Northwest Criterion Asset Management
Joe Arns, CFA was an equity research analyst with a wealth management firm outside of Philadelphia in the fall of 2008. He was amazed to see clients jumping out of the stock market at or near the bottom, permanently destroying a good proportion of their wealth. Even though the firm "knew its clients", the tools used to assess risk preferences failed miserably.
Joe set out to build a better way to evaluate a client's risk appetite and ensure that every investor had their BEST portfolio. A small survey of investors turned into a large commissioned study of a few thousand investors, and the knowledge base from that proprietary study became the foundation of an investment platform that combines a rich dataset of human behavior with algorithms and human expertise that continually evaluates the investment landscape to ensure each investor's portfolio offers the best return potential for a level of risk that is just right for them.
BS, Economics, Wharton School at the University of Pennsylvania
Assets Under Management:
Twenty four plus funds is likely far too many. If I were to review your portfolio, I'd likely see a lot of duplicative positions — same companies, same industries, same geographies, same bond maturities, etc. This is called the pu pu platter approach, and it is common among advisors or firms that don't express any real opinion on the markets. However, your return so far this year is actually pretty good and raises another alarm in my head. I suspect you have a lot of large-cap U.S. equity spread out among several different funds. So while you have a great many funds, I wonder if your portfolio is actually very diversified after all.
In part. Selling the employer stock is a fantastic idea. Even if you were optimistic about the company's prospects, it wouldn't make sense to have all of your savings in one stock — investors can diversify some of their risk by holding a portfolio of companies, so if you hold only one stock you are effectively taking risks you are not getting paid to assume!
Paying off your mortgage may make sense too. There are psychic benefits from owning your home free and clear, and the rate on your mortgage is likely higher than what you would receive in a money market or savings account. However, going from investing a lot of your savings in one company to having zero in stocks strikes me as too extreme — even with today's high stock prices. If you were able to tolerate the risk of investing in one company, you likely have the stomach to invest in a broad-based fund that includes hundreds of companies. I would consider a less extreme approach that places a portion of the money leftover after paying off your mortgage in low-cost stock ETFs and some in bond ETFs and a money market account.
What is your investment risk tolerance? It sounds like you have the ability to assume a good deal of investment risk, but the first step in advising you on the right type of investments starts with a better understanding of your willingness to risk losing money in search of higher returns than you can earn in the bank.
Real estate investing is not limited to owning your own residence or renting one out. You also could consider investing in real estate investment trusts (REITs) through a brokerage account. REITs invest in all different types of property, not just residential real estate, and tend to provide a high level of current income. Such an investment might be appropriate for your IRA.
If you don't want to contribute any of the $10,000 toward long-range goals like retirement, your best bet is to open a money market account with an annual percentage yield that is close to the effective Federal Funds rate. CD's are not an attractive option right now as the Federal Reserve is likely going to continue boosting the Federal Funds rate toward 3%+ from 2-2.25% at present. That's why you've seen a lot banks promoting their CD products — they want to lock in cheap funding for themselves while they still can!
The short answer — it doesn't matter. If you save $12K per year in a taxable brokerage account for 6 years and invest it aggressively, you will likely draw the account down to zero within 2 or 3 years of your wife's retirement if your spending level remains at $11K per month. Rental real estate won't put you in a position that's any better. If you pay down your mortgage instead, you are still looking to plug a $4K per month deficit for nearly a decade until you can tap your retirement accounts.
If you wife wishes to retire in six years, your goal should be to have your monthly spending at that time exceed your monthly income by less than $500 per month.