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I have a friend that is getting about 400k as part of a retirement payout. (choose this over the 9k a year they were offering for installments)

My question is where should they invest this? Not looking for specific companies (but feel free to comment) but looking for a service type that would fit their needs based on the specifics below:

  1. They own home outright.
  2. They have a healthy savings and no debt.
  3. They would like to invest the money aggressively for their age - not outrageous but aggressive.
  4. For the most part they want index funds or funds with no/low fees.
  5. Having their funds liquid is a want.
  6. They are alone - so no other money income.
  7. They have about 2 weeks to give company address of where money will be deposited.
  8. Friend will start drawing dual social security and money off an annuity soon. For the most part they could live off of this, as house is paid for.
  9. In USA.
  10. Eligible for IRA? I need to ask.

I probably have more info, just ask.

  • How involved does your friend want to be in managing this portfolio? – Nosrac May 24 '17 at 16:05
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    @blankip the S&P is up about 145% since the beginning of 2009. Don't be too proud of your performance in a record bull market. – quid May 24 '17 at 16:23
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    "For the most part they want index funds or funds with no/low fees." Seems like that's the answer - are you asking for specific fund recommendations? Do they have a brokoer or service that they use now (eTrade, Fidelity, etc.?) – D Stanley May 24 '17 at 16:28
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    @blankip Well the question is very broad, and Money.SE is not a place for specific investment advice. In general a good financial advisor would look at goals (income? growth? endowment?) and risk tolerance along with all other assets, which is not something that's suitable for a general Q&A site. – D Stanley May 24 '17 at 18:02
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    Is the lump sum eligible to roll into an IRA? That's how my pension lump sum was handled. If it is, and he takes it straight up, he'll have a huge tax bill. Once in the IRA he can choose how to invest. – JTP - Apologise to Monica May 24 '17 at 18:26
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Bogleheads has a wiki giving advice for folks who come into some money: windfall wiki. Generally speaking, (1) don't rush into anything that is hard to get out of, (2) carefully look at what your taxes will be and how to minimize or manage your tax burden, then (3) make reasonable investments after you have done plenty of research.

Selecting a few index funds covering all of the major asset classes (domestic and international stock, risky bonds, savings, maybe inflation protection) is as good as you can generally do. The problem is choosing the right weights across these asset classes as this may vary by person and we don't know what the optimal weights are. There are general ranges, though, that are reasonable. An example of where to start again comes from bogleheads: their three fund portfolio.

Actually if you have money and are interested in investing wisely and avoiding giving money to financial advisors and mutual fund managers, you should just head to bogleheads and spend time with the folks there, who are of like mind.

  • This is good advice but looking more for what type of service sector, not portfolio or fund management advice. We need to start comparing services/fees and wanted to start in the right place. – blankip May 24 '17 at 17:29
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    I think you want a discount broker. Start with Vanguard, Fidelity, Schwab, Ameritrade, etc. Again, Bogleheads for advice from people with similar resources and mindset. StackExchange isn't best for that type of recommendation. – farnsy May 24 '17 at 17:32
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They should open an account at one of the major discount brokerages, like Schwab or Fidelity. By default they money can be deposited there into a core account (money market). They will then have the option of investing the money however they see fit. They will have a variety of low cost funds to choose from. The large houses will also assign an account manager to them that they can meet with to help plan their investments. While not the same as a financial planner, the account managers are pretty sharp and can help them get started.

Me, for their situation, I'd pick a variety of income-based investments, funds or stocks that pay a dividend, a bit in a low-cost index fund, and some bonds or bond funds. Anything in a fund is close to being liquid in the sense that it can be sold at any time (win or lose) and the cash will be available in a couple days. If they buy any bonds, those aren't so liquid but the payments will be steady.

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