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I have an older relative that I am going to help in managing their money. His income is fine to live on. In terms of assets, he has about $250k in a variety of separate CDs, stocks, checking accounts, savings accounts, etc. Overall, he is not getting a very good return and, because of his age, his record keeping is a bit spotty - we can't find all of his statements and since they are from a number of different institutions it is very hard to manage.

I have always enjoyed managing my 401k in a single account that I can access online and use as a dashboard to control how it is invested. Is there a reason why we shouldn't consolidate all his cash and put it in a single mutual fund account and then put together a mix of investments that work well for him? That way there would a single online account where everything can be managed and analyzed and the statements will be available anytime.

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Overall I think your idea is sound. The key here is to choose that 401k provider wisely and have a specific asset allocation plan (like Joe mentioned)

Summary of this approach:

Pluses:

  • Easier to manage, analyze and modify investments.

Minuses:

  • Could get locked into high fee, moderate return investments.

I'd consider Vanguard for simple, no frills investing. If you're looking to get into choosing stocks, check out the Motley Fool.

  • For a taxable account or IRA you can choose the provider, but for a 401k it is your employer who chooses. If you change jobs, and both employers have plans, you do usually get to choose whether to leave the old-employer money in their plan (and manage two accounts, more if you repeat this) or transfer it to the new-employer plan (and manage one account) – dave_thompson_085 Feb 17 at 19:58
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As your question appears in the second half, so will my answer. Like you, I will provide some background. I remember buying gasoline for $1.759 per gallon. I am so old that I remember buying gasoline for $0.759 per gallon. I recently paid $2.759 per gallon. You claim that your relative is not getting a very good return. Some would suggest that, at $2.759 per gallon, I am not getting a very good price on gasoline. Rates, yields, returns and the price of gas are not what they once were. It is actually difficult to get a pretty bad return relative to the current market. I suspect your relative is no longer getting what he used to get but he is getting a fair return.

About record keeping. Your Uncle Sam benefits at your expense when you keep poor records. There are substantial penalties for failing to report everything. Most high school graduates can manage one checking account, one savings account, several charge cards and about 20 CDs and stocks at different institutions with little more than the following: a) a wall calendar b) a shoe box and c) a stack of 3 by 5 cards. Don't misplace the shoe box. If you can use a spreadsheet, it is even easier. Backup your data.

There are a several reasons why you shouldn't consolidate all his cash and put it in a single mutual fund account and then put together a mix of investments that work well for him.
- you are doing it backwards 1st put together a mix of investments that work well for him 2nd consolidate the assets. Your phrasing suggests a general lack of understanding - most CDs have penalties for early withdrawal. - while you enjoy managing your 401K in a single online account, your older relative might not be as comfortable with a lack of paper statements (see shoe box above)

Let me tell you a little about my 401K. x% blue chip, y% small cap, z% bonds, w% foreign stock. Once a quarter, I change my current contribution to re-balance current value towards my target percentages. Every 30 months or so, I consider changing my asset allocation. The allocation considers my age, my spouses age, our childrens ages, my risk tolerance and my intermediate view of the markets. Your mileage my vary.

to recap

  1. set reasonable expectations for returns
  2. organize your records
  3. get an asset allocation plan
  4. reduce the number of accounts
    in that order
  • I don't think the gov't wants you to keep poor records. They are called penalties. The gov't could forecast and estimate taxes if everybody kept honest, complete and timely records of their income. – MrChrister Jun 15 '10 at 5:56
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If this money is intended to be used for retirement and depending on how old "older" is, it sounds a little risky to be putting too much money in a stock based mutual fund.

While the CDs may seem like crappy investments right now, it is important to down-shift risk as you get closer to retirement because this person won't have as much time to recover if the markets take another big dip.

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You can move most or all of those financial products into a single account at one institution, but I wouldn't go with a "mutual fund account" like Vanguard.

The big online brokerages should offer:

  • stocks
  • bonds
  • mutual funds / ETFs
  • access to a wide variety of CDs
  • SIPC or FDIC insured cash sweep vehicle that earns the same as an ordinary savings account
  • checking -- some might offer only limited check writing, so you may need to stick with your current bank for checking
  • direct deposit / electronic transfer
  • possibly a local branch, should you have the need or desire for person-to-person service

Consolidating everything into one statement can vastly simplify your record keeping. With a balance of $250k, you should be able to get a paper statement without a fee.

Depending on where the accounts are currently held (e.g. if the stocks are at a full-service broker), you may also be able to save on fees.

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