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re: Large Inheritance at the age of 62, WWYD??
Posted on 4/1/15 at 11:14 am to Ace Midnight
Posted on 4/1/15 at 11:14 am to Ace Midnight
quote:
You can put together a package yielding about 5 to 6 percent,
How do you pick these? Do you have a screen? I've always been of the view that if a stock is yielding that much above 'market', there must be increased risk.
2
Posted on 4/1/15 at 11:47 am to Ole War Skule
I don't think 5-6% is reasonable at current valuations. Too much risk in those high yielding positions.
She can get 3.5%-4% and be invested in large companies with a very long track record of paying and raising dividends so the income will go up over time (you can average around 4-6% in dividend increases per year).
If she is going to use the money for income and not touch the principle this is the way I would go. She should not worry about the account balance going down or up in the short time frames as over longer periods it should go up with the market.
She should look at it as buying an annuity where she actually gets to keep the principle and it should go up in value over long periods of time.
She can get 3.5%-4% and be invested in large companies with a very long track record of paying and raising dividends so the income will go up over time (you can average around 4-6% in dividend increases per year).
If she is going to use the money for income and not touch the principle this is the way I would go. She should not worry about the account balance going down or up in the short time frames as over longer periods it should go up with the market.
She should look at it as buying an annuity where she actually gets to keep the principle and it should go up in value over long periods of time.
Posted on 4/1/15 at 2:35 pm to Ole War Skule
quote:
How do you pick these? Do you have a screen?
I would start at looking at dividata.com - the ones rated 4 and 5 in their "Top Stocks" is a good place to start. I think all "~6%" stocks would be a little risky, so every one of those - balance with K or INTC, and you can get to 5ish - maybe 5 1/8 - which is pretty good in today's environment - again - we're talking about 4 years - anything can happen.
You probably know more about ETFs than I do - aren't some of those paying dividends with reinvestment now? Certainly there is a low-risk one of those in the 4 1/2 to 5 percent range - that would be an annualized yield of almost 6 percent over 4 years. Yeah, the equity can take a hit, but equities are still the way to be bonds, CDs, savings accounts - about the only thing in the same league is real estate - but I'm not sure 4 years is the right window for that either (except she can roll that into long-term income - especially if leveraged properly - but like I said before, owning investment real estate is like a part-time job that you pay to get into - can be very lucrative, but not everyone likes to manage their investment hands on like that.)
Another thing to consider, perhaps, is an annuity - at least for part of it - can anchor the risk (and the yield, unfortunately) of an equity based approach.
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