Investments!

[Ian Gentles]

Say you had about $200,000 to invest, i dont, looking for some good return over says a five year period, where would you invest? Or would you just leave it in the bank?

[Dave McClung]

Say you had about $200,000 to invest, i dont, looking for some good return over says a five year period, where would you invest? Or would you just leave it in the bank?

If you are sure you can leave it there for a five year period, a good diversified mutual fund would be a good choice. My favorite at the moment is Fidelity Leveraged Company Stock FLVCX.

Even with the dip in the market of the past couple of weeks, FLVCX is up 13.12% for the year to date. It's past record is:

2006 -- 17.6%
2005 -- 17.5%
2004 -- 24.5%
2003 -- 96.3%

5 year average of 39.48%
Expense ratio of .85

Morning Star Rating -- 5 Stars
Stewardship Grade -- B

[Ian Gentles]

Thanks much appreciated

[Barbara Moulton]

Even with the dip in the market of the past couple of weeks....

I was wondering if what was happening in the markets would get mentioned here.

What's your opinion of all this sub prime scare Dave?

[Dennis M. Scott]

Some additional factors might be one's tax situation, one's age, other assets, life values, etc.

Might look for somewhere with a guaranteed return of 5-12%, tax free environment, fully accessible without interrupting yield.

If I had to return the funds five years from now, I'd likely attempt to double the amount so I could at that time relinquish the original and continue. It would probably require leveraging on some sort of pretty secure real estate.

However, I'm likely not your best source of counsel.

[Dave McClung]

I was wondering if what was happening in the markets would get mentioned here.

What's your opinion of all this sub prime scare Dave?

I think it is another example of the Federal Reserve not acting soon enough. First, the Federal Reserve made too much money available. There was more money available than there was legitimate demand. As a result of the artificially low interest rates, lenders began lending to people who weren't really qualified. That caused real estate prices to reach unrealisticly high levels.

Then, when the Fed realized that they had over shot their mark, they raised interest rates and restricted the available funds. That was the appropriate action, but they have now kept the high rates in place too long. Once again they have been too slow to act.

I predict that the Feds will lower interest rates at their next meeting, but their action may be too late to prevent a crisis for some financial institutions.

But to put things in perspective, the lenders have not yet lost any money. What happens in times like this is auditors require lenders to put up "reserves" for future losses. Reserves are strictly accounting entries that book losses before they occur. Less than 1% of outstanding loans are currently inforeclosure.

What impact will it have on you and me? Over the long run, it won't have much impact. Those of us who have saving for retirement have taken a 10% or more drop in value over the past couple of weeks, but as long as we don't sell before the market returns, we will be fine.

[Ian Gentles]

Would it be worth it for other person. to invest in pensions?

[Dennis M. Scott]

Would it be worth it for other person. to invest in pensions?

Tax laws in the UK are undoubtedly different than in the US. Also, without knowing the financial status of whoever has obtained the 200K, it's a little difficult to suggest. If the individual or couple will likely be in a high tax bracket when they retire, they might want to think twice about investing in tax deferred undefined benefit pension plans. If they are likely to be in a 40 to 50 percent tax situation when manditory distributions hit, they might want to consider taking the tax hit now - if their tax bracket is now lower. For instance, in the US, if the $200K was presently tax-free, as in the case of a life insurance death benefit payment, tax deferred instruments loose some of their appeal. I know quite a few people who are coming to retirement and now discover that they will retire in tax brackets higher than they've ever been in, and have fewer deductions than ever before.

Just a few months ago, I became aware of the death of a Nazarene layman who left an estate of between $75 and $100 million. He loved his church and his regional college - both of which he supported significantly during his lifetime. Amazingly, he had done no estate planning, and didn't even have a will. Most of his estate is being taxed at almost 80%. His family is not inclined to gift to either his church or his college, and they will receive remarkably little. I personally knew him, and I am confident that what is happening is not what he would have wanted.

So, your question is pretty appropriate.

By the way, the man above made his money in high end residential rental real estate - almost completely in property he obtained at foreclosures.

[Barbara Moulton]

I deal with the day to day financial stuff but Carl handles our long term investments.

The past few weeks have caught my attention though :-)

[Dave McClung]

Would it be worth it for other person. to invest in pensions?

In the U.S., we refer to that kind of contract as an annuity -- a promise to make payments at a certain level for the life time of the recipient.

Annuities make good sense for some people; however, they are issued by insurance companies. Insuarnce Companies normally have very conservative investment policies.

The Annuity contract is a combination of an insurance policy and an investment. Most financial advisors say that one is better off to buy a separate term life policy and invest the rest.