It sounds like you're ignoring conditional probability here. Or perhaps you believe that the future performance of the stock market is independent of it's past performance. "Past performance is no guarantee of future results", right?
On the other hand, I would argue that stocks are now likely to go up BECAUSE they have taken a recent hit. It's reversion to the mean, if we define the mean as exponential increase. I would further argue that investors in general accept that definition of the mean.
You could think of it as a public service. There might be many other people in the same position as your mother. You would be helping them. For all I know, some people reading the posts in this newsgroup may have been considering investigating in that very same bank before you reported. Actually you could give the name of the bank and still be anonymous. But even if you do not, you should still be congratulated for bringing up the issue. You have already mentioned some names of stocks and mutual funds, and that has been helpful. And even if your mother has no interest in finance, it might be to her benefit to persuade her to read the replies you have received here.
I'm not sure what you two are arguing about. I don't exactly understand what you're saying.
I'm not sure what my mother should do. Here are some possible options and outcomes, that I can think of, for my mother and her trust.
If she doesn't change the holdings in her trust and the market doesn't go up for months or a year or more, my mother won't have a lot to live on. When the market recovers, the trust should regain its value. What is the possibility that some of the stocks or funds never recover?
If she sells some stock and puts it in a money market fund or a CD, she would keep that money from losing any more value; but is she risking never regaining her losses?
If she sells some stock and buys some bonds, she may not lose as much money as with stocks; and the money will be worth more when the market recovers than if she put the money in a CD.
Are these realistic possibilities and options? What do you people recommend?
Unless she is trustee of the trust, then these are not realistic scenarios. As a non-trustee, she would have no say in how the trust is invested.
Recipients of the income from a trust are often not the trustees of the trust.
Find out where a copy of the trust is and whether your mother is entitled to read it. If the other relatives and the bank refuse to share a copy or do not have one, then she would have to hire an attorney.
Yes indeed. And it won't be worth as much as it would be if she leaves it in stocks. If the market recovers, that is. If it doesn't, then she'd be worse off.
I don't see how it can be possible to know what courses of action are reasonable from the details you've provided.
How would that be helpful? There is a trust at said bank with 90 some percent invested in stocks and it has loss 50% of it's value. That's not that much different from the market overall. No one knows the term of the trust, so it would be jumping to conclusion to think that the bank mismanaged the account.
What she had in January is totally irrelevant. That's ancient history. The very phrasing of the questions is misleading you.
Don't think in terms of "recovering her losses". Think in terms of what is the best way to invest going forward. Key things to think about are:
1) How much she needs to withdraw each month to live.
2) How long is she likely to need it?
3) What is the best way to get that income with appropriate risk?
4) If you can't get that income over that time with appropriate risk, how does she reduce expenses to the income she can get?
5) Do you (or her) have any control over this anyway?
I did read today that the dividend yield on the S&P 500 has exceeded the interest yield on 30 year Treasuries for the first time since 1958. Of course, some of those dividends are at risk in this climate.
A senior's portfolio lthat is 99% in stocks mutual funds with loads is unusual to say the least. You are right; if the terms of the trust are unusual, that mix could be appropriate. But I must admit I find it hard to imagine at the moment what such terms might be. But whatever the case I can see nothing wrong with the OP disclosing the name of the bank and listing the stocks and mutual funds in question. And actually giving the terms of the trust would also be informative.
If a senior's trust portfolio is 99% in stocks, most observers, without further specific information, would tend to believe the probability of the mix being legitimate and suitable for a senior is rather small, while the probability of mismanagement and profiteering is rather large. Nothing would clear up the uncertainty like the facts I have requested above!
I haven't noticed any accusations. Why should one object to the name of a bank and a list of stocks and mutual funds included in a portfolio? If no misconduct is involved, why should such information be secret? Readers who may have opinions about how a financial institution should handle a senior's portfolio and what products are suitable can make up their own minds after getting that information!
Don, queries about this-and-that distract from the real problem, which here is not understanding what a trust is. A trust is not a "senior's portfolio." In general, the purpose of a trust for a senior is to ensure that (a) the senior has minimal control over the principal, and (b) the principal goes ultimately to someone else after the senior dies.
This thread so far has too many unanswered questions to go around pointing a finger willy-nilly. Right now, the only finger I would point is one at the OP for not getting the facts about the trust. I hope he will seek them soon.
Merriman had a market-timing system based on moving averages of fund prices, and wrote a book about it back in the 80s, called "Market Timing with No-Load Mutual Funds". And he managed money for individuals using that system for a long time. Apparently, he tried to open regular funds using that same system, but they didn't do well. They closed down those funds back in 2005.
I'm not sure when, exactly, he decided that what he'd been doing for 20+ years with respect to timing was no longer relevant, but for quite some time now, he's been a very strong proponent of buy-and-hold with a globally diversified batch of low-cost index or index-like funds.
His firm, Merriman Berkman Next still takes clients whose money they run using his timing system, as well as clients using the buy-and-hold strategies.
Whether his funds failed or not - or *why* one closes up a fund - is a different question. It's entirely possible that the funds didn't attract a large enough asset base to make it worth keeping them open. I have no performance data on them. But it's expensive to open and keep open a fund and without a sizeable critical mass of assets, operating an open fund may easily be a money-losing proposition.
All of which is entirely besides the point that may be made in quoting some of Merriman's firms research. His site is filled with excellent articles and advice.
Anyway, the now defunct Merriman Growth and Income Fund used to trade under the symbol MTBCX.
We do all understand that you are upset looking at the decline in value of the trust.
As a few have mentioned, you do need to get specifics. The stocks you mentioned are probably large / low risk / growth category. The funds seem to be oriented towards growth. The likelihood is that as the market recovers, the trust will recover, but that's no more than a guess. Does your mother withdraw dividend and interest income, only, and how much? Does she withdraw a set amount of principal periodically?
As another poster suggested, I recommend you get an attorney with some experience in trusts and their funding to advise you.
Great point about the dividend yield. It has been higher in the 20th century, always at market bottoms, and only twice above 8%. It was huge at the 1932 bottom (18% - no one wanted stocks - they were toxic assets before their time). I think in 1982 it was about 7%. (Data from _Conquer the Crash_, Robert Prechter, 2002.) (2002! He called the FNM FRE bust and Fed bailout, bank failures, and more. It's very clearly in print.) He cites the bond yield / dividend ratio as a main indicator. If I read the charts and his thesis correctly, when that falls to 1.0 or less, it may be an indication the market is undervalued. And the converse - e.g. it was above 8.0 in 2000. I hear bond yields are inflation adjusted negative today, and I don't know what that means for stocks!
To date this year, very few companies have cut their divs. Hope I'm not being a foolish optimist here, but I don't think we're heading into "another 1930's".The earnings are always the number to watch, since that sets the payout ratio.
Yes, and I hope he will share them with us and clear up some of the unanswered questions. Even if the main purpose of the trust is to limit present expeditures and pass on the money to heirs, rather than provide income for a senior, I would still have doubts about the 99% being in stocks and mutual funds. The portfolio of a young person who is comfortable with risk seldom is that extreme.
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