Investing

[roseflower]

Hi!

I hoping I don't get annoying with too many questions!

For those that haven't seen my recent post, my Dad passed away and he set up his trust to be distributed in 2040. It may not make sense but that is how it is. 

I am looking at it as positive thing so that hopefully it can grow in the meantime. It will be distributed to me, my brother and my daughter. 
So if you had $100,000-130,000ish thousand dollars how would you invest it or would you invest it? Right now it is in a trust account not earning anything. 

Investing/retirement stuff is way over my head. My ex husband is in charge of the trust and he would like to do right by my dad and my family as well, but also isn't well versed in this either. 

Thank you for any insight you have. 

[mae0111]

I like ETFs. They’re lower cost than mutual funds most of the time, and more tax efficient. Vanguard has a good family of cheap ETFs. You may have to pay trading costs, but most of the time you can find a trading platform with a good number of commission-free ETFs. I always liked Fidelity because they also had a good cash sweep vehicle - so any cash that wasn’t invested was earning decent interest. I had another account at Schwab at the same time. At that time, Schwab’s cash sweep was earning .07% while Fidelity’s was earning 1.25%. I’m not sure what Vanguard’s was. Both Fidelity and Schwab had a lot of good commission-free ETF options, but Vanguard is definitely the cheapest.

Depending on your risk tolerance, I’d buy an S&P500 ETF, maybe a bit into international, and a higher grade corporate bond ETF. I don’t know a lot about bonds, but high yield is feeling risky if you are looking for something more stable. But that’s not based on any real research.

Good luck!

[gt7301b]

I would invest it in a target date retirement fund with Vanguard or Fidelity. The company will rebalance over time.

[goldengirlz]

I would also put it in a handful a broad ETFs, most of it in one that just tracks the market, and maybe couple of others like companies known for paying high dividends or an international fund. Most are commission-free these days since Robinhood has really upped the ante there. All Vanguard ETFs are commission-free on Vanguard.

Just my own experience, but I’ve been underwhelmed by how my target-date funds have performed compared to the investments I pick myself. You give up a lot of control but I guess on the flip side, you can just invest and don’t have to think about it. (ETA: The only target date fund we have is our 529, so tax-advantaged and I don’t believe we had a choice.)

[Deleted]

I guess it depends on what your financial goals are, what your financial situations is on 2040, and how close you’ll be to retirement when you get the money. Also, while it’s unlikely, there could be new products or tax laws in 2040 that will affect what you end up doing.

[mae0111]

Target date funds are good if you really never want to look at your investments again, but they’re expensive. You’re paying the target date fund fees, and you’re paying the fees of all of the underlying mutual funds within the fund of funds.

[roseflower]

Thank you all for the information. There are multiple ways to go...I don't know what is right or what is the best. Even if the money were able to be split up now, I would want to use it to try and create a larger savings or retirement as I don't have any right now.

[cosmowife]

Jul 14, 2022 17:53:47 GMT -5 gt7301b said:

I would invest it in a target date retirement fund with Vanguard or Fidelity. The company will rebalance over time.

If this is a taxable account, I would NOT do this. There was a bunch of articles in the news. People who were invested in vanguard’s target date funds outside of retirement vehicles were hit with major tax bills due to the way Vanguard rebalance the funds or something (I’m not an expert but definitely look into this before choosing a target date fund for a taxable account)

[mae0111]

Jul 16, 2022 6:40:57 GMT -5 cosmowife said:

Jul 14, 2022 17:53:47 GMT -5 gt7301b said:

I would invest it in a target date retirement fund with Vanguard or Fidelity. The company will rebalance over time.

If this is a taxable account, I would NOT do this. There was a bunch of articles in the news. People who were invested in vanguard’s target date funds outside of retirement vehicles were hit with major tax bills due to the way Vanguard rebalance the funds or something (I’m not an expert but definitely look into this before choosing a target date fund for a taxable account)

Mutual funds tend to have a higher tax liability than other vehicles. When a large shareholder redeems funds, the manager has to sell underlying securities to raise cash. This can cause capital gains.

So the redeemers get out without having to pay the gains of the underlying securities. Those gains are passed along to anyone still holding the funds at the end of the year.

Between rebalancing the target date funds and large redemptions, I’m sure the capital gain on the target date funds can be large.

I’m sure there’s more to it than that, but that’s definitely part of it.