invest 1 million dollars guaranteed income
August 19, 2008 7:34 PM Subscribe
Where should one invest 1 million dollars for guaranteed income ? I have been reading that there are Fidelity and Vanguard income funds guaranteed for life.
Please suggest how/where to invest 1 million dollars for at least 10% interest per year.
Thank You.
endless
Investing doesn't work like you think it does. Seek professional help.
posted by bdk3clash at 7:56 PM on August 19, 2008
posted by bdk3clash at 7:56 PM on August 19, 2008
Response by poster: Thanks all. I will seek a professional.
posted by endlessknot at 7:59 PM on August 19, 2008
posted by endlessknot at 7:59 PM on August 19, 2008
Best answer: Though the previous responses are terse, they are correct. I'm not aware of any investment anywhere that can provide guaranteed income. 10% is actually a pretty high return on investment, and as such it carries a lot of risk. That is, any investment that will give you an average 10% return is likely to fluctuate wildly.
If you're really looking for steady income, you should explore bonds and certificates of deposit and stocks that yield dividends. But these are not going to give you 10% returns.
Based on the question, though, I suspect you could profit from reading some of the great personal finance books that are out there. Start with Bernstein's The Four Pillars of Investing (my review). The author does a great job of exploring the history and psychology of investing, explaining why such concepts as "a guaranteed 10% return" are pipe dreams. He also offers suggestions for generating solid returns with minimal risk.
If anyone promises you 10% returns, they're talking out their ass.
posted by jdroth at 8:03 PM on August 19, 2008 [1 favorite]
If you're really looking for steady income, you should explore bonds and certificates of deposit and stocks that yield dividends. But these are not going to give you 10% returns.
Based on the question, though, I suspect you could profit from reading some of the great personal finance books that are out there. Start with Bernstein's The Four Pillars of Investing (my review). The author does a great job of exploring the history and psychology of investing, explaining why such concepts as "a guaranteed 10% return" are pipe dreams. He also offers suggestions for generating solid returns with minimal risk.
If anyone promises you 10% returns, they're talking out their ass.
posted by jdroth at 8:03 PM on August 19, 2008 [1 favorite]
Best answer: If I were you, I wouldn't start with a "professional". That's a good way to lose money, too. Start by educating yourself. Read up on the subject. Start with the Bernstein book I recommended above, and then read further based on his suggestions. I'd also recommend The Bogleheads Guide to Investing.
posted by jdroth at 8:05 PM on August 19, 2008 [2 favorites]
posted by jdroth at 8:05 PM on August 19, 2008 [2 favorites]
Just for some slight background.
CD's and Bonds are generally the most guaranteed return but you're looking at less than 5% return.
Some single stockss can get 25%+ a year.
But as you get a higher return you're going to have to assume more risk. A 10% return is moderate risk so not impossible by any means, but what a good financial adviser is going to do is spread you into buckets with some money in CD or bonds getting your steady 4.5%, some in low risk mutual funds, some in index funds, some in individual stocks etc.. Depending on your age and your risk aversion they will adjust this spread making it more or less risky.
posted by bitdamaged at 8:07 PM on August 19, 2008
CD's and Bonds are generally the most guaranteed return but you're looking at less than 5% return.
Some single stockss can get 25%+ a year.
But as you get a higher return you're going to have to assume more risk. A 10% return is moderate risk so not impossible by any means, but what a good financial adviser is going to do is spread you into buckets with some money in CD or bonds getting your steady 4.5%, some in low risk mutual funds, some in index funds, some in individual stocks etc.. Depending on your age and your risk aversion they will adjust this spread making it more or less risky.
posted by bitdamaged at 8:07 PM on August 19, 2008
You might want to ask the mods to make this anonymous. Announcing to the Internet "I have lots of money and little investment experience" isn't the wisest thing ever.
posted by The corpse in the library at 8:14 PM on August 19, 2008
posted by The corpse in the library at 8:14 PM on August 19, 2008
There is always a trade-off between risk and return in the financial markets. The greater the potential reward, the greater the risk.
I agree with jdroth that learning the basics of investing is the way to go. Consulting a professional isn't necessarily the best idea right off the bat. You might want to work with a financial adviser at some point, but you'll benefit from educating yourself whether you go that route or not.
Fidelity and Vanguard are widely respected, so you're on the right track there. I often recommend index funds, especially to first-time investors. I suggest you check out The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle (founder and former CEO of Vanguard).
posted by velvet winter at 8:21 PM on August 19, 2008
I agree with jdroth that learning the basics of investing is the way to go. Consulting a professional isn't necessarily the best idea right off the bat. You might want to work with a financial adviser at some point, but you'll benefit from educating yourself whether you go that route or not.
Fidelity and Vanguard are widely respected, so you're on the right track there. I often recommend index funds, especially to first-time investors. I suggest you check out The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle (founder and former CEO of Vanguard).
posted by velvet winter at 8:21 PM on August 19, 2008
Response by poster: Thank You all.
I wish I had that kind of money.
This is for research purposes.
posted by endlessknot at 8:26 PM on August 19, 2008
I wish I had that kind of money.
This is for research purposes.
posted by endlessknot at 8:26 PM on August 19, 2008
Where should one invest 1 million dollars for guaranteed income ?
US treasury bonds are good. Oh wait -- 10%? Guaranteed???? Hahaha!!!
You need to revise your expectations. You can live quite well one what you will be able to get guaranteed from the returns on 1 mil, but not that well.
Don´t trust anyone who says you will earn 10% guaranteed.
posted by yohko at 9:18 PM on August 19, 2008
US treasury bonds are good. Oh wait -- 10%? Guaranteed???? Hahaha!!!
You need to revise your expectations. You can live quite well one what you will be able to get guaranteed from the returns on 1 mil, but not that well.
Don´t trust anyone who says you will earn 10% guaranteed.
posted by yohko at 9:18 PM on August 19, 2008
There is, as has been pointed out, much confusion of terms in your post indicating a lack of familiarity with investing.
I will point out, though, that "guaranteed income" does in fact exist. It's a phrase associated not with investments per se but with annuitiies, such as the Fidelity Growth & Guaranteed Income Fund. Basically, you are giving them a chunk of change, which they invest, and you are paid a minimum amount every year for the remainder of your (or your spouse's) life. The amount is closer to 5%, please note. Like life insurance, you are betting that you will be able to benefit more than Fidelity can, and they are betting the opposite (and they're the ones with the actuaries). Strictly speaking, though, this is not an investment, but an income-producing asset.
Some single stockss can get 25%+ a year.
Well, heck, some single stocks can get 250% or 2500% a year. It's not impossible. But you have to be very, very lucky, or Martha Stewart (i.e. an insider). You are assuming a great deal more risk the more extraordinary the return. That means you could lose all your money, too.
It's possible to chase such returns if you have enough money to invest across a broad range of growth stocks. People even do this as a hobby. But you are a fool if you don't have the majority of your money in places that are a lot safer. Stock investing sounds a lot more sober, but it is basically gambling when you get down to it.
posted by dhartung at 10:05 PM on August 19, 2008 [2 favorites]
I will point out, though, that "guaranteed income" does in fact exist. It's a phrase associated not with investments per se but with annuitiies, such as the Fidelity Growth & Guaranteed Income Fund. Basically, you are giving them a chunk of change, which they invest, and you are paid a minimum amount every year for the remainder of your (or your spouse's) life. The amount is closer to 5%, please note. Like life insurance, you are betting that you will be able to benefit more than Fidelity can, and they are betting the opposite (and they're the ones with the actuaries). Strictly speaking, though, this is not an investment, but an income-producing asset.
Some single stockss can get 25%+ a year.
Well, heck, some single stocks can get 250% or 2500% a year. It's not impossible. But you have to be very, very lucky, or Martha Stewart (i.e. an insider). You are assuming a great deal more risk the more extraordinary the return. That means you could lose all your money, too.
It's possible to chase such returns if you have enough money to invest across a broad range of growth stocks. People even do this as a hobby. But you are a fool if you don't have the majority of your money in places that are a lot safer. Stock investing sounds a lot more sober, but it is basically gambling when you get down to it.
posted by dhartung at 10:05 PM on August 19, 2008 [2 favorites]
"guaranteed income" does in fact exist [...] annuities [...] Basically, you are giving them a chunk of change, which they invest, and you are paid a minimum amount every year for the remainder of your (or your spouse's) life. The amount is closer to 5%, please note.
That percentage amount is going to depend on your age.
If you are age 70, they are going to pay out at a higher rate than if you are age 25, because the 25 year old is likely to draw upon that annuity for many more years.
posted by Mike1024 at 4:52 AM on August 20, 2008
That percentage amount is going to depend on your age.
If you are age 70, they are going to pay out at a higher rate than if you are age 25, because the 25 year old is likely to draw upon that annuity for many more years.
posted by Mike1024 at 4:52 AM on August 20, 2008
Stock investing sounds a lot more sober, but it is basically gambling when you get down to it.
With the deck stacked in your favor to the tune of +8%/year or so.
posted by Perplexity at 6:42 AM on August 20, 2008
With the deck stacked in your favor to the tune of +8%/year or so.
posted by Perplexity at 6:42 AM on August 20, 2008
Stock investing sounds a lot more sober, but it is basically gambling when you get down to it. With the deck stacked in your favor to the tune of +8%/year or so.
Yes and no. Stock returns are far more complex than just saying "the market has earned X% of the last Y years." The expectation of continued returns leads to bubbles (see the tech bubble and the housing bubble), though obviously there are many other contributing factors. Stocks have averaged solid returns for nearly a century, but there are plenty of people, many of them not alarmists of any sort, who believe that ride is over. Maybe you've heard of Warren Buffett? Even he has begun to caution against high expectations.
What I'm saying is that stocks can provide high returns, but nobody knows what the best investment is for the next 20 years. Nobody.
posted by jdroth at 7:20 AM on August 20, 2008
Yes and no. Stock returns are far more complex than just saying "the market has earned X% of the last Y years." The expectation of continued returns leads to bubbles (see the tech bubble and the housing bubble), though obviously there are many other contributing factors. Stocks have averaged solid returns for nearly a century, but there are plenty of people, many of them not alarmists of any sort, who believe that ride is over. Maybe you've heard of Warren Buffett? Even he has begun to caution against high expectations.
What I'm saying is that stocks can provide high returns, but nobody knows what the best investment is for the next 20 years. Nobody.
posted by jdroth at 7:20 AM on August 20, 2008
I agree with previous posters that you'll be hard pressed to get any guarantees for a 10% return, but with proper financial advice and your own due diligence, you should be able to achieve that over the long haul. Benjamin Franklin always gave great advice about investing. In fact, in his will, he actually gave 1,000 pounds each to Boston and Philadelphia to be invested at a 5% rate of return for 200 years! Always think about the long haul.
The Benjamin Franklin Funds
posted by boba at 8:20 AM on August 20, 2008
The Benjamin Franklin Funds
posted by boba at 8:20 AM on August 20, 2008
There are funds with guaranteed returns, but the returns are generally lower than funds that incur risk. There are annuities, which provide a guaranteed income by paying out both principal and interest over a specified period of time, although annuities have a bad reputation because so many of them have horribly high commissions.
posted by theora55 at 8:48 AM on August 20, 2008
posted by theora55 at 8:48 AM on August 20, 2008
There are funds with guaranteed returns
Of course, there is still always the possibility of these funds becoming insolvent and not being able to pay out the "guaranteed" return. There may be some third party that guarantees an annuity, but they may not guarantee an amount as high as $1 million anyway.
posted by grouse at 11:15 AM on August 20, 2008
Of course, there is still always the possibility of these funds becoming insolvent and not being able to pay out the "guaranteed" return. There may be some third party that guarantees an annuity, but they may not guarantee an amount as high as $1 million anyway.
posted by grouse at 11:15 AM on August 20, 2008
One of the problems here is that $1 million is an extraordinarily large amount of money for one person to have just sitting in a bank account, or stocks or what-have you, but when it comes to money management, it is chump change. You basically will be getting similar treatment and have access to similar types of investments as anyone else who walks in off the street into an investment firm. You will not be able to invest in hedge-funds, or many other more exotic types of investment, nor will you have someone paying deep, careful attention to your portfolio. You will not have the access to the same investment minds as do the $100 million investors.
Also, even if you are quite wealthy, things still may not be so hot. Some high-flying investment firms have gone broke or near broke recently. Other firms seem to be pushing off some of their bad or overly risky real-estate investments on their ultra-wealthy investors. Also, the commission structure is quite high at some firms so that it almost entirely eats up the "alpha".
One interesting avenue is to give your money to Harvard. Or, Duke. Looking at my school, the endowment has averaged 17% annual growth over the past 10 years. One of their planned-giving options allows you to give a lump-sum to the school, which is set aside in a trust that gets the same return as the school endowment overall. You can choose how much you want to take out annually (as long as it doesn't exceed the rate of return for that year), and the only stipulation is that when you die, the university receives whatever is in the account. This link profiles an alumna whose gift kicks out 6% each year, and the principal is still growing in the double digits after that.
The way I see it, the advantage of these types of investments over a Vanguard solution is that the management quality is second to none, overhead and management fees are lower than a for-profit situation, and the mandate is not risky swing-for-the-fence returns, but rather sound management of the pool of money for years into the future. Also, there are tax advantages as well-- deductions for the charitable contributions, no capital gains on donations of highly appreciated assets.
Of course, as everyone else said, there are no guarantees. But, if you have the chance to piggy-back on a multi-billion dollar pool of money, why not?
posted by Maxwell_Smart at 11:21 AM on August 20, 2008 [1 favorite]
Also, even if you are quite wealthy, things still may not be so hot. Some high-flying investment firms have gone broke or near broke recently. Other firms seem to be pushing off some of their bad or overly risky real-estate investments on their ultra-wealthy investors. Also, the commission structure is quite high at some firms so that it almost entirely eats up the "alpha".
One interesting avenue is to give your money to Harvard. Or, Duke. Looking at my school, the endowment has averaged 17% annual growth over the past 10 years. One of their planned-giving options allows you to give a lump-sum to the school, which is set aside in a trust that gets the same return as the school endowment overall. You can choose how much you want to take out annually (as long as it doesn't exceed the rate of return for that year), and the only stipulation is that when you die, the university receives whatever is in the account. This link profiles an alumna whose gift kicks out 6% each year, and the principal is still growing in the double digits after that.
The way I see it, the advantage of these types of investments over a Vanguard solution is that the management quality is second to none, overhead and management fees are lower than a for-profit situation, and the mandate is not risky swing-for-the-fence returns, but rather sound management of the pool of money for years into the future. Also, there are tax advantages as well-- deductions for the charitable contributions, no capital gains on donations of highly appreciated assets.
Of course, as everyone else said, there are no guarantees. But, if you have the chance to piggy-back on a multi-billion dollar pool of money, why not?
posted by Maxwell_Smart at 11:21 AM on August 20, 2008 [1 favorite]
This thread is closed to new comments.
posted by smackfu at 7:46 PM on August 19, 2008