Give me a good reason why my FA wants to stick 185k into the equities market drawing between 1.40-3.1%? What am I missing?

While equities are the best long term investment more than likely your FA wants to move the money around to draw commissions and fees.

My father-in-law has used the same FA for 30+ years and while his investment has grown it is not worth nearly what it could be had he not been paying all those commissions. Every couple of months his FA has a new idea and moves the money around to generate fees and commissions.

I keep telling him to invest it and leave it alone but he doesn't know enough to know the cost of having his FA.

What do you have now? Bonds? Mutual Funds? Partnerships? Rentals?

Find a Certified Financial Planner over any Financial Adviser. Find A CFP

If you're going to stick 185k into equities, you better be drawing better than 1.4 to 3.1%. The long term return of the stock market is 10% a year.

Looking at the 1.4 to 3.1% and the term equities, I'm thinking your FA is wanting to get you into an "equity" annuity. While I'm not making any judgment calls on annuities, I'm saying if you don't exactly know what your FA is recommending, I'm thinking he's just in it for the commissions.

Is your Financial Advisor acting in a Fiduciary capacity? I don't know how to validate whether someone is a Fiduciary, maybe JALLEN or someone else can. But you want a Fiduciary if you're going to take advice as they, at least, have a legal obligation to look out for your best interests; everybody else is free to suck the blood out of you as much as they can.

I don't know how long you've been working with this FA. I would ask him whether this is actually an annuity. If he says no, then ask for a copy of the financial papers; securities are supposed to have a prospectus or a contract if it's an annuity which is still my guess. Make an appointment with a local schwab and ask to speak with an financial advisor. With 185 k to invest, they'll make the time for you. Confirm with them whether it is an annuity. If it is, find another FA, not because he's trying to sell you an annuity but because he's selling you something you don't understand and presenting it as a different investment.

Annuities by themselves aren't bad, it depends on your total portfolio and what you want the money to accomplish.

Be very careful out there right now. Since the beginning of April Russia has dumped 49+ billion dollars worth of US investments.

China has the most money invested in the US currently, and don’t be surprised if they don’t follow suit.

Crazy times out there right now.

Rey HRH may be on to something, it does smell like an equity-indexed annuity. They aren't necessarily bad, in fact they can be a lifesaver, but it depends on the product and the investor's situation.

Fortunately, you have at least one expert on these things on the forum. I sold annuities for 10 years, and can give you my free take on them.

quote:

Originally posted by JALLEN:
What do you have now? Bonds? Mutual Funds? Partnerships? Rentals?

Exactly. Can't say without knowing the whole picture.

Around Tampa a bank was advertising 2.0% apy on an 11 month CD.

Bank of the Ozarks.

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quote:

Originally posted by JR78:
Give me a good reason why my FA wants to stick 185k into the equities market drawing between 1.40-3.1%? What am I missing?

I can't answer that without knowing a few variables. Age, net worth, retirement plans, lifestyle, marriage, kids, travel, etc.
It does sound like an annuity. Of it is, withdraw everything you have and find a new investment firm. Also, never pay more than 80bp for managed funds. My guess he is trying to calm fears regarding volatility by setting a positive investment strategy. There is no free rides my friend, everything costs.

I wouldn't buy today. Calling for a 350 DOW drop at open. Probably be green by 4 pm.

Fuck FA. Buy an index fund or use dogs of the dow.

quote:

Originally posted by doublesharp:
I wouldn't buy today. Calling for a 350 DOW drop at open. Probably be green by 4 pm.

Fuck FA. Buy an index fund or use dogs of the dow.

Actually today is a good day to buy if it's a mutual fund. Assuming the market closes way down, you'll be buying at the closing NAV at 4pm. Which means you'll be potentially getting a bargain compared to if you bought yesterday.

Having said that I wouldn't buy quite yet. Fears of a trade war are not going away anytime soon.

quote:

Originally posted by JR78:
Give me a good reason why my FA wants to stick 185k into the equities market drawing between 1.40-3.1%? What am I missing?

Equities don't 'draw' anything but some pay dividends. If you take anticipated annual dividends and divide that by the cost of the investment, you can calculate an effective annual yield. Perhaps he said 'yield' and you heard 'draw'? Or, perhaps he was thinking of something other than equities - some derivative/annuity?

If $185K is a big fraction of the account, whatever it is you decide, it is probably not a good idea to throw it all in at once. Edge in over time, to reduce the risk that you wind up having 'bought high'. Google 'dollar cost averaging' for some background.

That's why we think it's an equity-indexed annuity. EIAs guarantee a certain minimum interest rate, typically between 1-3%, also and perhaps more importantly safeguarding the principle. You also get partial participation in the stock market. So if the S&P (a typical index) goes up, you can get more than the minimum interest.

So guaranteed principle, a minimum interest rate, and upside equity exposure. A no-risk way to invest in the stock market. The catch is that "partial" participation in capital growth. If the stock market posts historical high returns, your growth is limited, either by a cap or a participation rate, and the insurance company keeps the difference.

So it's not necessarily a bad deal at all, but you have to understand the limitations.

Now, more than any time over the past decade, is NOT the time to be front loading a large lump of $ into the equities market. Heck, my local bank is offering 2.5% on a 15-month CD.

If he wants to invest, wade in over time.

I am no expert - but after watching the run-up over the past decade - odds dictate that the market will soon lose steam.

As a point of comparison, Realty Income (O) pays $.2195 dividend MONTHLY, presently yielding ~5% based on today’s close of $52.86.

https://www.realtyincome.com/Home/default.aspx

^^^^ There are LOTS of great dividend paying stocks that are quite safe.