (20 years) and find Small Cap Growth.
http://www.callan.com/research/download ... %2f548.pdf

Then, look at the table and try to find a pattern. Good luck with that!
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staythecourse
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Re: 100 year investment

Post by staythecourse » Thu Feb 09, 2012 10:06 am

fredflinstone wrote:if you are investing a lot of money and you don't intend to fine-tune the portfolio (for example, through rebalancing) and you don't care about simplicity (why should this matter if you won't be fine-tuning the portfolio), you may as well buy individual stocks rather than a fund. You'll reduce your administrative expenses and you will be able to target the highest-risk, highest-return stocks (i.e. deep value micro-cap) much better than any fund can. (Funds often cannot buy the tiniest micro-caps because these stocks are illiquid.)

If you're investing $1,000,000, you might invest $5,000 each in 200 different micro-cap value stocks. Assume you pay $2 per trade to buy -- that's $400 -- plus another $2 per trade to sell. Amortized over the lifespan of the investments, that's $8 per year in expenses. That is an expense ratio of 0.0008 percent to start, but your expense ratio will drop as your portfolio grows. I challenge anyone to find a fund with a lower expense ratio.

You don't need any stock-picking skill. In fact, trying to pick stocks you think will outperform is likely to be counter-productive. Just use Google's stock screener to find micro-cap stocks (market cap less than $100 million) with "valuey" characteristics: low P/E ratios, low P/S ratios, high dividend yields. Then pick 200 stocks at random.

Assume $1 million invested with a total return, after costs, of 10 percent. That portfolio will grow to $12.5 billion in 100 years. By comparison, the same investment with a return of 8 percent would grow to "just" $2.0 billion.
I must say this is a BAD idea. What knowledge do you have that the 200 microcap stocks will survive for 100 years?? My guess is all 200 would go bankrupt over the next 100 years. I would like to know the % of microcap stocks that survived from 1911-2010 with the survivorship bias included. My guess is less then 10%. Would you bet 1mill. on 10% even if you could identify those non-bankrupting companies.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

PreserveCapital
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Re: 100 year investment

Post by PreserveCapital » Thu Feb 09, 2012 10:10 am

Here's a list of companys that were founded in 1912--100 years ago:

http://www.ranker.com/list/companies-fo ... /reference

manuvns
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Re: 100 year investment

Post by manuvns » Thu Feb 09, 2012 10:12 am

Liquid wrote:Total world stock fund.
60% total world stock fund + 40% total bond market fund

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Re: 100 year investment

Post by yobria » Thu Feb 09, 2012 10:26 am

soccerdad12 wrote:I was thinking of something with higher expected returns because I am not concerned at all about market swings. Vanguard small cap growth fund was my original thought.
That's a great, tax efficient, low fee fund and should do very well over time. However, you've concentrated 100% of your weath in only 1-2% of the global stock market. I'd do 100% total world stock market as others have noted. Should you add bonds? Depends on your desire for growth vs preservation of capital. A 60/40 split is just fine too.

Nick

staythecourse
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Re: 100 year investment

Post by staythecourse » Thu Feb 09, 2012 10:33 am

PreserveCapital wrote:Here's a list of companys that were founded in 1912--100 years ago:

http://www.ranker.com/list/companies-fo ... /reference
Now we have a list of companies that have "SURVIVED" since 1912.

Now the question is: How many companies were around at that same time that did not survive (i.e. survivorship bias) and don't think all of those which survived that was posted would have been classified as microcap back then. Also, don't forget you would have had to pick out the ones that will succeed in advance.

If this sounds familiar it should, this is the same company risk folks who try to actively security select go through. As we know that data is bad and worsens over longer time periods. The time periods they refer to even in those situations are 10 or 20 years. Here we are talking about 100 YEARS!! So you can imagine what your chances of success are.

Good luck.

T
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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fredflinstone
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Re: 100 year investment

Post by fredflinstone » Thu Feb 09, 2012 10:39 am

staythecourse wrote:
fredflinstone wrote:if you are investing a lot of money and you don't intend to fine-tune the portfolio (for example, through rebalancing) and you don't care about simplicity (why should this matter if you won't be fine-tuning the portfolio), you may as well buy individual stocks rather than a fund. You'll reduce your administrative expenses and you will be able to target the highest-risk, highest-return stocks (i.e. deep value micro-cap) much better than any fund can. (Funds often cannot buy the tiniest micro-caps because these stocks are illiquid.)

If you're investing $1,000,000, you might invest $5,000 each in 200 different micro-cap value stocks. Assume you pay $2 per trade to buy -- that's $400 -- plus another $2 per trade to sell. Amortized over the lifespan of the investments, that's $8 per year in expenses. That is an expense ratio of 0.0008 percent to start, but your expense ratio will drop as your portfolio grows. I challenge anyone to find a fund with a lower expense ratio.

You don't need any stock-picking skill. In fact, trying to pick stocks you think will outperform is likely to be counter-productive. Just use Google's stock screener to find micro-cap stocks (market cap less than $100 million) with "valuey" characteristics: low P/E ratios, low P/S ratios, high dividend yields. Then pick 200 stocks at random.

Assume $1 million invested with a total return, after costs, of 10 percent. That portfolio will grow to $12.5 billion in 100 years. By comparison, the same investment with a return of 8 percent would grow to "just" $2.0 billion.
I must say this is a BAD idea. What knowledge do you have that the 200 microcap stocks will survive for 100 years?? My guess is all 200 would go bankrupt over the next 100 years. I would like to know the % of microcap stocks that survived from 1911-2010 with the survivorship bias included. My guess is less then 10%. Would you bet 1mill. on 10% even if you could identify those non-bankrupting companies.

Good luck.
yes, many will go bankrupt and others will become huge, successful companies.

Overall, small cap value has beaten the total stock market over the last century; the smaller the companies, the better the outperformance.

http://www.moneychimp.com/articles/inde ... o_deep.htm

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Re: 100 year investment

Post by fredflinstone » Thu Feb 09, 2012 10:41 am

staythecourse wrote:
PreserveCapital wrote:Here's a list of companys that were founded in 1912--100 years ago:

http://www.ranker.com/list/companies-fo ... /reference
Now we have a list of companies that have "SURVIVED" since 1912.

Now the question is: How many companies were around at that same time that did not survive (i.e. survivorship bias) and don't think all of those which survived that was posted would have been classified as microcap back then. Also, don't forget you would have had to pick out the ones that will succeed in advance.
this is missing the point. The point is, on average, micro-cap value stocks as as group have handily outperformed the stock market as a whole. The percentage of companies that survive or go bankrupt is not relevant. As long as the OP buys a large basket of micro-cap stocks (e.g. several hundred) the law of large numbers will kick in.

Good article here on micro-caps: http://www.threepa.com/files/Perritt_Fu ... age_1_.pdf

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Re: 100 year investment

Post by grayfox » Thu Feb 09, 2012 10:45 am

soccerdad12 wrote:What would the best investment for a good amount of money that isn't meant to be spent for 100 years? It is a trust fund meant to build family wealth. Obviously since it isn't to be touched for a very long time it presents an unusual circumstance. Any thoughts are appreciated. Thanks.
One hundred years is a long time--too long to try and get too specific about which companies/industries/countries/regions will prosper and which will crash and burn. So forget about individual stocks, or sectors or segments of the market.

The only prudent thing would be to diversify as much as possible. So that would be World Stock Fund and maybe some Worldwide Bond Fund. How to split between stocks and bonds? I would think somewhere between 100/0 or 80/20 stocks/bonds. Stocks have the higher expected return.

You could just put it into Vanguard Total World Stock ETF (VT) and don't touch it for decades.

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Re: 100 year investment

Post by yobria » Thu Feb 09, 2012 10:47 am

staythecourse wrote:
fredflinstone wrote:if you are investing a lot of money and you don't intend to fine-tune the portfolio (for example, through rebalancing) and you don't care about simplicity (why should this matter if you won't be fine-tuning the portfolio), you may as well buy individual stocks rather than a fund. You'll reduce your administrative expenses and you will be able to target the highest-risk, highest-return stocks (i.e. deep value micro-cap) much better than any fund can. (Funds often cannot buy the tiniest micro-caps because these stocks are illiquid.)

If you're investing $1,000,000, you might invest $5,000 each in 200 different micro-cap value stocks. Assume you pay $2 per trade to buy -- that's $400 -- plus another $2 per trade to sell. Amortized over the lifespan of the investments, that's $8 per year in expenses. That is an expense ratio of 0.0008 percent to start, but your expense ratio will drop as your portfolio grows. I challenge anyone to find a fund with a lower expense ratio.

You don't need any stock-picking skill. In fact, trying to pick stocks you think will outperform is likely to be counter-productive. Just use Google's stock screener to find micro-cap stocks (market cap less than $100 million) with "valuey" characteristics: low P/E ratios, low P/S ratios, high dividend yields. Then pick 200 stocks at random.

Assume $1 million invested with a total return, after costs, of 10 percent. That portfolio will grow to $12.5 billion in 100 years. By comparison, the same investment with a return of 8 percent would grow to "just" $2.0 billion.
I must say this is a BAD idea. What knowledge do you have that the 200 microcap stocks will survive for 100 years?? My guess is all 200 would go bankrupt over the next 100 years. I would like to know the % of microcap stocks that survived from 1911-2010 with the survivorship bias included. My guess is less then 10%. Would you bet 1mill. on 10% even if you could identify those non-bankrupting companies.

Good luck.
Yes, this is truly a bad idea. What you'll wind up with eventually is a concentrated portfolio of a few winners representing .001% of the stocks in the market.

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Re: 100 year investment

Post by fredflinstone » Thu Feb 09, 2012 10:58 am

yobria wrote:
staythecourse wrote:
fredflinstone wrote:if you are investing a lot of money and you don't intend to fine-tune the portfolio (for example, through rebalancing) and you don't care about simplicity (why should this matter if you won't be fine-tuning the portfolio), you may as well buy individual stocks rather than a fund. You'll reduce your administrative expenses and you will be able to target the highest-risk, highest-return stocks (i.e. deep value micro-cap) much better than any fund can. (Funds often cannot buy the tiniest micro-caps because these stocks are illiquid.)

If you're investing $1,000,000, you might invest $5,000 each in 200 different micro-cap value stocks. Assume you pay $2 per trade to buy -- that's $400 -- plus another $2 per trade to sell. Amortized over the lifespan of the investments, that's $8 per year in expenses. That is an expense ratio of 0.0008 percent to start, but your expense ratio will drop as your portfolio grows. I challenge anyone to find a fund with a lower expense ratio.

You don't need any stock-picking skill. In fact, trying to pick stocks you think will outperform is likely to be counter-productive. Just use Google's stock screener to find micro-cap stocks (market cap less than $100 million) with "valuey" characteristics: low P/E ratios, low P/S ratios, high dividend yields. Then pick 200 stocks at random.

Assume $1 million invested with a total return, after costs, of 10 percent. That portfolio will grow to $12.5 billion in 100 years. By comparison, the same investment with a return of 8 percent would grow to "just" $2.0 billion.
I must say this is a BAD idea. What knowledge do you have that the 200 microcap stocks will survive for 100 years?? My guess is all 200 would go bankrupt over the next 100 years. I would like to know the % of microcap stocks that survived from 1911-2010 with the survivorship bias included. My guess is less then 10%. Would you bet 1mill. on 10% even if you could identify those non-bankrupting companies.

Good luck.
Yes, this is truly a bad idea. What you'll wind up with eventually is a concentrated portfolio of a few winners representing .001% of the stocks in the market.
That is a good point that I hadn't considered. You are right, I was wrong, and I withdraw my suggestion.

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Re: 100 year investment

Post by pkcrafter » Thu Feb 09, 2012 11:51 am

soccerdad12 wrote:What would the best investment for a good amount of money that isn't meant to be spent for 100 years? It is a trust fund meant to build family wealth. Obviously since it isn't to be touched for a very long time it presents an unusual circumstance. Any thoughts are appreciated. Thanks.
LifeStrategy Moderate Growth

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Watty
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Re: 100 year investment

Post by Watty » Thu Feb 09, 2012 1:28 pm

<I>...What would the best investment....</I>

You are asking the wrong question, instead of "investment" you should be looking at a mix of investments.

It would be a huge mistake to put in one asset class because it might have the highest return over that that time period. The reason is that when you have a diversified portfolio of several asset classes that is periodically rebalanced it will automatically tend to "buy low and sell high" which will boost your returns.

You would also want at least some dividend paying stocks or bonds in the portfolio to provide income to pay the expenses each year which may be non-trivial since you would be need to pay some institution to administer the trust. You would also need to keep the portfolio simple so that there is no "wiggle room" that would allow some future trust administrator to find ways to generate more expenses that could cost the trust a lot.

A simple portfolio of just;

Total (US) stock market.
Total International stock market
Total Bond market

Would work well

The ETF versions of the stock funds would likely be better than the mutual funds for tax efficiency.

These would keep it simple and the dividends and capital gains distributions could be used to help rebalance so it would not be too bad as far as tax efficiency. Depending on the amount involved and the taxes there are similar mutual funds that are managed for tax efficiency but I would be skeptical about them not changing, merging with another mutual fund, or liquidating over 100 years,

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Re: 100 year investment

Post by staythecourse » Thu Feb 09, 2012 2:32 pm

fredflinstone wrote:
yobria wrote:
staythecourse wrote:
fredflinstone wrote:if you are investing a lot of money and you don't intend to fine-tune the portfolio (for example, through rebalancing) and you don't care about simplicity (why should this matter if you won't be fine-tuning the portfolio), you may as well buy individual stocks rather than a fund. You'll reduce your administrative expenses and you will be able to target the highest-risk, highest-return stocks (i.e. deep value micro-cap) much better than any fund can. (Funds often cannot buy the tiniest micro-caps because these stocks are illiquid.)

If you're investing $1,000,000, you might invest $5,000 each in 200 different micro-cap value stocks. Assume you pay $2 per trade to buy -- that's $400 -- plus another $2 per trade to sell. Amortized over the lifespan of the investments, that's $8 per year in expenses. That is an expense ratio of 0.0008 percent to start, but your expense ratio will drop as your portfolio grows. I challenge anyone to find a fund with a lower expense ratio.

You don't need any stock-picking skill. In fact, trying to pick stocks you think will outperform is likely to be counter-productive. Just use Google's stock screener to find micro-cap stocks (market cap less than $100 million) with "valuey" characteristics: low P/E ratios, low P/S ratios, high dividend yields. Then pick 200 stocks at random.

Assume $1 million invested with a total return, after costs, of 10 percent. That portfolio will grow to $12.5 billion in 100 years. By comparison, the same investment with a return of 8 percent would grow to "just" $2.0 billion.
I must say this is a BAD idea. What knowledge do you have that the 200 microcap stocks will survive for 100 years?? My guess is all 200 would go bankrupt over the next 100 years. I would like to know the % of microcap stocks that survived from 1911-2010 with the survivorship bias included. My guess is less then 10%. Would you bet 1mill. on 10% even if you could identify those non-bankrupting companies.

Good luck.
Yes, this is truly a bad idea. What you'll wind up with eventually is a concentrated portfolio of a few winners representing .001% of the stocks in the market.
That is a good point that I hadn't considered. You are right, I was wrong, and I withdraw my suggestion.
Even a clock is right twice a day!! :D
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Re: 100 year investment

Post by novastepp » Thu Feb 09, 2012 4:48 pm

Remember too that at some point this 100-year portfolio will be 1 year away from being used. Do you want to be 100% in stocks during that last year?

May want to include a provision that changes allocation every 25 years or so, or a provisison that at least reduces risk during the last 10-15 years; you'll really want to mitigate risk near the end.

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Re: 100 year investment

Post by soccerdad12 » Thu Feb 09, 2012 5:04 pm

It may or may not be used. There isn't something magical about 100 years, except that it isn't to be touched at all for that long. If any money comes out after that 100 years it will only be in small chunks. Really it is a family endowment to continue in perpetuity and expected to continue to grow forever.

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Re: 100 year investment

Post by Lucio » Thu Feb 09, 2012 5:14 pm

soccerdad12 wrote:What would the best investment for a good amount of money that isn't meant to be spent for 100 years? It is a trust fund meant to build family wealth. Obviously since it isn't to be touched for a very long time it presents an unusual circumstance. Any thoughts are appreciated. Thanks.
If we're talking about more than $50 million, consider which assets have done well when governments or societies have failed.

Some things are harder to successfully expropriate than others. The last hundred years has shown that people who owned real property, buildings that were not destroyed, paintings, and sovereign bonds were able to make a recovery. Equities, not so much. For example, the current Russian government settled some of the debts of the Tsarist government in the early 1990s.

As an example of investing for the long term, consider the Fugger foundation, which has been going strong for 500 years.

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Re: 100 year investment

Post by Liquid » Thu Feb 09, 2012 6:16 pm

G-Money wrote:Remember, just because the money isn't needs for 100 years doesn't mean no one will look at the portfolio between now and then. Especially since the OP was considering small growth, which I assume was among last year's top performers, a little diversification goes a long way. I'm not aware of any institutional investor that is 100% stocks. Even over 100 years, it is possible that stocks underperform bonds.
Institutional investors are not 100% stocks because they have yearly funding requirements. In Pioneering Portfolio Management high equity orientation was one of the innovations of the Yale portfolio.

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Liquid
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Re: 100 year investment

Post by Liquid » Thu Feb 09, 2012 6:17 pm

novastepp wrote:Remember too that at some point this 100-year portfolio will be 1 year away from being used. Do you want to be 100% in stocks during that last year?

May want to include a provision that changes allocation every 25 years or so, or a provisison that at least reduces risk during the last 10-15 years; you'll really want to mitigate risk near the end.
Just purchase the Target 2112 Fund.

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Re: 100 year investment

Post by E-M-H » Thu Feb 09, 2012 6:33 pm

First, the trustee doesn't need to maintain the same investment over the lifetime of a long-term trust, and likely has a duty to invest the corpus more prudently than that. So your question is possibly just hypothetical. You could provide general guidance to the trustee without mandating a specific long-term investment. Second, and probably off-topic, the rule against perpetuities in some cases makes it difficult to set up such a long-term trust. Are you really considering this?

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Re: 100 year investment

Post by soccerdad12 » Thu Feb 09, 2012 8:55 pm

It isn't being considered. It is already done. Also trusts in some states are valid up to 360 years.

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Liquid
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Re: 100 year investment

Post by Liquid » Thu Feb 09, 2012 9:31 pm

soccerdad12 wrote:It isn't being considered. It is already done. Also trusts in some states are valid up to 360 years.
Wow 360yrs! Surely after a quick tax break the trust can be reestablished for another 360.



If you would like to Yalify:


US Equity 12%

US Bonds 4%

Foreign Equity 15%

Absolut Return 25% (Eg, merger arbitrage, long / short, market mispricings generally transactions with short time horizons mo-2yrs)

Private Equity 17% (Eg, venture capital, leveraged buyout)

Real Assets 27%, (50%RE, oil, gas, timberland)

Cash 0%


:beer

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Re: 100 year investment

Post by tc101 » Thu Feb 09, 2012 9:52 pm

Benjamin Franklin bequeathed money to Boston and Philadelphia over 100- and 200-year timespans. His will specified thy the money be invested in micro loans to working people in those cities.
Do you know what the returns were over the 200-year timespan?
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grok87
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Re: 100 year investment

Post by grok87 » Thu Feb 09, 2012 10:08 pm

soccerdad12 wrote:What would the best investment for a good amount of money that isn't meant to be spent for 100 years? It is a trust fund meant to build family wealth. Obviously since it isn't to be touched for a very long time it presents an unusual circumstance. Any thoughts are appreciated. Thanks.
I think you could do worse than David Swensen's portfolio:
30% US stocks
25% International (15% Developed 10% EM)
15% Real Estate
15% Treasuries
15% TIPs

Given the long time horizon, and the goal of building wealth I would probably tweak it this way

US STocks- heavy small value tilt
Real Estate- probably some direct real estate as well as TIPs
TIPS- 30 year tips all the way
cheers,
"...people always live for ever when there is any annuity to be paid them"- Jane Austen

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nisiprius
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Re: 100 year investment

Post by nisiprius » Thu Feb 09, 2012 10:14 pm

I think you want to consider very seriously the apparent fact that universities endowments may give lip service to the notion that they are investing for the very long term, but they can't really be doing it. They must be saying one thing and doing another, or Harvard wouldn't have cut research budgets and stopping facilities construction. It's easy to say you're investing for the long term; it's not so easy actually to do it.
Last edited by nisiprius on Thu Feb 09, 2012 10:17 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

dbr
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Re: 100 year investment

Post by dbr » Thu Feb 09, 2012 10:17 pm

nisiprius wrote:I think you want to consider very seriously the apparent fact that universities endowments may give lip service to the notion that they are investing for the very long term, but they can't really be doing it, or they wouldn't have been in such pain in 2008-2009.
I have a pretty good idea they are investing for the bonus that can be earned by the investment managers for outstanding annual results. At least a couple of guys at Harvard were walking away with $30,000,000 more or less a year each for a bit there before somebody else was on watch when the you know what flew.

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novastepp
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Re: 100 year investment

Post by novastepp » Thu Feb 09, 2012 10:30 pm

Liquid wrote:
novastepp wrote:Remember too that at some point this 100-year portfolio will be 1 year away from being used. Do you want to be 100% in stocks during that last year?

May want to include a provision that changes allocation every 25 years or so, or a provisison that at least reduces risk during the last 10-15 years; you'll really want to mitigate risk near the end.
Just purchase the Target 2112 Fund.

Kinda what I was thinking when I typed that. :)

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