# Investing $500K, lower risk options looking for 5% return



## ECMoney (Dec 13, 2011)

Quick question for you guys, if you had about $500K-$600K cash that you could invest where would you park it and what return would you be expecting from what amount of cash? What is a safe option that could possibly yield 5% return?


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## HaroldCrump (Jun 10, 2009)

Safe & 5% can't be used in the same sentence these days, LOL.
With that amount of capital, you should be able to negotiate a better GIC rate at your bank.
At least 15 bps higher than their best posted rate.

Safety & return % are inversely related, therefore, everything depends on how long you need to invest the money for, and its ultimate purpose.


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## humble_pie (Jun 7, 2009)

ECMoney said:


> Quick question for you guys, if you had about $500K-$600K cash that you could invest where would you park it and what return would you be expecting from what amount of cash? What is a safe option that could possibly yield 5% return?



quick answer:

women. girlz. boyz. street drugz. fenced prescription drugz. gunz. anti-aircraft missilez. illegalz. 

100% return

garbage is less profiitable. Illegal dumping of garbage might return 60-80%.


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## ashin1 (Mar 22, 2014)

put it all on black, and get double the return.......not serious lol


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## Nemo2 (Mar 1, 2012)

ashin1 said:


> put it all on black


Misinformation alert above......put it all on RED! Sheesh.


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## MrMatt (Dec 21, 2011)

Some 20yr corporate bonds are inching up to 4%+
Rogers, Enbridge, pretty good bets.

Though RCI.B stock is currently paying a dividend of 4%.

Depending on your risk tolerance, I'd dump most into medium term bonds/GICs paying, with some into some higher quality equities. No swinging for the posts, but just some solid companies.


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## humble_pie (Jun 7, 2009)

but mister Matt he is swinging

just flipping half a mil & wants a bunch of sharp answers real quick


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## cainvest (May 1, 2013)

So how long do you plan to keep this money invested?


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## humble_pie (Jun 7, 2009)

perhaps he should recruit kaeJS

EDIT i think the lower return for garbage dumping is because it's near impossible to get permits to move those trucks across state or provincial lines, let alone across the canada/US border


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## beans (Jan 25, 2011)

humble_pie said:


> perhaps he should recruit kaeJS
> 
> EDIT i think the lower return for garbage dumping is because it's near impossible to get permits to move those trucks across state or provincial lines, let alone across the canada/US border



BUUUTTT Alberta does have that fiiiiine incinerator? what's it called? Swan song? oh, no...Swan Hills. my bad.


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## MoreMiles (Apr 20, 2011)

MrMatt said:


> Some 20yr corporate bonds are inching up to 4%+
> Rogers, Enbridge, pretty good bets.
> 
> Though RCI.B stock is currently paying a dividend of 4%.
> ...


Solid? Blockbuster and Yellow Pages were solid at one time... what happens 20 years later in tech company is unpredictable. For example, people are cutting their cable service and moving to online streaming. Internet providers are getting caught up by LTE... And people are cutting their landline and long distance so there is no guarantee your Rogers or Bell will be around in 20 years.


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## blin10 (Jun 27, 2011)

MoreMiles said:


> Solid? Blockbuster and Yellow Pages were solid at one time... what happens 20 years later in tech company is unpredictable. For example, people are cutting their cable service and moving to online streaming. Internet providers are getting caught up by LTE... And people are cutting their landline and long distance so there is no guarantee your Rogers or Bell will be around in 20 years.


disagree, cell phones will always be around, people use more and more data.. a lot of people cutting cable that's true, but there's also a lot of people who just want to turn on Tv and watch content, not logging in somewhere... not to mention, for people to use netflix or stream online content, that eats internet bandwidth, so your internet bill will be higher... rogers/bell/telus ain't going nowhere in 20 years

you can't compare yellow pages/blockbuster to telecom companies, they are not really technology companies... technology companies are more apple, google, Microsoft, etc


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## marina628 (Dec 14, 2010)

I would say that depends on if that 500k is all you have on what advise I would give you .I personally am heavy in CAD Dividend stocks like the banks and ENB.


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## MrMatt (Dec 21, 2011)

MoreMiles said:


> Solid? Blockbuster and Yellow Pages were solid at one time... what happens 20 years later in tech company is unpredictable. For example, people are cutting their cable service and moving to online streaming. Internet providers are getting caught up by LTE... And people are cutting their landline and long distance so there is no guarantee your Rogers or Bell will be around in 20 years.


I have third party cable internet. Their primary cost driver is the regulated price they pay Rogers.
It's really quite simple, the phone & cable company in any area have an effective duopoly on high speed internet access. 
That part of the business will become a regulated utility, like electricity or gas. You can get your supply from a third party, but the local utility gets their "distribution charge" anyway.

For mobile it's spectrum that they own, and I'm sure the government will play more games, but the reality is they likely won't force them to any condition worse than a utility at cost+reasonable profit.
There is also the massive network to make it happen.

Regulated utilities tend to be decent investments.

FWIW I cut cable TV months ago, I don't miss it.


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## Synergy (Mar 18, 2013)

I don't think you'll find a "safe" option that's going to yield you 5% in this market. Check out what types of rates you can get for GIC's - haggle with a few of the big banks. If those rates fall short of your liking, consider increasing your risk and getting some professional advice. Once you've narrowed down a few options consider posting a new thread to get some opinions from the forum. Take your time, there's really no rush.


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## My Own Advisor (Sep 24, 2012)

Well, I'll break it down as if I had a choice....

$500K-$600K cash that you could invest where would you park it: ETFs and dividend-paying stocks.

...what return would you be expecting from what amount of cash? 4% real return.

There is no "safe option" that could possibly yield 5% return, especially real return. That's just me.


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## tygrus (Mar 13, 2012)

XRE and ZRE

Not zero risk, but as close as you are going to get to 5% return. Underlying product is real estate rentals, not tech fads,


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## Eder (Feb 16, 2011)

pssst.....bce...dont tell anyone else


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## donald (Apr 18, 2011)

hang out side money mart yo!st henri borough if you hail from humble stompin grounds and offer a percentage or 2 lower(bring cash)viola ez-peeze .
hustle that everyday boi!lol


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## cannew (Jun 19, 2011)

My account is really safe, and I'll guarantee a 5% return.

Madoff!


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## lonewolf (Jun 12, 2012)

Synergy said:


> I don't think you'll find a "safe" option that's going to yield you 5% in this market. Check out what types of rates you can get for GIC's - haggle with a few of the big banks. If those rates fall short of your liking, consider increasing your risk and getting some professional advice. Once you've narrowed down a few options consider posting a new thread to get some opinions from the forum. Take your time, there's really no rush.


 Stay away from banks go credit union. The banks goal is to make billions of dollars of profits from its clients


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## birdman (Feb 12, 2013)

You are right lonewolf, "the Banks goal is to make billions of dollars of profits from its clients". Then they pay it out in divies and an increase in stock price! Works for me! However, I do deal exclusively with CU's.


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## RBull (Jan 20, 2013)

cannew said:


> My account is really safe, and I'll guarantee a 5% return.
> 
> Madoff!



I thought that was more like 10%!


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## MrMatt (Dec 21, 2011)

I find Credit unions lacking in service.
I know someone who was having trouble on the weekend, they didn't even have a 24/7 customer care number.

They're nice and smiley, but their prices aren't much better, their product selection is slimmer. 
My local credit union doesn't even have no fee checking accounts.

I honestly don't see why people are so enamored with them.

If the banks give better service at lower cost, I'll go there.
That they make money while doing so is even better.


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## Nemo2 (Mar 1, 2012)

RBull said:


> I thought that was more like 10%!


Let's not be cheap...make it 50%! :biggrin:


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## jcgd (Oct 30, 2011)

lonewolf said:


> Stay away from banks go credit union. The banks goal is to make billions of dollars of profits from its clients


Lol. 'Cause most business operate to not make money.


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## thompsg4416 (Aug 18, 2010)

With a chunk of 500k you should be talking to your bank and other investment firms. They should be able to assign you a proper investment banker - not the trash that most of us talk to at the front door. 

Anti establishment aside, a good investment banker can open some doors for you. They can get you access to products and rates of return that the average retail investor does not have access to. That is my advice.


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## Just a Guy (Mar 27, 2012)

I think I read somewhere that you can open a brokerage office if you have $250k in assets. So open an office, compile a list of stocks, sell it as a mutual fund and charge 2.5%...it doesn't matter how the funds perform! and you get 2.5 of the total invested, so you're getting leverage which could make you a lot more than 5%.


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## ECMoney (Dec 13, 2011)

Reading through some of these posts now, some of you are funny! lol

Reason I am asking is for my father, he has retired and has an excellent pension plan plus he has some other RRSP's and investments. I got him to downsize and he has sold his home in Toronto and moved to a condo, one option I gave him was to get the cash from his home and invest it and if he can earn 5% for example he can live off that without really having to use his pension or other investments. They can stay put or dump those into further investments and he can carry a small mortgage on his condo with the condo fees, his $500-$600K investment would cover his living costs each year.

Hope that makes sense.


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## ECMoney (Dec 13, 2011)

An example would be the TD or RBC annuity that they offer.

If you put in $500K for 25 years for example they will guarantee you $2200 a month for the full 25 year duration.

Of course this is a very safe and secure option, and if you pass away before your 25 year term has completed your beneficiary can take out the rest in a lump sum or continue receiving the $2200/month payments throughout the remainder of the term.

This is just an example, but low risk and secure. Doesn't pay as well. Was trying to see what other options are there to compare.


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## tygrus (Mar 13, 2012)

ECMoney said:


> An example would be the TD or RBC annuity that they offer.
> 
> If you put in $500K for 25 years for example they will guarantee you $2200 a month for the full 25 year duration.


This is like a 5% return, no growth but no risk either. I have never investigated these before nor are they ever really talked about much.


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## HaroldCrump (Jun 10, 2009)

Yup, it is a 5.5% distribution, but keep in mind it is an annuity.
i.e. at the end of the 25 years, you aren't getting your capital back.

Given that it has neither longevity protection nor inflation indexation, a 5.5% nominal return does not sound all that unusual.
There is no free lunch.


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## marina628 (Dec 14, 2010)

DIS ,SBUX,TD,ENB,BNS,CM,FTS, TDB902 Is the portfolio I put together when we sold our first assets of our business,not balanced but I am comfortable to keep them next 30+ years.


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## MrMatt (Dec 21, 2011)

ECMoney said:


> An example would be the TD or RBC annuity that they offer.
> 
> If you put in $500K for 25 years for example they will guarantee you $2200 a month for the full 25 year duration.
> 
> ...


Is that a lifetime annuity? For what age?

As a straight cash annuity you're only getting about 2%, you'd be better off with a GIC/Bond ladder.


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## My Own Advisor (Sep 24, 2012)

marina628 said:


> DIS ,SBUX,TD,ENB,BNS,CM,FTS, TDB902 Is the portfolio I put together when we sold our first assets of our business,not balanced but I am comfortable to keep them next 30+ years.


No doubt many dividend investors in Canada own many of the same marina: CDN banks and CDN utilities. I know I do.


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## ECMoney (Dec 13, 2011)

MrMatt said:


> Is that a lifetime annuity? For what age?
> 
> As a straight cash annuity you're only getting about 2%, you'd be better off with a GIC/Bond ladder.


It is a 25 year annuity.
RBC has an Annuity Calculator you can use: https://www1.rbcinsurance.com/cgi-bin/rbaccess/rbunxcgi

So if you put $500K in you would receive $2200 per month for 25 years.

So your $500K would yield $660K paid out over 25 years, this is guaranteed. If the 25 year term outlives you, it gets passed to your beneficiary, either in a remaining lump sum or continued monthly payments as set.

I am not too familiar with these Annuities but do see that TD and RBC offer them as I am sure all other financial institutions.


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## ECMoney (Dec 13, 2011)

marina628 said:


> DIS ,SBUX,TD,ENB,BNS,CM,FTS, TDB902 Is the portfolio I put together when we sold our first assets of our business,not balanced but I am comfortable to keep them next 30+ years.


Yes this is a solid base and I looked into splitting across a variety of stocks but they are all at their 52-week high right now and probably not the best time to buy....then again I could be wrong!


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## blin10 (Jun 27, 2011)

ECMoney said:


> It is a 25 year annuity.
> RBC has an Annuity Calculator you can use: https://www1.rbcinsurance.com/cgi-bin/rbaccess/rbunxcgi
> 
> So if you put $500K in you would receive $2200 per month for 25 years.
> ...


that RBC offer is for suckers... lets say you buy safer stocks like RY,BNS,T,IPL,etc,etc that yield 3.5% divi, you buy 500k worth, in 25 years you will get 437k in JUST dividends and you will keep companies shares which could double in 25 years (also might be lower, so who knows, but anyway it won't be 0)...


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## HaroldCrump (Jun 10, 2009)

blin10 said:


> that RBC offer is for suckers...


@blin10, it is an annuity, this is how annuities work.
They guarantee a certain annual distribution with no equity or market risk.

Pensions are similar.


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## blin10 (Jun 27, 2011)

HaroldCrump said:


> @blin10, it is an annuity, this is how annuities work.
> They guarantee a certain annual distribution with no equity or market risk.
> 
> Pensions are similar.


I know, I just think it's not worth it imo


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## HaroldCrump (Jun 10, 2009)

Yup, blame ZIRP and QE for these distribution rates.


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## RBull (Jan 20, 2013)

Nemo2 said:


> Let's not be cheap...make it 50%! :biggrin:


Where do I sign? :biggrin:


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## KaeJS (Sep 28, 2010)

Eder said:


> pssst.....bce...dont tell anyone else


Glad to see some things haven't changed.

Nice to see you around, Eder.


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## KaeJS (Sep 28, 2010)

humble_pie said:


> perhaps he should recruit kaeJS


I return more than 5%.

I only return 5% when the market has a negative year.

Oh, and I charge a fee. :biggrin:

humble, maybe the OP could throw half a mill into an options trade and gamble on the future?


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## yyz (Aug 11, 2013)

MoreMiles said:


> Solid? Blockbuster and Yellow Pages were solid at one time... what happens 20 years later in tech company is unpredictable. For example, people are cutting their cable service and moving to online streaming. Internet providers are getting caught up by LTE... And people are cutting their landline and long distance so there is no guarantee your Rogers or Bell will be around in 20 years.


And that is why you see RCI and BCE getting into providing content in a big way. Plus if people are streaming they are using the internet provided in a large part by .... RCI and BCE


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## james4beach (Nov 15, 2012)

ECMoney said:


> Quick question for you guys, if you had about $500K-$600K cash that you could invest where would you park it and what return would you be expecting from what amount of cash? What is a safe option that could possibly yield 5% return?


Can't believe I'm late to this thread... I love low-risk investment 

There is no such thing any more as a "safe" investment that gives a 5% return. A safe investment can certainly give a 2% return and may give a 3% return, but that's about it.

In the current interest rate environment, to be able to live off of 500k you absolutely need a mix of interest and living off the capital. The annuity is kind of doing that too... you're not living just off generated earnings, you're also eating into the capital with that scenario. Once you get above that 3% level -- which is the most that safe investments can generate -- you're going to have to eat into the capital.

Here's the simplest illustration of a 5% yield on a safe investment. Put your 500k in a cash savings account. Withdraw 25k cash from it each year and there's your 5% yield. You can do that for more than 20 years before the money runs out.

Not quite as silly: put the 500k into a GIC ladder, making sure all your deposits are fully insured. You can still withdraw 25k a year and now the money will last 30 years... not bad. [ This calculation assumes no taxes, low inflation, and a 5 year GIC rate of 3%, all a bit optimistic ]

By the way, if interest rates were more like four percent on the five year GIC, as it was just a couple years ago, that 500k would last a whopping 42 years. Which illustrates why people are really angry with the Bank of Canada and Federal Reserve for keeping interest rates so low.

Basically there's no easy answer to this.


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## james4beach (Nov 15, 2012)

By the way, beware solutions involving "purchasing equities". This is inevitably what others here, and certainly advisors, will tell you to do.

If you go that route you have to seriously think about the risk you're exposing the money to. There have now been two 50% market declines in the last few years so any amount you expose to equities should be thought of as having the risk of losing half its value.

e.g. say you put that 500k into half GICs, half equities. This would be common advice these days, though I would not call it "safe" investment. If you go that route, then you now have 250k exposed to equities and a worst case scenario would be 250/2 = 125k loss. So while the money _may_ grow and last longer, it also could drop to 375k. The dividend payouts can also decrease while the equities drop in value. To see examples of this, look back to banks in 2008 who cut their dividends, and more recently to utilities (e.g. ZUT fund) which both declined in price and paid out less in distributions.

"Safe" is a subjective term. Make sure you think carefully about the risks of equities before getting sucked into the let's-all-invest-in-dividend-stocks craze. Currently people _think_ dividend stocks are the best solution to their retirement needs, but that's only because these stocks have been rising steadily for the last 5 years. But they are still stocks and come with risk of decline. It's easy for people -- and advisors -- to forget this during "good times" like we've had the last 5 years.


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## brad (May 22, 2009)

james4beach said:


> By the way, if interest rates were more like four percent on the five year GIC, as it was just a couple years ago, that 500k would last a whopping 42 years.


Are you sure? Because higher interest rates usually correspond to higher inflation rates -- considering interest rates without also considering inflation gives you only half the picture.

I'm old enough to remember when 5-year GICs were paying 10% interest, back in the 1980s. But inflation was running at several percentage points higher than 10% back then, so you were losing quite a bit of money at 10% interest. Is that what you want?


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## humble_pie (Jun 7, 2009)

i for one believe that your present plan has got things backwards. You're speaking of asking your Dad to live off his investments - in fact to invade his capital & reduce his private investments - so that his pension income can accumulate & be re-invested.

things should be the other way around, in my view. Dad should live off his pension, with supplementation from his independently-held investments if necessary.

these latter - the funds he holds in outright ownership - should largely be invested so that this portfolio has a good opportunity to grow in value. The reason is yourself, along with any other heirs to his estate that Dad might have.

some of its income can be withdrawn as necessary to supplement the pension income; but in general a good manager would be looking for a "balanced growth" type of approach; in other words, some fixed income, some blue chip stocks.

IMHO the worst approach you could invent is the one you have laid out here - spend the private investments while accumulating the pension. It's true that unused pension income can be privately invested ... but why go to all that broker expense & management bother? there will be double commissions: a) reinvest unused pension income by buying new securities; & b) sell existing privately-held securities in order to obtain income.

better to set up a sound, long-lasting private portfolio in the first place & then let it grow at lowest cost. One or a few high-quality canadian stocks could be DRIPPed, for example. The dividends will provide canadian tax credits while leading effortlessly & without cost to a larger holding.


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## RBull (Jan 20, 2013)

^This.

You said what I didn't bother to write (and described much more succinct than I could.) I was scratching my head reading the OP wondering why would someone want to over complicate and add cost to this situation? 

We are living what you have described.


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## cashinstinct (Apr 4, 2009)

Something to think about is the "gap" between the pension income and the required annual amount for living expenses.

Like said above, spending pension money seems like the most logical 1st step.

Depending on how much money is needed per year after pension income, the mix between equity-fixed income could be determined.

I like the idea to have dividend stocks/ETFs to provide income and possibly no reduction / little reduction of capital.


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## humble_pie (Jun 7, 2009)

bull elsewhere you've mentioned that you enjoy reading lonewolf's posts ... i enjoy reading your posts as well & they are certainly much more transparent than our lupine friend!

(a postscript for EC the OP here) i usually feel somewhat alarmed when i run across an adult offspring in cmf forum who is trying - often from a position of insufficient investment knowledge or experience - to direct his parents' portfolio, or his girlfriend's portfolio, or sometimes his wife's portfolio.

fortunately there are many adult offspring here in the forum who do grasp the solemn responsibility involved in handling investments for someone else. When it comes to parents or other ageing relatives, often these members will retain the very best professional advice they can find.

nearly always, they will work to empower the parents, as opposed to taking responsibility away from parents & treating them somewhat like minors or incapacitated persons.

these are the very same persons who don't hesitate to manage their own portfolios, in fact it's clear in the forum that they are managing their own portfolios very wisely. It's just that they understand how grave the responsibility is, when one is acting for the benefit of another person who may be helpless.

EC won't you please forgive this boldness if i say that i don't get the sense you, yourself, have enough investment experience yet to take on the formidable task of fully caring for another person's finances. It sounds like you contribute well, but for a few years yet it might be best to engage a good portfolio manager.

.


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## james4beach (Nov 15, 2012)

humble_pie said:


> things should be the other way around, in my view. Dad should live off his pension, with supplementation from his independently-held investments if necessary.
> . . .
> IMHO the worst approach you could invent is the one you have laid out here - spend the private investments while accumulating the pension.


I totally agree, right on humble_pie and great catch!

Another way to look at it is that the pension plan is someone else's promise to you... it's not your money directly. The 500k capital on the other hand is directly owned money.

Make that "someone else" pay out their promise to you _first_ before eating into your own capital.

Doing it the other way around, as the original poster suggested, incurs another huge risk. The danger is that you will blow through your capital first, then when you move onto the pension you may discover the pension is gone. This can happen if the company/government goes bankrupt. Nortel is a very recent example of this, as is Detroit's municipal pension -- gone.

Remember that pensions are promises, often (but not always) backed by assets in a 1:1 fashion. The 500k capital is very different: it's an actual amount of money, or net asset value of an investment portfolio.


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## sags (May 15, 2010)

I agree wholeheartedly with Humble's advice.

I also would recommend treading very carefully when dealing with a family members capital or finances.

We had a guy at work who managed his mother's finances, and from time to time she would give him some money.

Other family members found out about it and complained to the police. He was charged with theft from his mother. As she was already not deemed mentally competent, he could not provide evidence the missing money was a gift.

He was found guilty and sentenced to house arrest. He came to work with the electronic shackles on his ankle.

Just saying............tread carefully............and document everything with witnesses.


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## RBull (Jan 20, 2013)

humble_pie said:


> *bull elsewhere you've mentioned that you enjoy reading lonewolf's posts ... i enjoy reading your posts as well & they are certainly much more transparent than our lupine friend!*
> 
> (a postscript for EC the OP here) i usually feel somewhat alarmed when i run across an adult offspring in cmf forum who is trying - often from a position of insufficient investment knowledge or experience - to direct his parents' portfolio, or his girlfriend's portfolio, or sometimes his wife's portfolio.
> 
> ...


Thank you. Likewise with your posts.


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## protomok (Jul 9, 2012)

Just a Guy said:


> I think I read somewhere that you can open a brokerage office if you have $250k in assets. So open an office, compile a list of stocks, sell it as a mutual fund and charge 2.5%...it doesn't matter how the funds perform! and you get 2.5 of the total invested, so you're getting leverage which could make you a lot more than 5%.


+1

You could simplify the fund by investing 50% of the fund in a TSX index fund (TDB900) and 50% in Canadian Bond Index (TDB909). Then in the marketing material put lots of meaningless pictures of happy people wearing sweater vests, along with a couple dollar signs and arrows pointing up.


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## lonewolf (Jun 12, 2012)

ECMoney said:


> Quick question for you guys, if you had about $500K-$600K cash that you could invest where would you park it and what return would you be expecting from what amount of cash? What is a safe option that could possibly yield 5% return?


 Hi, ECMoney

Go with risk off trade, Most are going with risk on trade. When Risk on trade by the retail investor goes to risk off trade, The value of risk off trade will increase allowing you to invest in risk on trade by far more then a 5% discount. Meaning your dollars will increase in value.


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