This time I was asked what I thought of advice she gave in a Q&A a couple years back in Costco's magazine* Jan '05;
She's asked by a couple in their "late 40's" how to invest $2.5 million they netted from the sale of their home, they need at least $50K per year. All they add is they would like to live off the interest and/or dividends but retain the principal. Of course I understand that a profession would ask some probing questions and Suze, in a magazine Q&A format can't do that. Her advice? Now, before I tell you her reply, I'll quote from her Larry King interview some years ago;
ORMAN: There has never been a 10-year history in time, no matter when you bought -- so let's say you bought the day before the crash in 1987. Ten years later...
KING: You're ahead.
ORMAN: You would have had more money than in any other investment out there.
So, you're expecting that she'd suggest a mix of stock funds, leaning toward low cost index funds, and perhaps some bonds for the shorter term. Looking at what the couple has and needs and just taking the 'ten years later' line from Suze, I'm thinking that ten years' cash (i.e. bonds/CDs) would be $250K or 10% of their assets, maybe even a bit higher. But at 45 or 50, one is clearly a long term investor with a 40-50 year time horizen and should be loaded on stocks. Drumroll, please.......
She told them to invest 100% in muni bonds laddered from 1 to 7 year maturities. Did the world change, and I missed it? She did say some very good things on the show with Larry King, why did she do a 180 degree turn here? The difference to this couple between the muni bonds and a better, mixed portfolio is a difference in the millions of dollars 20 years hence.
Please take a moment to read my comments on Suze.
Until next time, JOE
*I've been accused of taking the question and Suze's reply out of context. Please read the entire Q&A at www.costcoconnection.com and judge for yourself.