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  • Retirement Strategy: What If You Are Already Retired And Need More Income Now? [View article]
    We moved to Portugal - ten year holiday from income taxes in Portugal for new residents, and the cost of living here is about 35% of what it was back in the Washington DC area where we're from. It's working well so far. Language is a bit tricky, though.
    Nov 25, 2015. 03:27 PM | 3 Likes Like |Link to Comment
  • Retirement Strategy: What If You Are Already Retired And Need More Income Now? [View article]
    The stocks in this article are all fine companies, but it's worth mentioning that reaching for yield can satisfy your income needs today, but that doesn't mean the income is safe and reliable. In fact, it is very hard to predict or control your income flow from any portfolio - controling costs, however, is something that you have direct control over. In my case, I found it easier to slash my living expenses by moving abroad. One thing I especially enjoy about it is that it makes it far easier for me to afford to invest in companies based on the quality of the dividend income, rather than the quantity of the dividend income. Personally, I find it easier to sleep when I earn money off of train lines, house paint, tampons, long-term lease income, hammers and beer... as opposed to leveraged mortgage funds that use derivatives and stuff I don't understand.
    Nov 25, 2015. 03:25 PM | 3 Likes Like |Link to Comment
  • Retirement Strategy: I Am Selling Chevron From The Team Alpha Retirement Portfolio [View article]
    Good for you. It hurts to take a paycut, but honestly, your first priority is to preserve capital from permanent losses, and your secondary priority it to grow income. You're just doing what you think you need to do in order to keep those priorities straight.
    You're pretty light on utilities - you could add ED and preserve your income level. You already have oodles of REIT exposure, which is why I'm not tossing that out as an option, although you'd probably take a pay raise if you put CVX proceeds into HCP or OHI.
    Or, branch out into something like SWK or MKC. THey have low yields, but both have been paying (and growing) dividends for decades and decades and decades. The more unrelated industries you have, the better you sleep at night.
    Nov 23, 2015. 02:10 PM | 1 Like Like |Link to Comment
  • 25% Allocation To Apple - Too Much Risk? [View article]
    Jarena, first off, you need to average those earnings out - I suggest you review MSFT's earnings over the past five years, adjust for inflation, average them, and then take a normalized PE ratio.
    Second, you are absolutely correct that the stock market discounts information, and absorbs that information almost instantaneously. The problem is that trading momentum takes over, and then the rumor mill starts up, and stock prices go off into la la land, where they may reside for seconds, days, or even years. A low PE ratio stock indicates bearishness, and could discount the probability of negative news, but more often than not, it can also indicate that Mr. Market is smoking crack (again) and has lost his marbles when it comes to stock pricing.
    Mr. Market's crack habit is, indeed, why most of us here on SeekingAlpha do what we do.
    Nov 23, 2015. 01:08 PM | Likes Like |Link to Comment
  • 25% Allocation To Apple - Too Much Risk? [View article]
    If you take a moment to re-read the comment that you wrote, you will see quite plainly that you wrote "as simple and RISK FREE as Apples currently" in the second sentence to your reponse to my comment (emphasis mine). And you are correct that life (including but not limited to investments in Apple stock) is not risk-free.
    Nov 23, 2015. 01:00 PM | Likes Like |Link to Comment
  • 25% Allocation To Apple - Too Much Risk? [View article]
    Simple and risk free, you say?!?!? You realize that Apple controls volumes of cash, and a book of derivatives with a notional face amount, that are much larger than those carried many banks? Apple has $64,462 million in debt, which is only slightly less than all the debt carried by the American Express Company (About $101,114 million). Apple uses credit default swaps, interest rate swaps, currency swaps, and securitized structures across the world hedged with financial products that are complex enough to require an enormous team of traders and bankers (some of the best in the business, I might add). Their cash management is complex enough that Tim Cook has been called to testify in front of Congress on that very subject. I'm surprised to hear anyone suggest that Apple's hedging and risk management structures are either simple or risk free.
    Nov 22, 2015. 05:46 PM | Likes Like |Link to Comment
  • 25% Allocation To Apple - Too Much Risk? [View article]
    If you are going to own a 25% allocation to one company, you owe it to yourself to undertake the following excercise: imagine you are a lawyer, and you have just been hired to prosecute someone named Investor X who put 25% of his client's money into Apple. The stock has crashed to zero, and your job, Counselor, is to craft the best arguments you can for proving how reckless Invest X was with his client's money.

    To argue this case, you might, for example, look at some analogies... How about Citibank, circa 2006? Prince Alwaleed (one of the world's most renowned investors) owned this massive stake in Citibank (perhaps as much as 10% of his entire portfolio might have been in Citi? Or maybe it was that he owned 10% of Citi's stock. Don't know - you're the attorney, so you check it out). What I recall was that Citi was trading at a PE ratio of about 10 - a screaming bargain compared to the S&P500. Cheaper than Apple today. The earnings at Citi were FANTASTIC! Hey, just like Apple today! And the book value? I believe Citi's stock price was close to equal to the cash and "cash like" assets on its books. Even cheaper than Apple today! And Price Alwaleed knew the company cold - he was on the board of directors. What happened? Prince Alwaleed took a 90% loss on that possition. That's right, counselor - he had ALL the same justifications for owning Citi in 2006 that you have for owning Apple today, only he was far better informed than you are (unless you're on the board at Apple) and Citi was a far more compelling valuation play based on the criteria you cite in this article.

    After you've worked your tail off crafting all the best arguments you can devise for NOT holding 25% of your entire portfolio in one stock that you think you know so well, then return to the notion that your investment program is low risk. I'm not suggesting that you change your investment program, but I am suggesting that you might want to entertain a possibility that it is very risk. It could be that the upside is well worth the risk! I simply suggest that you do whatever you can do to be 100% honest with yourself before the market does that job for you. I always find that it's easiest to do that when I put myself into the shoes of my own worst critic.
    Nov 22, 2015. 06:08 AM | 1 Like Like |Link to Comment
  • You Just Got $1 Million. Now What? [View article]
    In theory, Too Impatient, real estate is great stuff. I own investment property, and believe in diversifying income streams across asset categories. But here is the thing. It's a ton of work. If you don't know what you are doing, real estate is a business that will suck you dry. Someone slips on a bananna peel in front of your house or building, you get sued. The paint chips? Your tenant stops paying rent. I mean, the list goes on. So, for a novice to plunk down a large percentage of their money into a complex, hassle intensive and illiquid asset like real estate? Hmmm, bad move if you asked me.
    Nov 19, 2015. 12:57 PM | 2 Likes Like |Link to Comment
  • You Just Got $1 Million. Now What? [View article]
    Rhiannion - sorry to hear you and your mom had to go through that, but I am very happy to know that you've worked out an equilibrium point.

    AS10675, I'll just pass along an annecdote - make of it what you will. A friend of mine lived for YEARS off of handouts from his parents. Didn't bother with college, and when things went bad at a job, he'd just up and quit because he had this safety net in place. Needless to say, he didn't exactly follow a recipe for success in life, but didn't need to either. Once he got in trouble with a gambling debt. Bail out. And then there was an infamous credit card debt, where he ran up something like a $7,000 bill for dinner and drinks at an expensive restaurant in NYC (didn't have a job at the time, either). But NO PROBLEM! Mommy was at the ready with her checkbook.

    One day, my buddy realized that "needed" a new car, asked momsy, and was shocked when she said "no." Then he needed rent money. The answer? No. He was livid. The bills started to pile up, and soon calls from collection agencies followed. But every time he asked momsy to bail him out, he was shocked and livid to hear the same line: No. Now, it got bad enough that he had to move out of his apartment, and stay on a couch with friends for a few months. Basically, the guy was homeless. Not much fun after a lifestyle of $75 a plate entres, right?
    Years later, he's got a regular job, has an apartment, buys his own food. Credit card companies will probably never touch him with a ten foot pole, but that's maybe a good thing. The thing is, he is on great terms with his folks, and now thinks that getting cut off was the best thing that ever happened to him. Getting weened off that financial crack habit was good for everyone concerned. How this could relate to your sister's situation with your dad, I cannot possibly say. Make of this story what you will, and if anything useful can come out of it, that's my hope.
    Nov 19, 2015. 12:54 PM | Likes Like |Link to Comment
  • You Just Got $1 Million. Now What? [View article]
    I like your idea of giving stock - you got that whole feed a man a fish, verses teach a man to fish thing down. When my son was born, I gave him a some stock too. Now he is ten and we sit down once a month and figure out how he wants to reinvest the dividends. I don't pay him an allowance (and never will) or pay him to do chores around the house (nobody pays me for doing our dishes). Don't need to either - those dividends are teaching him to be self-sufficient.

    For your dad, have you considered setting up a trust? I'd talk to an attorney about revocable living trusts, specifically. I don't practice law anymore, but quite a few times I set up trusts for elderly folks who didn't have 100% of their faculties. They'd be the trustees of their own trusts, but serve with someone else who could more or less take over if their medical conditions deteriorated. Also, you can draft the document so that BOTH trustees must consent to gift making. Then, when people show up hat in hand, the co-trustee can put the brakes on excessive giving. The point is, what you described with your dad, that is not an unusual situation, and there are many ways to deal with it. Might be worth exploring.
    Nov 19, 2015. 11:20 AM | 2 Likes Like |Link to Comment
  • You Just Got $1 Million. Now What? [View article]
    I take 2 hours of lessons every day. very tricky language.
    Nov 19, 2015. 05:33 AM | 1 Like Like |Link to Comment
  • You Just Got $1 Million. Now What? [View article]
    Ah, sun is up here in Lisbon and the day is well underway. But for you, it must be, what, crazy early in the morning? What's your excuse! Go back to sleep!
    Nov 19, 2015. 03:52 AM | 1 Like Like |Link to Comment
  • You Just Got $1 Million. Now What? [View article]
    This is great advice overall. The number one bit of advice I could give someone with a windfall: tell nobody. Keep your windfall entirely silent if you can. If you are lucky, maybe you will have one or two completely reliable and trusted people who you can talk to. As soon as word gets out, you will be shocked by how many people (some strangers, many acquaintences, and possibly a handful of close friends and even family members) will ask for loans, gifts or for you to fund their various projects. I've seen a situation where a person's parents are murdered, they get a life insurance check, and literally one week after the funeral, other family members are coming over and saying "I really need some money."
    Sometimes the facts prevent you from maintaining confidentiality, but if you have any control over the facts, my advice is to opt for complete secrecy.

    Second bit of advice: get comfortable with saying "no". Whenever anyone (I mean ANYONE) asks for anything, as a rule, say "no" regardless of the merrits of the ask. The reason for doing so isn't selfish - keeping money 100% out of your relationship with other people ensures healthy relations. It's also crucial to stick to your investment plan. If your plan is to invest in a diversified index of stocks and bonds, making loans or gifts to your cousin to start a new gizmo business is simply outside the scope of your investment plan and thus, not an available option. It has nothing to do with your cousin's personality or the merrits of his or her business proposal - it's just not how you manage money because it isn't written down as part of your investment plan.

    Second bit of advice: only listen to accountants and lawyers who are paid hourly. Under no circumstances will you work with any profesional who is paid a percentage of your assets. That applies ESPECIALLY to accountants and lawyers - who must be objective and have no stake whatsoever in your net worth or income (other than the hourly billables the charge you).

    Third bit of advice: if you don't know anything about finance, pay off all debt other than your mortgage, put some cash into one or two insured bank accounts (maybe enough for a year's worth of expenses) and stick whatever is left into a diversified stock and bond index fund - I suggest Vanguard's total stock and bond market fund VBINX. Or, you can go with a stock index ETF such as SPY or VTI, and a bond index ETF that generates tax-free municipal bond interest income (like MUB). I'd keep the allocation in the 60/40 range initially, or 50/50. Write down your plan (and it could be as simple as "I invest 50/50 into SPY and MUB" and spend only 3% a year). Refer to your plan whenever confronted by any financial choice, and ensure that your choice is 100% consistent with your plan in every way.

    Fourth bit of advice: forget about the money you invested. It will generate average returns by definition, which is plenty. Once it's invested, you can make a choice: (1) ignore it and just live off the income; (2) ignore it and withdraw 3% or 4% a year (whether income, capital or both) for living expenses; or (3) spend a few years learning how to invest or start businesses and go into business for yourself - gradually cycling capital out of your stock/bond portfolio into alternative investments you pick or businesses that you start.

    What I would not do under any circumstances at the begining: anything fancy. Hedge funds, venture capital funds, private equity - those things are designed for the specific and exclusive purpose of reallocating capital from investors to managers. Do not pick stocks or allow others to do it for you. Do not buy real estate. Do not pay advisors to pick funds for you. Just go with passive, low cost stock and bond index funds and keep it that simple. If you hear someone say that you can reduce risk by owning "uncorrelated" assets, run. I remember hearing about a hedge fund that invested in rare fountain pens because the price for rare fountain pens isn't related to stocks or bonds. Don't invest in wierd stuff like fountain pens! Diversified, low cost broad based index of stocks, bonds, and that's it. If you want to get fancier, then FIRST spend three years studying finance and investing for a few hours a day, and gradually get experience with all the joys of making expensive mistakes. And keep a journal of all the mistakes you make and how much you lose as you are getting your education. That process alone could dissuade you from becoming a full time investor. Or, who knows, it could be the perfect job for you.

    Sudden windfalls seem like a happy thing. The truth is that it depends on the facts surrounding the windfall, and how well the windfall is managed. This article is a very good source of ideas on how to approach the issue of windfall management, but as with so many things, what looks reasonable on paper isn't always easy to do in practice.
    Nov 19, 2015. 03:38 AM | 23 Likes Like |Link to Comment
  • Revolution! Spectre! Yummy Juice! [View instapost]
    THanks for saying so!
    Nov 18, 2015. 11:35 AM | Likes Like |Link to Comment
  • Reinvesting Dividends To Supercharge IRA Contributions [View article]
    Darren - this is a very useful article. I've used the approach you outline in this article for over 20 years (although when I started, I didn't understand why or how it would work any better than just buying an S&P500 fund in my IRA). Not only does it work in theory, but it works very nicely in fact. The one little extra secret I use is that I generally will reinvest dividends into more shares of whatever company in my portfolio happens to be down the most. Not only does it give me a higher yield on my reinvestments (which produces even that much more income to reinvest next quarter), but it gives me a real sense of delight when I see stock prices are down. You don't fear short term capital losses when you are fervently reinvesting dividends every single month (or quarter, or year). Your approach, Darren, basically puts you into the position of being a permanent buyer.
    Nov 13, 2015. 04:43 PM | 1 Like Like |Link to Comment