Personal Investment & Financial Planning Q`s/investments questions


Thank you in advance I understand you are not giving me legal or investments advice I am just asking your opinion.
My wife and I are 50 yrs old two small kids. We have no outstanding debt with home, business, cars. We have 5 million in tax free bonds, about 600k in tactical equity and 300k in opportunity income, two IRAs totaling 300k that is indexed. I like the tax free bonds but interest rates are low and have been low. We dont like most mutual funds because of  associated fees. We have called bonds this yr and are struggling to find something to put them into. We dont like replacing 5% bonds with 2% bonds. What other avenues could we look at? We dont have the knowledge or time to chase investments or play the stock market.

Hello and happy holidays,

First, let me congratulate you on your financial success.  Based on what you have described you would be in the top 2% of American families based on your net worth.

Your portfolio is conservative, given your age.  Like most conservative investors, you face the dilemma of declining returns for “safe” investments like muni bonds, CDs, money market funds, and treasuries.  And of course, it all starts with treasuries.  You can see in the link below that we have not seen treasury rates like this since the 1950s.  And growth prospects in the 1950s (the heart of the baby boom) were a lot more optimistic than they are today (the retirement of the baby boomers).

As interest rates have declined, investors have moved up the risk ladder looking for more yield.  That is a big part of the reason why equities have done extraordinarily well over the last six years: the risk premium paid by stocks looks more attractive now that the “safe rate” is so low. There is no magic formula.  However if you look at the spread between investment grade corporate bonds and treasuries, there seems to be a fair additional return for the additional risk.

I also think that Real Estate Investment Trusts (“REITs”) can be a reasonable step up on the risk ladder from corporate bonds.  They come in many different flavors, but because in most cases they own underlying real estate, they are perceived less interest rate sensitive than bonds – but still in the interest rate sensitive category.  Utility stocks are another "yield based" equity investment, with some regulatory protection from higher costs.

Another option for high income investors looking for tax-advantaged investments are Master Limited Partnerships (“MLPs”).  These are a little more complicated, some are publicly listed (which reduces some of the tax advantages), but most are not. Your net worth would allow you to invest in these types of assets.  Whether they are appropriate for you is a different question.  And they come with a greater degree of complexity for your tax return.  Not all MLPs are in the oil & gas category, which has been badly depressed since the collapse in oil prices, but the majority are. I have attached another link for you.

I agree with your comment about mutual funds.  Management cost in the fixed income mutual fund area can be a big percentage of your yield, and for equities you will probably do better with indexed ETFs.  Give the size of your portfolio, a bond ladder makes sense. You own the bonds directly, you know the values at maturity (assuming no defaults), no management fee, and if rates begin to rise you will be rolling your maturities into ever higher yielding assets.    You can do this yourself, or for a small fee buy a pre-packaged one from a discount broker

(I don’t think the “wrap fee” programs most “full service brokers” want to sell you make any sense).

Hope this is helpful.  Congratulations again and good luck!

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John Guilford Kerr, CFP, CFA


I can answer questions related to personal financial planning, asset allocation, private equity investment analysis, fixed income, mutual fund, ETF, and stock questions, estate planning (basic), education planning, insurance planning, and business financial planning.


I have thirty-eight years of experience in finance, in the U.S. and internationally, for both public and private corporations. I have specialized in personal and small business financial planning and investment advisory services since 2005.------ - ten years commercial banking, New York, Paris, Houston, Charlotte, Atlanta---- - six years treasurer of a publicly traded health care company, Philadelphia----- - six years international project finance (Bechtel), San Francisco, Manila, London----- - five years head of international hotel development (Hyatt), Chicago---- - eleven years personal financial planning.----- Registered Investment Adviser, Hawaii---- FINRA General Securities Representative - Series 7---- FINRA Uniform Combined State Law - Series 66---- Resident Producer Insurance License, Hawaii-, Accident and Health or Sickness, Life, Variable Life and Variable Annuities

CFA Institute of Hawaii---- Certified Fiancial Planner Board of Standards, Inc-----. National Association of Personal Financial Advisers----- Financial Planning Association----- National Association of Tax Professionals

Project Finance Yearbook - 1997 / 1998 "Manila Water & Sewerage System Concession"----- "The Road To Helsinki, An Analysis of European International Relations Leading to the Conference On Security and Cooperation in Europe"' published 2015.

Certified Financial Planner, Certified Financial Planner Board of Standards, Inc.---- Chartered Financial Analyst, CFA Institute----- Certificate in Financial Planning, Boston University---- Masters in Foreign Affairs - University of Virginia---- Bachelors of Arts, Government - Ohio University

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