Monday, September 24, 2007

managine a relatives money

Recently, a relative asked me to manage money for himself and his father. I'm a bit hessitent, but due to his situation, I see it makes sense.
I don't like being responsible for performance, but he just read part of All About Asset Allocation and seems to agree with the philosophy, which is what I would use.
He doesn't have much to invest ~ $16k and his father about $12k.
My thoughts are to put about 35% in bonds - need to find a non-taxed sheltered bond index fund - something that doesn't produce too much current income.
Then would put the rest in:

Large cap ETF
Value large cap ETF
European ETF
Asian ETF
(emerging ETF if non alot of overlap with the other 2)
Small cap ETF
Is there a small cap value etf?
Mght put small amount in a commodities ETF

Not sure of the asset allocation percentages yet.

I'm planning on putting the accounts in a low / free trade brokerage like Zecco. One account for my relative and the other for his father.

I'll rebalance annually.

He seems comfortable with using index funds and I've set his expectations for level of return. He'll have a longer investment window.

Has anyone done this before for a relative before? How do you manage it?

Regards, makingourway

PS He wants to completely forget about the money and have all dividends reinvested.


Wayne said...

Wish I had know about Zecco. I set up something similar but against Sharebuilder. Was looking for something inexpensive ($4 a trade) and somewhere that reinvested dividends. As for ETFs, highly recommend it and invested in the Vanguard ETFs. Did not buy any bond ETFs but instead went after specific sectors like REITS (VNQ) and utilities (VPU) in place of it.

Financial Choices said...

This is a tough one. After a death in my family a few years back I was heavily involved in some family financial decisions. Everything from a home, pensions and a brokerage account. It was a good life lesson in trying to not let your emotions get in the way of sound financial advise is to be cautious. Also, be up front about the potential for short term losses even if he has said "he will completely forget about the money"...Wish you the best..