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Mr. B is a widowed, sixty-nine year old retired machinist. His primary source of income is his social security check and interest earned on the $ 200,000.00 he has saved over his lifetime; which is currently in a savings account at his local bank. He is looking for a good investment that will provide him with safety of principle (low-risk), a reasonable monthly income to supplement his government benefits (high-yield), and still have some money left to leave to his nephew when he dies…
Mr. B. is unwilling to take any large losses in his portfolio, so safety of principle will important. He needs a good return to provide monthly income and supplement his social security, and is willing to erode the principle somewhat over the next twelve years of his life expectancy. Accordingly, our fund search will focus on bond funds, as there is no need to consider higher risk investments in the international or growth stock sector. Since Mr. B. has neither the risk tolerance level nor the need to grow his portfolio, we will search for a managed bond fund that has low expenses. As for tax consideration, Mr. B. is currently in a low tax bracket and is looking for his money to provide the highest dependable return. Accordingly, he does not require a sophisticated tax strategy using municipal and other tax-advantaged investments.
The screening criteria are: High-yield bond, average manager tenure for the category, no-load funds only, category average fund expenses, four or five star rating from Morningstar, and a Morningstar risk level of below average (Morningstar, 1). ...
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