My brother is a Veteran with PTSD. How can I increase his income and invest his modest savings?

Financial Planners

by Quentin Fottrell

‘Index funds didn’t bring in much income,’ says writer of letter

dear Quentin

My brother is a Veteran and is battling Complex Post-Traumatic Stress Disorder (C-PTSD). He has his 100% permanent disability certification and receives monthly payments from the government. He also received a small amount of money owed, but spent most of it on his rent and bills.

At this point, I only have a few thousand dollars left. A monthly stipend is enough to live on, but it is marginal and unlikely to keep up with the cost of living in an expensive city. With a Veterans Hospital nearby and our large (and wonderfully caring) family, leaving here is not an option.

He shares a house with relatives, which is not sustainable in the long term, so he has asked me to help him invest the rest of his outstanding balance. I’ve done pretty well with my own investments, so I agree to help him, but he’s worried that my experience is too limited. He needs both income and gratitude, but at the same time low risk.

To that end, we’ve selected a variety of dividend kings with as many ladders as we can to ensure that something is paid almost every month, and we’ve also selected closed-end funds (CLMs) that pay dividends at high dividends. It comes out every month.

That total is well below the minimum level most advisors are worth managing, and the CFP he spoke with just recently recommended an index fund. Index funds didn’t make much money. What resources would you recommend?

a nervous investor

dear nervous,

Establish a living income for your siblings, consider a housing assistance program for veterans, and determine your investment objectives. To build capital (brother’s nest egg) or to increase income to help a younger brother. Give him more peace of mind by having a more stable financial life. In other words, put together a long-term financial plan that takes into account all these moving parts.

Don’t be discouraged by the relatively small amount invested. A consumer education website launched more than a decade ago by the CFPB Board of Directors, is a convenient search engine for certified financial planners, with sections dedicated to helping veterans, medical services, and more. cites special economic benefits for Or low down payment mortgages, GI Bill education benefits, special legal protections, low cost investment opportunities, additional savings plans, cheaper life insurance and more.

President Biden signed the Veterans Compensation Cost of Living Adjustment Act (COLA) last month. This directed the Department of Veterans Affairs to make a cost-of-living adjustment for 2024 Veterans Benefits equal to the cost-of-living increase applicable to Social Security benefits, as outlined by the Social Security Administration. This is an annual bill passed with bipartisan support in both houses of Congress.

Bryson Roof, CFP of Harrisburg, Pennsylvania-based Fort Pitt Capital Group, said, “We agree that a passive index investment strategy is not a wise approach to getting your monthly paycheck back.” talk. “It is important to continue to focus on dividends and build up bond positions. Looking for companies with long-term upside potential while focusing on high-dividend stocks can help offset long-term inflationary pressures. (“Ladder” means buying multiple fixed income products from the same category that mature at different times.)

High-yield online savings accounts and Certificates of Deposit (CDs) are low risk and good timing. We are in an era of unprecedented rate hikes. “High-yield online savings accounts average an annualized yield of 3.3%,” said Carey Carbonaro, Senior Vice President and Director of Women and Wealth at Advisors Capital Management. “Our clients are currently locked in 5-6% CDs, treasury bills and government bonds for five years.”

She’s not a big fan of closed-end funds. “Closed-end funds often trade at a premium or discount to net asset value (NAV), meaning investors may pay or receive more than the fund’s assets are actually worth.” she says. “Unlike open-ended mutual funds, closed-ended funds are traded on a stock exchange and may have limited liquidity, resulting in wider bid-ask spreads and a It can make trading difficult.”

Close-end funds can use leverage to boost returns, and while borrowing may not be a red flag for many investors, it could increase the volatility of the fund and increase the risk of the brothers’ investments, Carbonaro said. added Mr. “Closed-end funds generally have higher expense ratios compared to other investment options such as exchange-traded funds (ETFs) and index funds, which can reduce overall returns over time,” she adds. rice field.

Dan Herron, a CPA based in Pismo Beach, CA, can help guide your company’s overall strategy. In addition to high-yield savings accounts, he has other offers. Some fixed-income index funds and ETFs pay monthly dividends, and dividend growth and high-yielding exchange-traded funds could give you exposure to stocks with a focus on dividend income.

Many balanced and income funds offer a combination of bonds and potential capital appreciation, Herron said. Ultimately, he added, you can choose any combination of these options. Bucket 1: “High-yield savings account — this will give you easy access to money and a good return.” Focus on earning income, then your distributions will be automatically credited to your checking or high-yield account.”

you are on the right track. Investing in individual stocks is a game of chance and not for the faint of heart. A person who bought Tesla (TSLA) or Apple (AAPL) stock 10 or 20 years before him should not use it as a template for his own investment plant. Making easy money always looks easy in the rearview mirror. Private investors who made big money on individual stocks got very lucky and invested with a long-term plan in mind.

Prudence and wisdom are good qualities for an investor like you. And I think that’s where the tension in your whining comes from.

And most importantly, thank your brother for his service.

Readers write to me with all sorts of dilemmas.

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– Quentin Fottrell

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(Closed) Dow Jones Correspondence

07/12/23 1214ET

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