[cabo35]

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investiments?

Return on investments?

[under55]

Well I did what they said and about 18 months before I retired I moved most of my money to a stable return fund. I am taking out enough now to pay off the the house in TV before we move there in May 2011.

[kar guy]

I took all of mine out of Merrill Lynch and puit it in equity stock index funds. I will be garanteed 13% this year ( 10% immediatly ). This is probably the best decision I have made. Take care Kar guy

[spk7951]

Well we moved out of the market a couple of years ago and put that money into CD's at 5%. If I was doing that now I probably would still go with CD's but for a shorter time frame due to the low return rates.

[Boomer]

Originally Posted by cabo35

If you pulled 250k out of the stock market....where would you put it?

I know its tempting, but, please play nice with the question.

Consider:

Preservation of wealth in the short and long haul.

Safety of investments?

Return on investments?

Cabo,

First of all, I really try hard never to tell anybody what I think they should do with money. But this is just a hypothetical you are putting out here so I will hypothetical right back atcha.

It sounds like you are asking about the formula for what I call "the cost of sleep."

There are two key words in your question: preservation and safety. If that is truly all that is important, and ROI, not so much, I would use short term CD's in banks insured by the FDIC.

I would split it up maybe, even though I think the FDIC is insuring up to $250,000 now. But I think that might be slated to revert back to $100,000 at the end of the year. I have not looked at the FDIC website for a while. But it explains all that and has something where amounts can be plugged in to check what would be insured. It is not just a flat amount. It has to do with how the accounts are named.

CD rates are so low right now, it is painful to even ask about them. The reason I said short-term CD's is that I do not see how they can get a whole lot worse and I have wondered if inflation will cause rates to go up over the next year.

Those double-digit CD's I held in the early 80's were freakish I know. I knew it was not right even then. Those double-digit CD's paid Boomette's tuition. I do not expect rates even close to those, nor should they be.

But how inflation cannot set in and affect rates, I do not know. But they will find a way to pay us nothing is my guess. Even so, short term CD's are what I would use. Of course, rates could also get lower. So who knows how CD rates will be down the road.

(I will try very hard now not to start in here on a rant about the Fed over the past several years.)

So back to those CD's. Painful though those rates may be, FDIC insured CD's pass my cost of sleep test. I am so unsophisticated as an investor that I cannot even imagine buying a CD on the internet. I like small, bricks and mortar banks that shelve their mortgages and do things the old-fashioned way. And where when I go there, they say, "BOOMER!" You know, like on "Cheers" when they say, "NORM!"

I never invest in anything that is not liquid. Let me clarify that. By liquid, I mean CD's and stocks that, of course, I could take a hit on for cashing in at the wrong time, but that would be my decision. I have to have those decisions all in my own hands. I refuse to tie up in an annuity. I do not understand annuities. I do not try to understand annuities. I cannot turn it over. But that's just how I am.

And since you said "out of the market" I will not go into dividend payers like utilities. Who knows anyway about those. Somebody might decide they are not green enough or something like that. But we just bought more utilities.

Cabo, I know my answer was 101 and you already know that stuff. I wish I had a really good answer. And I know the thing about how low rates lose against inflation. But the principal remains. And sometimes all I can do is try to hang onto the principal, even though inflation eats away at it. But also, I just cannot let go of those dividend payers. Even though they take a hit in price, the check is still in the mail. For now.

It was not supposed to be like this.

And that was all just hypothetical. I know nothing.

Boomer

[spk7951]

Originally Posted by Boomer

Cabo,

First of all, I really try hard never to tell anybody what I think they should do with money. But this is just a hypothetical you are putting out here so I will hypothetical right back atcha.

It sounds like you are asking about the formula for what I call "the cost of sleep."

There are two key words in your question: preservation and safety. If that is truly all that is important, and ROI, not so much, I would use short term CD's in banks insured by the FDIC.

I would split it up maybe, even though I think the FDIC is insuring up to $250,000 now. But I think that might be slated to revert back to $100,000 at the end of the year. I have not looked at the FDIC website for a while. But it explains all that and has something where amounts can be plugged in to check what would be insured. It is not just a flat amount. It has to do with how the accounts are named.

CD rates are so low right now, it is painful to even ask about them. The reason I said short-term CD's is that I do not see how they can get a whole lot worse and I have wondered if inflation will cause rates to go up over the next year.

Those double-digit CD's I held in the early 80's were freakish I know. I knew it was not right even then. Those double-digit CD's paid Boomette's tuition. I do not expect rates even close to those, nor should they be.

But how inflation cannot set in and affect rates, I do not know. But they will find a way to pay us nothing is my guess. Even so, short term CD's is what I would use. Of course, rates could also get lower. So who knows how CD rates will be down the road. (I will try very hard now not to start in here on a rant about the Fed over the past several years.)

So back to those CD's. Painful though those rates may be, FDIC insured CD's pass my cost of sleep test. I am so unsophisticated as an investor that I cannot even imagine buying a CD on the internet, I like small bricks and mortar banks who shelve their mortgages and do things the old-fashioned way. And where when I go there, they say, "BOOMER!" You know, like on "Cheers" where they say, "NORM!"

I never invest in anything that is not liquid. Let me clarify that. By liquid, I include CD's and stocks that I could take a hit on for cashing in at the wrong time. But that would be my decision. I have to have those decisions all in my own hands.

And since you said "out of the market" I will not go into dividend payers like utilities. Who knows anyway about those. Somebody might decide they are not green enough or something like that.

Cabo, I know my answer was 101 and you already know that stuff. I wish I had a really good answer. And I know the thing about how low rates lose against inflation. But the principal remains, if that is what is improtant.

It was not supposed to be like this.

And that was all just hypothetical. I know nothing.

Boomer

The FDIC insuring up to $250,000 of deposits is set to return back to $100,000 at the end of this year.

[KayakerNC]

Originally Posted by kar guy

I took all of mine out of Merrill Lynch and puit it in equity stock index funds. I will be garanteed 13% this year ( 10% immediatly ). This is probably the best decision I have made. Take care Kar guy

Index funds with a guarantee?
Or did you utilize some sort of an annuity package?

[champion6]

Originally Posted by kar guy

I took all of mine out of Merrill Lynch and puit it in equity stock index funds. I will be garanteed 13% this year ( 10% immediatly ). This is probably the best decision I have made. Take care Kar guy

You have my attention!!!

Can you be more specific? Who offers this investment? What is the name of the fund or funds?

I don't understand your statement about a guarantee, but I will investigate that when you explain what you bought.

Thanks.

[TrudyM]

I have diversified greatly, and was not hit too bad in recent events. Or at least I don't think of it that way because I never saw the bubble gains as real. That said we plan on refinancing our sons house so we have a stable income. He has a good job and would never stiff us. That said in order for it to be arms length and make the payments deductable for him (and income for us but at our lower tax rate) the rate has to be the same or not much lower than what he can get elsewhere. This has the side benifit of avoiding state inheritence taxes in some states (Fed not an issue we don't have that much)
This was suggested by the investment bankers and hedge fund managers in my family.

Hope this helps

[Irish Rover]

I don't think I would pull out of the market right now. Personally, my portfolio has been bouncing back so I'm straying put. If I did make a move it would probably be into bonds. Good luck.

[Boomer]

Originally Posted by TrudyM

I have diversified greatly, and was not hit too bad in recent events. Or at least I don't think of it that way because I never saw the bubble gains as real. That said we plan on refinancing our sons house so we have a stable income. He has a good job and would never stiff us. That said in order for it to be arms length and make the payments deductable for him (and income for us but at our lower tax rate) the rate has to be the same or not much lower than what he can get elsewhere. This has the side benifit of avoiding state inheritence taxes in some states (Fed not an issue we don't have that much)
This was suggested by the investment bankers and hedge fund managers in my family.

Hope this helps

I have an opinion on this one. Please forgive me for not keeping it to myself. I know you did not ask. This is not directed at your specific situation, just family mortgages in general.

This could be a good idea because it is recycling the family money. You know about the imputed interest rate and the IRS stuff. And I assume you are going through an attorney and filing the mortgage at the courthouse and making sure the title is clear and figuring out how the property taxes and insurance will be handled. You are the bank when you do this so from an investment perspective, you have to think like a bank, not like mom and dad.

But I just have to say that anyone doing this really needs to consider what would happen if for some reason the house payment did not come through, one time, two times, maybe more not than often.

By bringing this up, I am not saying that a child would intend such a thing to happen. What I am saying is that life happens. Illness. Job loss. A spouse. An ex-spouse. All sorts of things could possibly get between you and the house payment.

But if the answer is that you could really do without the money if you had to, and if all the bases are covered, just like you are the bank, these things can work out fine. Just not always.

I have known of family mortgages. I know people who have done it. I have seen the good, the bad, and the ugly. But a family mortgage can't truly be arm's length. Even if on paper it is that way.

When looking at this as an investment, the bottom line has to be whether you as the lender can afford not to get paid. Life happens.

I wish you the best. (And I really do know of some of these that have worked out beautifully. But possibilities must be considered, just like with any investment.)

Boomer

[spk7951]

According to The Wall Street Journal Congress voted this week to extend the $250,000 deposit insurance limit for the FDIC until the end of 2013.

[Boomer]

Originally Posted by spk7951

According to The Wall Street Journal Congress voted this week to extend the $250,000 deposit insurance limit for the FDIC until the end of 2013.

Thanks, spk.

Now if only we could get even 5% on CD's. But I wonder if we will ever see that again. The window for 5% did not seem to be open for long. At the time, I was running around chasing 5 for 5. (And feeling like I was probably being an idiot. And I wish that were true. I would much rather have seen the market thrive.)

And if only Congress has sense enough not to mess with the capital gains tax and dividends taxed at 15%. Unless they want to make those rates even better. Ya think????!!!

I have to wonder if the market will be getting back on its feet and staying there about the time those tax rates expire by 2011. If Congress messes with those rates for the worse, I have to wonder if that would pretty much hamstring the market. At least for the individual, small investor. (But I am a mere bumpkin. I don't know anything.)

There are those who believe that stocks are fairly valued now. I am a buy and hold girl. And I have bought a little lately. But only dividend payers that I understand. With CD's paying nothing, I figured if I feel comfortable that the dividend rate is pretty much locked in, I might as well shop a little. Get paid to wait. Kraft has been my favorite buy recently. Seems like mac and cheese is in vogue and will be for a while.

I don't think anybody really knows what to do. This is like nothing we have ever seen before. I do not care what they say.

Boomer the Buy and Hold Bumpkin

[rshoffer]

Call Bernie Madoff

[spk7951]

Boomer,

My feeling is that we will not see 5% interest on CD's for quite some time. I could not even hazard a guess as to a time frame because I have no faith in the economy right now. (I think I am a victim of bail-out fatigue). We completely bailed out of the stock market, which as our personal portfolio, in May 2006 when we lost 20% in two weeks time. That was cash set aside to carry us until we could tap one of our 401k's and we are now happy we did that.