Join our investing community

Investing a large lump sum just prior to retirement

Discussion in 'Investing Strategies' started by sfdoddsy, 20th Mar, 2019.

  1. sfdoddsy

    sfdoddsy New Member

    Joined:
    19th Mar, 2019
    Posts:
    3
    Location:
    Sydney
    Hi all.

    Just sense-checking some advice I've been given.

    Assuming you were late 50s, how would you invest a large lump sum?

    Say $3 million or so.

    Self-employed with irregular income coming in.

    Thus will need income and some capital growth.

    Also have $400K super and an investment property returning $40K pa.

    Thanks.
     
    twisted strategies likes this.
  2. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    ( non-professional ideas only , i have no qualifications in this area )

    FIRST a full medical check-up ( gives you some idea of life-expectancy and long-term ability to guide your decisions )

    this is a TOUGH time to be looking to invest some cash ( for a good outcome )

    is it possible to delay buying and put the time into extra learning ( and thinking ) about investing

    some concepts to understand

    1. ALL investing involves risk ( otherwise the government wouldn't guarantee the first $250,000 of your bank/term deposit .)

    risk can be a reduction of the cash investment or total capital loss
    Investors Should Be Risk Diverse, Not Risk Averse

    Dividend Reinvestment Plan - DRIP
    in 2020 i plan to swap into 50% cash divis, 50% extra shares ( cash income + extra shares to resist future inflation ) when i 'officially ' retire

    Compounding.

    i currently reinvest my dividends in most of the plans available ( that is likely to change in 2020 , i just hope i make the better choices )

    for growth and yield shares are the only game in town ( but have very big potential risk , )

    yes i have shares , but many were bought in 2011 and 2012 when many of share prices where much lower ( so many could drop 40% and i would still be in front )

    read carefully all the paper-work linked to bonds , hybrids , ETFs , REITs , LICs , those tiny differences can make IMPORTANT differences to your outcomes

    each investment type has it's advantages and traps ( and time to shine brightest )

    good luck .. it will seem like hard work , because you need to be careful , while the future is very uncertain ( but can be highly rewarding .. often in unexpected places )
     
  3. sfdoddsy

    sfdoddsy New Member

    Joined:
    19th Mar, 2019
    Posts:
    3
    Location:
    Sydney
    Thanks.

    Alas, I think the real issue is not the What but the When.

    I would feel far more comfortable if the markets were 20% down as they were in December rather than now that they re back to gaudy heights.

    I think I lack the cojones to go all in when everything still screams 'PEAK!'.

    :(
     
    twisted strategies likes this.
  4. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    i am on the verge of ;official ' retirement ( am currently on a disability pension )

    and completely agree

    i started my retirement dreams ( investing ) very late 2010 , not realizing my health would take a sudden downturn in 2016

    so my 'instant retirement income fund ' was well-timed for all the wrong reasons ( rushing to grab good assets in 2011/2012 instead of waiting for that GFC like crash ., which still hasn't arrived )

    there is an old pearl of wisdom ( for traders ) sell in May and go away , come back on St Ledger's day ( September )

    hinting the market is much more volatile in that period ( as traders sell-down to pay tax liabilities ) .. that might work in your favour .. if the market doesn't crash badly say carefully put 10% to 20% of the available cash into the market 'cherry-picking solid investments ( companies unlikely to fail )

    there is a school of thought that say small buys .. cost because of higher brokerage ( per share ) and that is mathematically correct , but what if that targeted share was to drop 10% the next week and you still had spare cash ???

    you will have to find a balance that doesn't ruin your sleep ( i prefer to trickle cash into the market )

    cheers

    ( fear and greed are both good when carefully controlled NOT suppressed )
     
    RS Gumby likes this.
  5. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    270
    Location:
    hodor
    I didn't see a question...

    I'd be seeking advice about getting as much into super as possible. Most efficient vehicle you'll find.

    You need to look at your risk appetite, annual income requirements to decide on the actual best investments for you
     
    twisted strategies likes this.
  6. AnthonyKing

    AnthonyKing Well-Known Member

    Joined:
    30th Oct, 2010
    Posts:
    45
    Location:
    Sydney NSW
     
    twisted strategies likes this.
  7. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    maybe the original poster needs to ask himself ( or herself )

    what result is desired after retirement

    a common idea is to withdraw down 4% of the portfolio value every year ( i disagree with this idea , but the answer must be for YOU )

    currently an investor is faced with near term uncertainty .. the potential of falling interest rates ( a real income killer if you are planning to live on bonds or term deposit interest ) but ALSO a property bubble ( so the possibility of reduced rental income ) AND a possible share market crash ( and reduced div. income and possible capital loss ) BUT ALSO rampant inflation ( sends costs through the roof ) if any intervention goes badly wrong .

    i would nearly be leaning towards bonds and interest-bearing equities ( at a time like this ) but i notice subtle ( and some crude ) increases of risk in exchange for inferior returns .

    so i have a SLIGHT bias towards REITs ( they rarely pay franking but try to deliver stable returns )

    i inherited some ( and added to ) shares in and estate and some physical property ( earning solar energy income plus some rental income ) the property will be redeveloped in the next property boom so as long as it is cost neutral at the moment , is fine by me .

    an additional question must be the health of you and your partner ( are one or both of you liable live to 100 )
     
  8. sfdoddsy

    sfdoddsy New Member

    Joined:
    19th Mar, 2019
    Posts:
    3
    Location:
    Sydney
    The desire after ‘retirement’ is to be able to have a similar lifestyle as the one we enjoy now.

    Given the amount we have suddenly acquired due to the sale of our house at way above market value, the trick apoears to be not to stuff it up.

    Alas, as mentioned above, the current environment seems to be a particularly bad one to take a plunge anywhere.

    But the alternative of earning 2% in the bak is equally unappealing.

    The logical thing is to chuck as much into super as possible but due to the rule changes we can’t.

    My partner is also a fair bit younger and couldn’t access her super for 15-20 years.
     
    twisted strategies likes this.
  9. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    ah ha ,

    so at least some investment outside your super is considered wise ( for you )

    so ... a decision on income v. income + capital growth ( to resist inflation and i would expect inflation to return within the next 10 years ) could be important

    how about a bias towards REITs now ( as they are facing headwinds ) and a bias towards LICs and shares later using unspent income if/when the share market crashes .

    this is a difficult time to place investment cash ( wisely ) a shifting economy and shirting regulations ( and that shifting is unlikely to cease in the next 5 years )

    i still think dollars invested in your ( and your partners ) financial/investing education ( see if they are tax deductible ) might be a big winner .. i suspect there will be all sorts of investment strategies unleashed to trap the unwary ( using current trend of releasing very complex ETFs as a guide to the future )

    remember Buffet's first rule ..... DON'T lose money ( a surprisingly tough rule to follow every day )