Best way to invest a large sum of money

The key is to keep it simple

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From the September/October 2015 issue of the magazine.

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Moyra Thompson, 60, is retired and her $600,000 mortgage-free house is up for sale. “I want to sell before boomers flood the market with homes,” says Moyra, who receives $2,100 a month from two small pensions and will start collecting CPP at age 65. Right now, her $150,000 portfolio is invested in bank mutual funds with an overall management expense ratio (MER) of 1.9%, split evenly between fixed income and equities—but even with an additional $600,000 Moyra is concerned her money won’t last into her 90s. “I’ll need $15,000 net a year from my portfolio. I’m not sure the 50% fixed income and 50% equity split will give me that.”

Certified financial planner Chris Stephenson of Steadyhand Investment Funds in Vancouver says that if Moyra’s goal is to withdraw $15,000 annually from a $750,000 portfolio (an extraction rate of 2%), she’ll have no problems. In fact, this is easily achievable with her current asset mix of 50% stocks and 50% fixed income, and Stephenson sees no reason to change this. “Investors often feel they have to change investment strategy when they get a large sum of money. But if your goals can be met with your present strategy, it makes sense to continue with it.”

Still, there are a few things Moyra can do to hold onto more of her money, Stephenson adds. Investment costs are important, and Moyra could lower her current portfolio’s 1.9% MER by switching over to no-load, low-fee funds. He recommends a portfolio comprised of Steadyhand’s Founders Fund (75% of holdings) and Income Fund (25%)—which would still give Moyra an asset mix of 50% stocks and 50% fixed income. Her all-in costs? “Assuming a portfolio value of $750,000, Moyra would pay roughly a 0.9% MER—a very affordable amount to pay for a diversified portfolio,” says Stephenson.

Moyra should also set aside two years’ worth of living expenses, or about $30,000, in a savings account. “She should replenish this every 18 months by selling some of her investments in the Founders Fund and Income Fund,” says Stephenson. Finally, Moyra should consider meeting with a fee-for-service planner annually to ensure her financial plan stays on track.

8 comments on “Best way to invest a large sum of money

  1. Perhaps she’d be better to visit the fee for service financial planner before “the fix.”

    Reply

  2. Circle looks like nest thermostat

    Reply

  3. I am now looking to invest a larger amount in someting safe.
    Skyline Reit looks good.
    If she invested $200,000 her return would be about $15.000 per year plus a small equity gain.

    Reply

    • Randy, Reits are stocks, and will behave like stocks during a market crash, so cannot be desceribed as having low volatility.

      Reply

  4. She could reduce her costs to las low as 0.18% using just 3 stock ETFs (Canada, US and international) and a bond ETF.

    Reply

  5. is moyra expecting the total amount of $600000.00 to go into her portfolio?? where is she going to live now that she has sold her house? is she replacing her living accomodations to a condo, apt or even another home albeit smaller?? this story does not really add up.

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  6. I assume Moyra has a good portion of her Portfolio in a TFSA TO free her of some taxes

    Reply

  7. Other writers are right,something doesn’t add up.$15000/yr withdrawl wouldn’t even pay rent in the Vancouver area.CPP and OAS would help,but not much.And I didn’t even touch tax issues.

    Reply

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