Safe place to put money for a 4% return

[Rob Base 2.0]

So a retired friend of mine asked me for recommendations for a relative safe place to get s 4% return. He has over $100k to invest (this is his minimum, if he likes it he will invest more).

With my military retirement $$ I haven't worried too much or researched to much about "safe" investments. I been more into risk so nice I figure my retirement check is "safe" I can take more risk.

I appreciate any advice.

Thanks

[Deleted]

Pretty sure there is no safe 4% return in today's interest rate environment. I think there might be some long term CD rates in the twos. Gonna have to take a bit of risk for 4%.

[phil5185]

a relative safe place to gets 4% return

It doesn't work that way - the rule is 'risk and return are directly proportional'.   'Safe' places are designed to track inflation, you get safe storage of money where your purchasing power is maintained -  savings accounts, CDs, money markets, etc - things that return 0.5% to 1.5%.

If you want a return that outpaces inflation, you must select an investment that has risk. Ie, to get a 4% return, you need to take a 4% risk - for an 8% return you need to take an 8% risk, and so on.

Common investments in the 4% to 5% range are Bond Index Funds (such as Fideliy's FSITX) and Vanguard's GNMA Fund (VFIIX). Both have a fairly short duration factor, 3 to 4 years, that makes them 'safer' against a 'down' bond market (and that added safety limits their returns.)

[Rob Base 2.0]

That's why I said RELATIVELY safe.

[Deleted]

Mar 26, 2017 13:15:49 GMT -5 Rob Base 2.0 said:

That's why I said RELATIVELY safe.

I'm aware.

If you take advice back to your friend I would use the term "lower risk" rather than "relatively safe".

[hoops902]

The problem with "relatively safe" is "relative to what?".  Does "relatively safe" mean "only goes down if the US government itself defaults" or does it mean "6/10 years it's going to get a decent return"? Also, a 4% return over what period of time? You can be relatively safe that a market-tracking fund will get well over 4% average over 30 years, but you wouldn't have same safety assumption over 1 year.

Bond funds seem like the closest to what you're asking though. 

[busymom]

I'd suggest an annuity, if I didn't have to turn in my YM card.     Within the last week, I actually got an offer to purchase an annuity at a 4% return, or better, but I didn't take it.  I know some people who love them, but most folks I've talked to don't recommend annuities. YMMV


FWIW, Fidelity currently has a CD among the banks it represents that has a 2.85% return, but that's the highest I've seen in awhile.

[tskeeter]

Mar 26, 2017 22:14:57 GMT -5 hoops902 said:

The problem with "relatively safe" is "relative to what?".  Does "relatively safe" mean "only goes down if the US government itself defaults" or does it mean "6/10 years it's going to get a decent return"? Also, a 4% return over what period of time? You can be relatively safe that a market-tracking fund will get well over 4% average over 30 years, but you wouldn't have same safety assumption over 1 year.

Bond funds seem like the closest to what you're asking though. 

As interest rates go up, bond funds lose value.  The Fed has indicated an intent to increase the benchmark interest rate three times during 2017.  Looks to me that there is a very high probability that bond funds will be a poor investment over the next year or so.