SMART MONEY: Performance is best measure of mutual fund holdings
DEAR BRUCE: How many mutual funds should I own? Currently I have eight. — Reader, via email
DEAR READER: The short answer is, I have no idea. First, it depends on how much money you have invested. If you have several million dollars, it may well be that eight is not a sufficient number of funds. Eight is a reasonable number to cover a fair amount of money. But if you have a relatively modest amount of money, then perhaps eight is too many.
The more important question is, how are the mutual funds doing? If some of them are doing well, I would stay with them. If you have one or two turkeys, it may be time to drop them and shift the money into the accounts that are doing well.
DEAR BRUCE: I am a senior citizen with only $10,000 remaining on my mortgage. My home is valued at $240,000. Between my income from investments and a small pension, I live comfortably, but there is nothing left for extras.
Would you recommend a reverse mortgage so I can buy a new automobile, or would you advise selling some of my stock to accomplish the purpose? — Retired in California
DEAR RETIRED: Much depends on how much money you have in your investments. The reverse mortgage would be the last thing I recommend, if you have other assets that can be converted into cash.
The notion of borrowing against the value of your home has a lot to recommend it. The older you get, the better deal you will get. However, it’s not the least expensive way to raise money.
Should you have sufficient funds, there is no reason you shouldn’t be spending principle into your senior years. It’s not realistic, although not impossible, to earn enough on your investments to allow you to spend a decent amount of the total (say 5 percent) and still not reduce your overall investments.
Until I know the rest of the story, it would be difficult to tell you which way to go. On balance, the reverse mortgage may be a useful tool, but it would be the last one to consider.
Send questions to firstname.lastname@example.org. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.
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