Consider mutual funds
Mutual funds embrace a range of asset classes, offering the flexibility and variety to tailor and adjust your parents’ holdings based on their needs, objectives and tolerance for risk.
Here are some of the ways a mutual fund investment portfolio could be designed, based on specific needs and goals:
- Do your parents need more income to pay annual living expenses? For a lower-risk option, consider a fixed-income mutual fund that invests in government or corporate bonds that may generate a steady annual return. Learn more about mutual fund fees and expenses. (Be aware, though, even though it’s low, bond funds—like stock funds—carry risk and can lose money).
- Do they want capital appreciation for future generations? An equity fund is intended to deliver higher returns than fixed-income funds, though equities also carry a higher risk of loss of capital than bond funds. If your parents don’t need their investments for regular living expenses, equities may be the solution to help them grow their wealth and benefit loved ones or charitable organizations in the future.
- Do they want some growth—but with somewhat less risk? A conservative asset allocation fund may be the way to go. For example, the Thrivent Moderately Conservative Allocation Fund is designed to target 43% stocks, putting it more on the conservative investing side. When retired, many families take a conservative investing growth approach in hopes of maintaining their savings through the rest of their lives and to share with future generations.
Use this investing-style quiz to help you and your parents identify how their risk tolerance will shape the investments you choose.
While there are no guarantees on returns—and mutual funds do carry risk and may lose or gain money—they would allow you and your parents to spread the risk over numerous stocks, bonds and other investments. This diversification could allow returns on one investment to help balance or even outweigh a loss in another. While diversification can help reduce market risk, it does not eliminate it. Diversification does not assure a profit or protect against loss in a declining market. You also can change investment options and weights as your parents’ financial needs change. Consider working with a Thrivent financial professional to help with this strategy.
Whatever you decide, make it clear to your parents that you have their best interests in mind. And, be transparent in your dealings. Regularly review the performance of their assets and the options they have available and keep things as simple and clear as possible.