Investment Mystery Update
Posted on June 29, 2006 by Her and tagged investments
Thanks to our readers, I have been able to solve (partly, anyway) the mystery of an investment my grandmother set up for me.
Reader Claire (of Tired But Happy) commented,
I can see how you would want to avoid approaching your grandmother. Another idea would be to just call the brokerage firm. You wouldn't even necessarily need to speak to your g-ma's broker.
Great idea, Claire! I found the brokerage's phone number online and called it. I got the automated system which prompted me for my social security number. I punched it in, figuring my gig was up. But it accepted it, and prompted me to set my new password. I punched that in and was immediately offered to "Push 1 for account information." I did!
Since I didn't speak directly to a broker (I am trying to be as discreet as possible), I only got the basic information. The account is worth around $12,000 with the assets invested entirely in the Franklin Templeton Utilities Fund Class A (FKUTX). There have been no redemptions, transfers, exchanges or purchases. The system listed three recent distributions, each about $90, and said they were reinvested.
So, some of my basic questions have been answered. I now know how much the account is worth, what sector it is invested in, and how actively it is being managed.
Some questions are still unanswered. Most baffling is why it is invested in an income fund if my grandmother isn't taking the distributions as income.
Now what? There's the old adage, "Don't count your eggs before they hatch," and I'm pretty sure this account counts as an unhatched egg. Since my grandmother has never spoken of the account I suppose she may be counting on it as an emergency fund for herself. This is all fine with me. The most important information I have gained from all this is that I now know I am (potentially) over-invested in energy utilities. Without counting on her money specifically, I can "work around" it in regards to my retirement investments. I hold an energy stock in my Roth IRA (Ameren Corp, AEE), and surely own stock in energy utilities in the mutual funds in my 401(k). I am also over-invested in income funds. In addition to the FKUTX fund I also have shares in MFS Research Bond Fund A (), another income fund. At my age my portfolio should be weighted more toward growth than income. So my plan now is to dump these kind of investments in my retirement accounts and purchase more large cap mutual fund shares instead. Him disagrees with my logic, believing I should pretend I don't know about the possible windfall. What do you think?
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Alberen | Jun 30, 2006
Instead of investing in Income or Growth stocks I would really recommend putting most of your money in stocks that will go up in the future. But since you can't know which ones those are then at your age I would focus on Growth stocks.
Of course remember the story of the tortoise and the hare- can that teach us something about wise investing?
So now you know that your grandmother isn't taking money from the account, the distributions are being reinvested, but you have to pay tax on them. Does she have to pay part of the tax too? You could compare your 1099 to the distributions paid on the account.
It's probably in this fund because it is nice and safe.
Don't know why this is such a difficult topic to raise. You get the statements and pay the tax, so it isn't like some secret you aren't supposed to know about. You own at least part of this thing.
I'm glad my comment helped. :)
As for whether you should take the account into consideration in your overall investment strategy--I think that yes, you should to a limited extent. I certainly wouldn't put any more money into energy stocks, altho if you like the energy stock and it's not a good time to sell it, I wouldn't be too anxious to get rid of it just because of the Possible Future Grandma Windfall.
BTW, would I be too greedy if I asked you to link to my blog in your post above, since you did quote my comment?
Y'all are popular, and I want some reflected glory.
Sarah | Jun 29, 2006
I would just ask your grandmother. She may be more willing to talk about it than you think. I was hesitant to ask my parents about an account they have for my siblings and I, but one day I did and they were very willing to answer my questions. You seem to be treating this as top secret when you are paying taxes on it. I would just call your grandma to chat and bring it up. Don't feel greedy for asking. Your grandmother probably never thought to bring it up. Once you talk to her you will know if you should adjust your other investments. I wouldn't do anything until you find out more about the money and what your grandmother intends for it to be used for.
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