A long time ago I made a post indicating that my mother was going to give me some money to invest for her, which would also act as an early inheritance. I didn't really know what to do with the money, and had trouble balancing all the different issues (income vs. growth, taxation problems, etc.). I could only think of something like a Vanguard Managed Payout fund, which some posters justly pointed out was rather awkward.
I sent my mother some books (Bogleheads Guide, etc.), and after looking them over, she now has the courage to invest the money herself. She has asked me to help her set up a discount brokerage account at TD Trust and would like my guidance in selecting a small group of funds. I have no qualms about playing with my own money, but with my mother's, I am very worried about making mistakes. She will look over any portfolio decisions with an accountant/adviser, but first I (we) would appreciate your collective wisdom.
a) I will only be able to put about 15% of her money in a registered account.
b) She will probably only want to draw down 3% a year, with NO inflation adjustment. The money is not necessary and is just for travel, luxuries, etc. Her pension and rental income provide her with enough to live on.
c) Although she doesn't need the money, she does not want to see the money ravaged too much by inflation in the decumulation stage (thus the desire for some growth). However, if I have to go in any direction, I believe she would do better in a low-growth, low-volatility portfolio. Even though she could theoretically just take dividends from an all-equity portfolio, I don't think the volatility would be pleasant for her.
d) I don't want to slice and dice too much. I think she would feel much more comfortable with a small group of funds.
e) I would like to keep MERs low, but to a certain extent am willing to trade cost for psychological well-being. That is, I don't mind putting some money in a relatively expensive Claymore monthly dividend fund if any knowledgable posters indicate they find the monthly payouts to be reassuring.
Considering the above, I am looking for a portfolio that would provide better than 6% nominal return with moderate volatility. Would the following seem reasonable?
15% Canadian Bond index (iShares - XBB)
10% Cash/Money market fund/GICs (suggestions welcome)
15% Canadian preferred shares fund (Claymore - CPD)
25% Canadian equity fund (iShares TSX 60 - XIU, or XIC, or dividend fund - XDV/CDZ)
15% U.S. equity fund (Vanguard Dividend fund - VYM or VIG - inefficient, I know, but she feels more comfortable with some dividends)
20% World equity fund (simple world fund like Vanguard - VT, or a dividend/value fund like iShares - IDV )
Any comments or criticism are welcome.