Downtown Investment Advisory
Downtown Investment Advisory (DIA) is a Registered Investment Advisory firm that provides investment management services focused on fixed income. DIA specializes in creating custom portfolios of individual bonds, from high yield to municipal, and alternative fixed income investments to achieve a desired yield target. DIA also invests in stocks through low-cost Index ETFs. DIA's investment expertise was developed over 20 years of institutional fixed income investing, and navigating through the crashes of 2001-2002 and 2008-2009. As an independent firm we do not have incentives to place clients in certain assets and we do not earn sales commissions. DIA has fiduciary obligations to all of its clients that many investment professionals, such as advisors at the large brokerage firms, are not required to provide.
The answer is absolutely. Junk bonds are really a misnomer, better known as high yield bonds. For some reason high yield bond are seen as highly risky, but the fact is that over the past 20 years high yield bonds have outperformed stocks with 1/3 less risk than stocks. If you look at the performance of high yield in the last two market crashes, high yield has vastly outperformed stocks. And if you are an income investor, these bonds provide a steady yield in the 6% range on average today. Sure, high yield bonds are riskier than investment grade and government bonds, but the yields are these are in the 2%-3%. The best way to invest in high yield bonds is by holding a diversified portfolio of individual bonds and plan to hold to maturity. If you can do this, then you can ignore market volatility, simply wait for the maturity date to get repaid and collect interest along the way. My investment advisory practice specialized in fixed income, specifically creating laddered portfolios of high yield and other bonds. If interested check out www.downtownllc.com.
Downtown Investment Advisory
IULs and similar life insurance policies are complex financial instruments that few people truly understand. Even as a financial professional, I have trouble analyzing all the opaque moving parts involved in these insurance products. One thing is certain, fees are high, and insurance salesman have strong incentives to sell these products. Less certain is if they are the right answer for most people. The first question is if you actually need life insurance, are you more concerned with leaving money to heirs or having the money you need for your retirement? I suspect the answer is money for retirement. A better solution in my opinion would be to invest all your assets in more traditional investments like bonds and stocks. Given your age, I would recommend a mix of bonds (ranging from investment grade to high yield bonds) to generate a steady stream of income that you can withdraw from your accounts each month for living expenses. Another portion would be invested in stocks for long term growth, with a focus on lowest cost index funds (no individual stocks, and no mutual funds). My Registered Investment Advisory practice specialized in fixed income, specifically creating portfolios of individual bonds clients hold to maturity. The interest earned can be reinvested or withdrawn. Only with further discussion could a proper allocation plan be assessed and implemented. I would be happy to discuss further, and you can learn more about my practice, Downtown Investment Advisory, at www.downtownllc.com. As a fee-only independent advisor with fiduciary obligations, I have no incentives to "sell" any products or to place client in in-house mutual funds.
I concur with some prior answers that your assets are clearly enough to cover your living expenses now and in retirement. You are in a strong position with large liquid holdings and a substantial IRA that can continue to grow tax free. However, you are simply holding too much cash, and there is no need to dip into this cash for living expenses. Inflation slowly erodes the value of cash, so I would strong recommend that you put this cash to work, since you need to plan for many more decades. Although the only information I have is your note, I am guessing that you lean towards the conservative side on investing. I would recommend allocating a large portion of your cash holdings to a portfolio of individual bonds, including a wide variety of high grade municipal bonds, investment grade corporate bonds, and high yield bonds. I would think targeting a 3.5%-4.0% net yield is achievable. By holding individual bonds, you can ignore market fluctuations and simply seek to hold the bonds to maturity. The income stream generated can be withdrawn as needed for living expenses, or reinvested to take advantage of compounding interest. In this way your cash can last for decades, without high market risk. You may also want to consider a portion of investments in stock index ETFs (no mutual fund and no individual stocks). My Registered Investment Advisory practice specializes in fixed income, specifically creating portfolios of individual bonds. However, only with further discussion could a proper allocation plan be assessed and implemented. I would be happy to discuss further, and you can learn more about my practice, Downtown Investment Advisory, at www.downtownllc.com. I also write extensively on Seeking Alpha about fixed income, you can find my articles here.