My father is 65 years old this month and he has about $150,000 spare cash lying around. What can he do or invest in with this $150,000?

Hi anon,

Assuming that these monies are over and above his emergency fund for expenses, you can consider looking at the following to invest the monies:

1. Ensuring that his CPF RA is at least at the full retirement sum so that he will get a decent payout from CPF Life

2. Annuities that provide a guaranteed stream of income

3. Bonds such as SSB which will give semi-annual coupons

4. Fixed income funds that can provide quarterly or even monthly payouts

5. Balanced funds that will provide quarterly or monthly payouts

6. Equity funds that will provide dividend payouts (usually quarterly at this point)

7. Dividend paying equities

You'll notice that I have listed them in order of what I feel should be the most important to achieve. Items 1 to 3 are risk free, whereas items 4 to 7 carrying increasing levels of risk. The best result will likely be a mixture of some or all of the items listed, but this must be done in conjuction with consideration for his overall portfolio of assets. For items 6 and 7, you might not want to put more than 10% of this $150K into it.

There are two ways to approach this:

Low Risk Assets

Since investment only yields non-guaranteed returns, we need to be careful on what we invest in. Generally, I will suggest for your dad to consider high grade bonds, or blue chips with proven track records for reasonable dividend yield.

However, so long as we invest the money, your dad needs to be prepared to lose his capital. Hence, we will need to manage his expectation here.

Annuity

Alternatively, he may consider a step-up guaranteed payout lifetime annuity that increases the rate of payout. Through such products, your dad is able to hedge his capital against inflation while enjoying high guaranteed payout itself.

Furthermore, this can be built in conjunction with his investment to create an overall financial portfolio that gives him the best of both worlds - protected against poor returns when market is down, and enjoying potentially higher return when the market is doing well.

Do not forget!

By the way, if your dad has not done so, do nudge him to consider doing comprehensive estate planning for himself. For instance, to set up a CPF Nomination and to draft a Will.

More details:

What is CPF Nomination

What is a Will

All these steps ensure that his portfolio will be well taken care of and will reach his intended beneficiaries.

Here is everything about me and what I do best.