Announcement Am I right to be worried about my retired parents' investment strategy?

fuzzybabybunny

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Jan 2, 2006
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#1
For the past 5 years my dad has been investing according to the teachings of Investors Business Daily and MarketSmith. I don't know much about these, but it appears to be entirely technical in nature, looking at trends on graphs and numerical metrics and such.

He's seen really good (40%+ YTD) gains on his stocks, and even 300 - 400% on some individual stocks, but here is his portfolio:

0% bonds.
30% aggressive tech mutual funds
70% in ten tech stocks (mostly enterprise software)

My parents are both retired and my dad is doing all the investing. When I ask him about any individual stock he has no idea what they do or any of their business plans or their competition or details of the industry they're in. He simply says that they're rated very highly in MarketSmith and he buys based on the metrics it gives him. He never talks in terms of "why" a certain stock is doing this or that but only in terms of how much it has grown.

Anyone have any experience with MarketSmith and such? I don't know anything about individual stock investing but the common wisdom, especially for retired folk, is to be very conservative and even active investors who understand the businesses they invest in don't do as well as a simple index fund. What my dad is doing sounds very risky. Everything he is investing in is doing well, but... the entire *market* is doing well.
 

KB

Diamond Member
Nov 8, 1999
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#3
I would be. AggressIve investments like his tend to do well until a crash, see 1999. He could leave himself having to sell his stocks very low because he is unable to fund his retirement. He should be in some bonds depending on his age and I always recommend index funds.
 
May 24, 2003
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www.uovalor.com
#4
Yep I'd be worried. It's one thing to play the market for fun and hope you strike it rich and have extra play money, but to do it with your retirement? Hell no.
 
Oct 10, 1999
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#5
he is positioned for growth . What is his age ? A more balanced approach is what he needs .
 
Nov 8, 2012
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#7
Any brokerage or guide worth a shit will tell you the simple fact that single stock investments is high risk as far as retirement is concerned... Which is fine - you know.... if you're 30 years old.

By age 40 you should START the process of converting some of the risk assets to less risk (basically, move a portion from stocks to bonds). At age 68 you should have a damn good chunk of your portfolio in bonds and out of equities.


Since he is currently retired, is he cashing things out? Or is he using other assets first?
 
Nov 4, 2009
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#8
Am I right to be worried about my retired parents' investment strategy?
(Context: I'm only 55 and gamble on the stock market. I've won a lot. I've been burned really badly. I've provided for their first car and 529's that allowed for $0 debt. I follow very much in my fathers footsteps who passed away at 89, who had a full life)
The short answer is No: It's none of your business. My children tell me to enjoy the roller coaster ride and don't give mom a heart attack.
A different answer: We always worry about the one's we love in multiple ways and in multiple subjects and all children wonder about their inheritance. Instead of criticizing and critiquing; enjoy the conversation he delivers about himself. Be honest in answers to the questions he asks but respect his desire to Pursue Happiness.
 
Nov 8, 2012
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#9
Am I right to be worried about my retired parents' investment strategy?
(Context: I'm only 55 and gamble on the stock market. I've won a lot. I've been burned really badly. I've provided for their first car and 529's that allowed for $0 debt. I follow very much in my fathers footsteps who passed away at 89, who had a full life)
The short answer is No: It's none of your business. My children tell me to enjoy the roller coaster ride and don't give mom a heart attack.
A different answer: We always worry about the one's we love in multiple ways and in multiple subjects and all children wonder about their inheritance. Instead of criticizing and critiquing; enjoy the conversation he delivers about himself. Be honest in answers to the questions he asks but respect his desire to Pursue Happiness.
Uh huh, yeah - it's all fine and dandy to say it's none of my business... Until it's too late and they are on your doorstep broke as shit with lifetime disabilities asking for your help.

Or you know, you can do the best you can to prevent disaster before it comes. You know, preparation?
 
Nov 4, 2009
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#10
Uh huh, yeah - it's all fine and dandy to say it's none of my business... Until it's too late and they are on your doorstep broke as shit with lifetime disabilities asking for your help.

Or you know, you can do the best you can to prevent disaster before it comes. You know, preparation?
A very selfish answer justified by calling your parents very selfish. As you imply, you cannot prevent disaster but you may mitigate by providing your opinion with love and not anger, of his ways. Don't tell him what to do. That will have a negative impact on your relationship. You worrying about things you have no control over. Do you really think you have control over your father?

Edit: I wanted to form a more complete and personal revealing answer but I can't as I'm very busy today. Perhaps I will come back to this if anyone is interested in my perspective.
 
Last edited:
Jul 12, 2006
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#11
He is way overexposed to a sector that already has some fairly recent disastrous crashes. I hope he has an actual short-term plan to get out and diversify.
 
Nov 8, 2012
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#13
He is way overexposed to a sector that already has some fairly recent disastrous crashes. I hope he has an actual short-term plan to get out and diversify.
Or at the very least, non-invested funds that can be utilized if and when the market has a downturn.
 

eng2d2

Senior member
Nov 7, 2013
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#14
Hard to say. My young mouth will say he is dumb but i learned when I delve into investing that it’s individual preference. Best to ask if he is comfortable with his strategy. You can say he is gambling but hard to argue against a 40% return. I am always interested when it comes to money but you learn quick that it’s not one size fits
all. A Better to ask if he is comfortable with his strategy. Maybe your parents can sustain the loss and recover quick. Seems like they know what they are doing. You could learn from what his strategy is.
 
Nov 8, 2012
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#15
A very selfish answer justified by calling your parents very selfish. As you imply, you cannot prevent disaster but you may mitigate by providing your opinion with love and not anger, of his ways. Don't tell him what to do. That will have a negative impact on your relationship. You worrying about things you have no control over. Do you really think you have control over your father?

Edit: I wanted to form a more complete and personal revealing answer but I can't as I'm very busy today. Perhaps I will come back to this if anyone is interested in my perspective.
That's what I'm saying though - if it isn't your business right now - then when is it your business? When they are broke and begging to live with you?

I guess I'm just a glass half empty person - I would rather look at it and say "We can prevent future problems by stepping in now instead of waiting until after disaster strikes"...

To each their own though I guess.
 

eng2d2

Senior member
Nov 7, 2013
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#16
One more. Did he ask you or ask for your help?
When I started cout making a living and got interested in investing there was a guy I knew pitching investment. He was a finance summa cum laude in a college like univ of Phoenix. I laughed and told myself this guy is a scam. Then 9 ybears later the guy is driving a Lamborghini (cheap) then 2 years later 5 more super cars. Bought a nice house. Have a street name after him. All along I have been laughing at his pitches I made mine but he made more. Lol. He is on CNBC and his own local show.
How can I convince others that this guy is a scam. He seem to have a good return.
Lol
 
Oct 22, 2001
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#17
It would be helpful to know if either of your parents are receiving pensions. Also, how much of a gap there is between their monthly living expenses and their monthly (pension and Social Security) income. IMHO they should have enough cash and/or short term equivalents (i.e. not equities) to cover that gap for at least 12-24 months. The reason for this is to ensure that they have money to cover that gap during a market dip and do not have to "sell low" to maintain their lifestyle.

FWIW, I am also in my sixties and retired. I am still pretty heavy into equities myself (hopefully still have 2-3 decades to live!), but think that your dad would be wiser to diversify more through index funds and ETFs and restrict his MarketSmith investments to less than 30% of their nest egg. At this stage in life, IMHO we baby boomers shouldn't be trying to "swing for the fences" with all our investments; we are better off playing more "small ball" that conservatively grows what we already have. I am also not a big believer in technical analysis as a method for long term equity investing. But maybe that's just me....

Perhaps you might be able to interest him in some financial planning websites?
 

Exterous

Super Moderator
Super Moderator
Jun 20, 2006
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#18
Do they need more money? And how much of that money they want to get is worth the risk of losing 40-60% of their investments and taking years to recover? Sounds like they've already 'won the game' since they're retired so why are they still playing so much and risking losing what they've won? If it were me I would be very worried. Of course they've done well - the stockmarket has largely done exceptionally well over the last 11 years. That won't continue. How do they survive if they're still invested in 10 tech stocks and those crash? Is that 'no more international trips this year' or is that 'knocks on fuzzy's door because they can't afford food'? (Do they have annuity, pension, social security etc to fall back on and cover basic needs?)

If your dad wants to keep doing his own investing, doing it with a subset of funds would be a good way to scratch that itch without risking the entire portfolio. Normally you don't do that with more than 10% of your portfolio but hell even 25% of their portfolio for his 'play money' would be better than 100%. Put the remainder in a split of stock index funds\bond index funds such that the entire portfolio comes close to a 60/40 stocks\bonds split* and they'll have something much more likely to retain principle for them to live on.

*Much debate on the overall best ratio, risk level comfort in retirement and how much treasuries should play into this
 
Nov 21, 2001
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#19
^ great response. He left out the most important part. If he is just investing to maximize gains, just to play the game, he needs to step back and think about it.
One of the worst driving forces is to try and maximize inheritance. Children can make their own way, unless the child is disabled in some way.
 

Mai72

Diamond Member
Sep 12, 2012
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#20
Why you should have multiple soursec of income. My goal is to have 3-4 sources. All passive.

Then you can use say one source to do things like what your father is doing. If it goes belly up, it's not that big of a deal. You've got other sources of income coming in. To your question, as others have stated it's risky. Especially in your 60s. If he were say 25 I'd have a different opinion.
 

Mai72

Diamond Member
Sep 12, 2012
8,674
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#21
^ great response. He left out the most important part. If he is just investing to maximize gains, just to play the game, he needs to step back and think about it.
One of the worst driving forces is to try and maximize inheritance. Children can make their own way, unless the child is disabled in some way.
Definitely disagree.

Why not be in the position to give back? It doesn't mean to give millions to your kids, but you could pay for their college. The reason kids get into trouble when they get a large inheritence is because no one teaches them about money. Giving a 20 year old a ton of cash is asking for trouble. But, if you can show them that money needs to be respected, and actually show how money works in our economy. Like compounding interest. Delayed gratification. Assets ve liabilities. And so on... Encourage them to read books on finance. The power of giving back.
 
Nov 8, 2012
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#22
Why you should have multiple soursec of income. My goal is to have 3-4 sources. All passive.

Then you can use say one source to do things like what your father is doing. If it goes belly up, it's not that big of a deal. You've got other sources of income coming in. To your question, as others have stated it's risky. Especially in your 60s. If he were say 25 I'd have a different opinion.
I think the main message is a diversified source of funds.

You can have 6 sources of income - but if all of them revolve around selling equity investments then they are all a lose lose. The main thing is that if and when a recession occurs during your retirement that you can pull funds from sources that don't require you to sell off equities at their reduced prices.

Point being, is another 2008 recession will occur in our life - the stock market will fall... and during that time, selling off stocks that were cut in half is the dumbest move you can make. The smartest move you can make is find cash through other means such as social security, cash, savings, bonds, etc...

All of this is a dumb conversation though - because there is no question that as you get older you need to reduce your volatility. Period. A decent rule of thumb for someone that isn't informed on investments would be that your percentage in stocks over bonds should be roughly equal 100 minus your age. Thus if you are 60 you should only have a max of 40% in stocks. See: https://www.investopedia.com/articles/investing/062714/100-minus-your-age-outdated.asp
 
Nov 21, 2001
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#23
Definitely disagree.

Why not be in the position to give back? It doesn't mean to give millions to your kids, but you could pay for their college. The reason kids get into trouble when they get a large inheritence is because no one teaches them about money. Giving a 20 year old a ton of cash is asking for trouble. But, if you can show them that money needs to be respected, and actually show how money works in our economy. Like compounding interest. Delayed gratification. Assets ve liabilities. And so on... Encourage them to read books on finance. The power of giving back.
I'd pay for the college up front. That's not inheritance, that's taking care of business. If you do a good job with your children they will not need an inheritance.
 
Apr 8, 2002
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#24
For the past 5 years my dad has been investing according to the teachings of Investors Business Daily and MarketSmith. I don't know much about these, but it appears to be entirely technical in nature, looking at trends on graphs and numerical metrics and such.

He's seen really good (40%+ YTD) gains on his stocks, and even 300 - 400% on some individual stocks, but here is his portfolio:

0% bonds.
30% aggressive tech mutual funds
70% in ten tech stocks (mostly enterprise software)

My parents are both retired and my dad is doing all the investing. When I ask him about any individual stock he has no idea what they do or any of their business plans or their competition or details of the industry they're in. He simply says that they're rated very highly in MarketSmith and he buys based on the metrics it gives him. He never talks in terms of "why" a certain stock is doing this or that but only in terms of how much it has grown.

Anyone have any experience with MarketSmith and such? I don't know anything about individual stock investing but the common wisdom, especially for retired folk, is to be very conservative and even active investors who understand the businesses they invest in don't do as well as a simple index fund. What my dad is doing sounds very risky. Everything he is investing in is doing well, but... the entire *market* is doing well.
If they are close to retirement time to be loading up on safe investments that arent so volatile. And he isnt diversified at all if all his money is in tech.
 
Feb 25, 2011
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#25
It's his money, not yours; he's allowed to die broke if he wants. So your worrying is kind of a secondary thing. Also, there are limits to what you "owe" him vis a vis financial support, especially if he screws up.

But if he's only 68 and he's in good health (and your mom is in the picture) he should probably be planning like he's going to live to be 90 and not risking 70% of his assets in stocks. That's super-dangerous.
 

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