Flood Insurance – A Post-Harvey Revisit

Like everyone with a home mortgage, I have homeowner’s insurance that covers most catastrophes, although the list of covered catastrophes specifically does not include flooding.

flood_insuranceOccasionally I worry because my house backs right up to the San Antonio River. Fortunately, my yard and house are outside the boundaries considered to have a 1 percent chance of flooding per year, the so-called “100-year flood plain.” So up until now I’ve never had flood insurance, nor have I been required to have it by my bank.

There was a bit of weather recently in Texas you may have heard about, which got me thinking again about flood insurance, and also about how reliable our current risk-assessment methods are.

As a financial rule, I’m usually in the “don’t buy too much insurance” camp, urging people to self-insure whenever possible. Or as the French might say, I adopt an “après moi, le deluge” approach to many insurable risks.

Flood insurance, however, might be in the special category of things for which self-insuring doesn’t work as well. Meaning, even though my house sits outside of the 100-year flood plain, I really cannot afford the unexpected but catastrophic loss of my house due to flooding.

I called up my insurance provider this past week to get a quote on flood insurance for my house. I learned a few things.

I received an annual premium quote of $499 for up to $250,000 in damage to my house, plus an additional $100,000 for personal belongings, subject to a $1,250 deductible in each loss category.

Interestingly, I learned my insurance provider is acting not as the underwriter of flood insurance, but rather as a broker for the federal government’s National Flood Insurance Program or NFIP administered by FEMA, the Federal Emergency Management Agency. [LINK:]

In fact, everyone has to go through a private insurance company to get this federal flood insurance. Almost nobody gets private flood insurance.

I mean, there’s also a private market solution, but barely. I went to one provider online and entered all my data to match the quote I got from my regular insurance provider. The annual premium would be $3,219. So, more than 6 times as expensive as the FEMA quote. With that difference, you can sort of see why the federal government dominates the market.

Matthew Hartwig, a spokesperson for insurance provider USAA, told me that their flood insurance call volumes rose up to 9 times their regular rates before, during, and after the landfall of Hurricane Harvey. Customer inquiries even now continue at a higher than normal rate.

Unfortunately, none of those flood insurance sales in late August and early September can help Hurricane Harvey victims, because of a 30-day wait rule, before recently-purchased flood insurance becomes effective. Buying now only helps for the next flood.

Interestingly, engineering and flood risk specialists are in the process of re-evaluating how we deal with flood risk these days.

The old way of risk assessment is to simply map out whether a property is, or is not, in a 100-year flood plain.

Patrice Melançon, Watershed Engineering Manager for the San Antonio River Authority, described to me at least a few engineering discussions underway in the wake of Harvey.

She cited her counterparts in Houston who are actively discussing whether the right level of “risky” should be to look closely at properties previously considered to be in a so-called “500-year flood plain,” or areas that have only a 0.2 percent chance of flooding per year.

harvey_floodingOf course, a common-sense reaction to that news is to wonder whether things have changed, possibly due to climate change, such that previous rainfall data informing the 100-year flood plain is no longer accurate in 2017.

While FEMA still relies on maps that show the 100-year flood plain, they are developing – in conjunction with local partners like SARA – a more sophisticated set of maps that show the likelihood of flooding within 30 years, as well as the probabilistic severity of flooding inside and outside the 100-year flood plain, The new maps are “informational” and “consultative” rather than being used for regulatory purposes like the 100-year flood plain maps, but nevertheless represent the next level of risk-analysis.

I’ll be checking out those new maps. Even now, about 25 percent of flood claims occur on houses located outside of a flood zone. That’s on houses that are deemed safely outside the flood plain, like mine.

Finally, Melançon mentioned to me that SARA expects to receive, in another 3 or 4 weeks, updated computer modeling and analysis of what would occur if Harvey-level rainfall dumped on the city of San Antonio. I’m pretty interested in those results too.

Personally, I don’t want to pay $500 to protect against a thing that’s never going to happen.

On the other hand, a “thing that’s never going to happen” just happened all over the city of Houston and in towns up and down the Texas coast. And four different Category 4 and 5 hurricanes were never going to make landfall within four weeks of each other until Hurricanes Harvey, Irma, Jose and Maria actually smashed all normal expectations of weather patterns.

nuclear_bomb_explosion
Not covered in your homeowners insurance policy

So, yeah, we’re buying flood insurance.

As a scary epilogue to this story, you know what else is not covered by regular homeowner’s insurance? Property damage due to nuclear war. And I know that’s never going to happen either, right? Anyway, enjoy your morning coffee with breakfast, everybody.

 

A version of this post ran in the San Antonio Express News and Houston Chronicle.

 

 

Please see related posts:
Insurance Part 1 – Risk Transfer Only

Insurance Part 2 – The Good, The Optional, and the Bad

Insurance Part 3 – Life Insurance Calculations

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Risk and Uncertainty and Heuristics

riskI’ve become very attached to the “Five Year Rule,” which is my consistent rule-of-thumb answer to the question: Should I invest in stocks?

Five Year Rule

How does the Five Year Rule work? I answer the “should I invest question” with a question of my own.

Will you need the money in less than five years? If yes, then you can’t invest in stocks.

If no, then you should invest in stocks. It’s that simple.

I find this works better than more sophisticated approaches precisely because the stock market is just too darned uncertain for my little brain to comprehend.

A Risky World

Donald RumsfeldFormer Defense Secretary Donald Rumsfeld infamously quipped

“There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”

And although this sounded at the time nearly like a particularly strangled Dr. Seuss poem, and Rumsfeld stated it at a difficult point in the lead-up to the 2003 Iraq War, he had a point there.

Despite the guffaws at Rumsfeld and the catastrophe of that particular war, as an epistemological statement, I’d like to offer my thumbs-up to Rumsfeld.

A simpler but similar phrase – often attributed to Mark Twain – goes like this:

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

We all need better ways of sorting through what we know and what we don’t know, We need help with risky and uncertain situations.

Risk Savvy

I recently finished a book called Risk Savvy by Gerd Gigerenzer, a theoretician of decision-making who provided some of the research behind Malcom Gladwell’s better-known book Blink.

Although I don’t recommend Risk Savvy overall, Gigerenzer makes in important distinction between situations involving “risk” and other situations involving “uncertainty.”

Risk vs. Uncertainty

Decisions involving risk, I understand, are ones in which we try to reasonably calculate the chances for success or failure based on a set of known probabilities, and we act accordingly. My regular poker game with the neighborhood dads follows the logic of “risk” decision-making. I put my $20 into the kitty, and then I place bets based on reasonable guesses about what cards may fall and what my fellow players hold in their hands.

Risk management in this situation has to do with calculating odds, placing appropriate-sized bets (and also possibly limiting my alcohol intake.) I find this enjoyable, and to a degree, easily-managed risk.

Incidentally, to give you a sense of my poker track record, my youngest daughter collectively calls the neighborhood dads “the bad men who take Daddy’s money.”

The uncertainty of this situation, in the Gigerenzer sense, however, is distinct from the risk. It arises not from the cards, probabilities, and bets but rather from the chance that one of the neighborhood dads suffers a psychotic break and decides tonight is the night to upturn the table, grab the kitty full of twenties, and make a mad dash for the Mexican border.

poker_riskThat hasn’t happened yet, thankfully. But it would certainly fall outside the expected risks I thought I was taking when I showed up on any given Sunday night. “Uncertainty” in my example arises from risks I didn’t know I was taking. In a Rumsfeldian sense that neighborhood dad making a run for the border might be an “unknown unknown.” It’s hard to plan for that kind of thing.

Back to Stocks

As a student of the markets, I believe deep skepticism about whether we understand the risks we take is extremely helpful to keep top of mind.

We can approach a risky situation like the stock market, for example, with a scientific risk-management mindset. We try to solve the (known) unknowns. We calculate a firm’s past profits and model an estimate of its future profits. We estimate the effect of changes in interest rates and exchange rates. Growth curves. Technological changes. Management styles. Marketing strategies. Competitor analysis. Insider holdings. This is the stuff of the business section of all newspapers, magazines, television shows and blogs. All of these are known risks for any individual company and therefore any individual stock investment. And I would argue, deep knowledge of each and all of these risks might be nice, but sadly still leave you with woefully incomplete information. You still haven’t covered all the uncertainty.

No risk models in the world prepare you for commercial airlines to hit towers in a clear blue sky day in New York City. The model still won’t warn you about the following month, when Fortune Magazine’s winner of “America’s most Innovative Company” – 6 years in a row – will evaporate $74 Billion in shareholder value (Enron.) Or that that same month of October 2001 a product launch (iPod) by a tired, has-been tech company (Apple), is the key first step toward its future as the most valuable stock in the world.

Two faulty approaches we humans take in the face of all this uncertainty are 1. To avoid the uncertainty altogether and 2. To build increasingly complex models.

Avoiding the stock market altogether would be a shame since it’s one of the best tools for slowly building wealth over a lifetime.

Gigerenzer, the author of Risk Savvy, offers a helpful corrective to the traditional risk-management style of building increasingly complex models for calculating all the risks.

Hueristics

Gigerenzer’s advice is to substitute simple heuristics – also known as “rules of thumb” – to give you pretty good results in the face of extreme uncertainty.

Without knowing it, long before I read Gigerenzer, I’ve been cleverly substituting my Five Year Rule for all that fancy financial modeling. Not only are the market risks incalculable, the unknowns are really just too great. We probably don’t even know the things we don’t know.

The thing I can control, and that I do know, is whether I’ll need my money back within five years. If yes, I don’t put it in the stock market.

If I don’t need the money, well then, cowboy up!

A version of this ran in the San Antonio Express News

Please see related post

 

Book Review of Risk Savvy by Gird Gigerenzer

 

 

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Book Review: Risk Savvy by Gerd Gigerenzer

Gerd Gigerenzer wrote Risk Savvy: How To Make Good Decisions in the spirit of Nate Silver’s The Signal and The Noise, and Innumeracy by John Allen Paulos. These latter books propose a “How To Think” while also proposing that people should be taught to think differently, and stop making epistemological errors.

Distinct from The Signal and The Noise, however, Gigerenzer has a strong respect for the value of intuition, which Silver tends to discount in favor of a “1. Hypothesis, 2. Data, 3. Revised Hypothesis” pure rational approaches.

Gigerenzer dedicates significant pages of his book to the value of intuition over rational approaches, and even authored a book called Gut Feelings.[1] (I haven’t read that, and probably won’t.)

Gigerenzer helpfully suggests that in a complicated world of high uncertainty, the best we can do may be to radically simplify our analysis by using rules of thumb. He’s proposing this in the face of a modern trend to build increasingly complex models for analysis, which may lead us to miss the big picture of uncertain risks.

Also distinct from The Signal and The Noise, I found Risk Savvy mostly tedious. It felt like an extended book version of anecdotes delivered to business school students or physicians or pharmaceutical executive retreats[2], and that’s not a good thing.

Gird covers a wide range of decision-making situations, from health-care to restaurant menus to investments and romance. I read the investments section carefully, intrigued by the promise of one subchapter: “How To Beat a Nobel Prize Portfolio.”

gerd_gigerenzer

His conclusion – use simple rules of thumb and eschew complexity – obviously appeals to me when it comes to investments. His explanation of a “mean-variance portfolio” from Nobel Prize winner Markowitz, and a comparatively better and simple portfolio known as “1/N” is terrible. He explains neither portfolio well, but glosses over what either of these would look like. Up until that point in the book, I had wondered what explained my simultaneous confusion and boredom by Gigerenzer’s book.

After reading his investments section, I realized he’s bad at explaining important but complex topics, while at the same time inundating his audience with dumbed down anecdotes gathered from his lectures to business people who want complex-sounding concepts without real substantive explanations.

Like Malcolm Gladwell, but much less interestingly written.

risk_savvy

Please see related post:

Book Review of The Signal And The Noise by Nate Silver

Book Review of Innumeracy by John Allen Paulos

 

[1] I gather Gut Feelings built on Gigerenzer’s good fortune that Malcolm Gladwell’s drew upon Gerd Gigerenzer’s research on the value of intuition for his popular book Blink. I further gather that Gigerenzer has produced important research in the field, and that I’m reading the popularized version of Gigerenzer’s research.

[2] Gigerenzer frequently cites talks he’s given to these groups throughout the book. The “I was giving a lecture to this group…” doesn’t make for a compelling anecdote.

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Ask An Ex-Banker: 100% Equities Even In Retirement?

retirementHi Michael,

I enjoy and look forward to your advice every week. I am about to do as you (and a lot of other smart people) recommend and move our investments to several diversified equity index funds. My question: would you still suggest no index bond funds for someone in our age bracket? I am 71, and my wife is 65. We have a comfortable railroad pension and this year I started my Required Minimum Distribution (RMD.)  We have modest money to transfer ($145,000) from Morgan Stanley to I was thinking Vanguard.

–Bob in San Antonio

Thanks, Bob for your question, which refers to my recent exhortation that 95% of people should have 95% of their money invested 95% of the time in diversified 100% equity index funds, and never sell.

The quick answer to your question is yes.

I still would give you the same advice, although with a few caveats. The first caveat of course is that this advice is free, and you get what you pay for!

Also, I don’t know your full situation so I’ll make base-case scenario assumptions and you can fill in the details. The key to the choice to remain 100% in equities (instead of bonds or some other fixed income) is your time horizon. Above a 5-year time horizon (my minimum for ‘investing’) then people should be in diversified equities rather than ‘safe’ bonds or savings.

Now, you are 71 and your wife is 65, which puts your expected remaining lives (according to this Social Security actuarial table) at 13.4 and 20.2 years respectively. Given the way probabilities work, you should want to maximize your investment account for 20 years or longer, at least to support your wife (who is likely to outlive you). If you have heirs, your time horizon will be longer than even 20 years, and might really be measured in many decades.

required-minimum-distribution table
Divide retirement assets by the divisor to calculate RMD

I’m assuming all along that you will not have to sell the funds in your account, and you won’t be spooked by market volatility, which can and will be substantial over the next 20 years. At the worst moments, sometime in the next 20 years, risky assets like stocks could lose 40% of their value from their peak, the sky will look like its falling (it won’t be), and you have to know yourself well enough to know whether you could stomach that kind of volatility without selling.

Pensions & Social Security act like a bond anyway

Another factor specific to your situation that makes 100% equities even more acceptably prudent is that your railroad pension looks and smells and acts like a bond. Meaning, it probably pays the same amount every year without any volatility, or maybe it adjust slightly upward for cost of living changes. Social Security works the same way. The fact that a huge portion of your income is fixed income and bond-like and safe and snug should make you even more comfortable with the idea that you can remain exposed to volatile equities.

Without your pension & social security – If you had only your equity portfolio to cover your expenses – you might be forced to sell some equities to cover your costs at an inopportune time, and then 100% equities would be less of a slam dunk.

Adjust for RMD?

Speaking of selling, the RMD could change your decision (and my advice) slightly.

You know you’ll have to withdraw some required minimum distribution (RMD) each year, based on the IRS rules and your expected lifespan. A reasonable case could be made that you should keep at least one year’s RMD in cash, since you know your time horizon on that amount of money is very short. Many reasonable people might advocate a few years’ RMD in cash for the same reason.

I think its just as reasonable, however, to decide instead to keep the account fully invested in 100% equities, betting that equities will outperform bonds more years than not, and that your twenty year time horizon still justifies the decision.

asset_allocation
I totally disagree with this suggested asset allocation

The deciding factor between these reasonable scenarios, in my mind, is how ‘comfortable’ the ‘comfortable railroad pension’ really is. If your lifestyle costs are fully covered by the pension, and the retirement account subject to RMD rules is just extra money, then you can think of that investment account as intergenerational money. If you have heirs or a favorite philanthropy to pass money to, for example, then the time horizon for your account can be measured in decades, and you should undoubtedly stay 100% in equities. I’m confident that with a 20 year time horizon or greater, there will be more money in the end via equities than there would be if you invested in bonds.

With plenty of interim volatility, of course.

Good luck!

Michael

 

Please see related posts:

Hey Fiduciaries: Is It All Financially Unsustainable?

Stocks vs. Bonds – the probabilistic answer

 

 

 

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Entrepreneurs: Pack Half the Luggage, Bring Twice The Money

A version of this post ran in the San Antonio Express News.

In late high school and college I travelled to Mexico as often as I could. Some trips I went for ten days, later trips for a semester of school, then a whole summer. Finally, after graduating from college, I lived and studied in Mexico for a year.

I always carried the student travel bible at the time, Let’s Go Mexico, whenever I crossed the border.

I memorized two pieces of advice in the Introduction to my Let’s Go Mexico book.

“First, lay out all of your clothes and other luggage you intend to take in one pile on your bed. Next to that pile, place all of the money you think you will need to spend.

Now, pack half the stuff and take twice the money.”

The second piece of advice from Let’s Go Mexico was of a similar vein, something along the lines of “Take no more luggage than you could – if necessary – carry at a dead run in the middle of the night for a mile.”

I loved that advice and it always – for me at least – put me in the right adventurous frame of mind for border crossing.

Advice for Entrepreneurs

I’ve written before that it helps entrepreneurs to be a bit ignorant and maybe a touch funny in the head in order to launch themselves into a new business venture.

Entrepreneurs are risk takers. They exhibit the kind of crazy that would enjoy situations involving a dead run for a mile at midnight on the streets of Juarez.

Lately I’ve thought about the Let’s Go Mexico advice, and how that’s exactly the advice I would give to first-time entrepreneurs.

Instead of luggage, of course, you have your business start-up costs.

First, in your business plan, lay out all of the costs of things you think you need to get started. Next to that, figure out how much money you already have available for your venture. Here’s the thing: To survive your first year in business, you’ll have to make do with half those things, and you’ll need twice the money.

Also, if luggage in my analogy equals costs, try to start your business with no more costs than you can carry at a dead run for a mile in the middle of the night. Ok, the metaphor doesn’t quite work. But I hope my point is clear(-ish.) Entrepreneurship is incredibly difficult, your business will encounter the unexpected, and you’ve got to be ready to pivot in a totally unanticipated direction.

Writing a Business Plan

I work on educational videos for a regional non-profit microlender LiftFund that offers training for new (and experienced) entrepreneurs. Writing a business plan is one of those things which every business owner does.

A couple of my videos walk folks through the different component parts of a business plan. What I want to say at the end of the videos, however, is that – no matter what your plan says – you’ll need to cut your planned costs in half and figure out a way to put your hands on twice the cash.

Mike_Tyson_Strategy
Business Guru Mike Tyson

Everybody’s Got a Plan

I guess the following is a true story, since I found it on the interwebs.

Boxing great Mike Tyson was peppered, pre-fight, with journalists’ questions, asking how he would respond to his opponent’s plan for delivering a devastating left uppercut.

Mike responded sagely “Everybody has a plan ‘til they get punched in the mouth.”

(In my mind’s ear, I always hear that quote in a high-pitched voice, the final word pronounced ‘mouf.’)

Anyway, the point is, an entrepreneur’s written business plan only gets you so far. Because, at some point, everything goes into complete disarray.

Metaphorically speaking, you’ll be bleeding from the mouth, running your business at top speed for a mile in the middle of the night, just praying you make it to safety.

So remember, you entrepreneurs: carry half the luggage, and bring twice the money.

 

Please see related posts:

Videos Playlist for Entrepreneurs – Learn Excel

Video for Entrepreneurs – Personal Financial Statement

Entrepreneurship Part I – Fixed Income v. Equity

Entrepreneurship Part II – Lessons From Finance

Entrepreneurship Part III – The Air, Taxes, Retirement

Entrepreneurship and Its Discontents

 

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Ask an Ex-Banker: How to Invest Unexpected Cash

A friend asked me recently for investment advice.  I sent her my thoughts by email but couldn’t resist making it into an “Ask an Ex-Banker” post.

Fear and Greed

Question:  My daughter got caught in the housing downturn and finally has sold her condo in NY but is too poor in this economy to buy a bag of chips, let alone a house in LA.  So she is trying to figure out what to do with the $90,000 left over after paying off student loans and replacing a broken car.  Do you have any suggestions for earning more interest?  K__ and I could use a suggestion as well, but none of us can stick it away for 3 years because as optimists, we are always hoping things will change.   Thanks.  Paula H., Sarasota, FL

 

Hi Paula,

It’s nice to hear from you.  Thanks for reaching out!

Sorry to hear about your daughter D’s housing condo mess, but, from a distance, my first thought is that it could have been worse.

Despite getting caught in the housing downturn, she came out $90,000 ahead – after student loans and a broken car – a victory.  It gives her a positive net worth, something most people in this country don’t have.

In my opinion, the first and only difficult thing about a pile of money like this is deciding whether you should put it in the ‘Risk’ or ‘No Risk’ investment bucket.

‘No Risk’ includes things like cash, a bank account, money markets, and annuities, while ‘Risk’ encompasses just about anything else, typically stocks, as well as real estate, and funkier investments as well.  We tend to assume lots of different flavors of ‘Risk’ investments, but I’m increasingly convinced all ‘Risk’ investments are fundamentally the same.  You can make money, you can lose money, but there’s no guarantee you’ll get all your money back when you need it.

If you decide on ‘No Risk’ then you should expect virtually no return, just the same amount of money available to you when you need it next.  If you decide ‘Risk’ then the investment could go up or it could go down in value, but, in the short run at least, there’s no way to know where you’ll end up.  The key advantage to dividing up the world this way – into these two buckets – is that it forces you to realize the illusion of having both safety and a good return in the same investment.  You can’t.  Anyone who offers you both absolute safety and a good return is lying.  Run away from them.

In your question you’ve already hit on the key answer/problem in your question: Timing.  If D might need the money within 3 years there’s no chance to earn a decent investment return, while also entirely protecting principal.

Earning a reasonable return right now, without taking risk, is impossible.  If you choose the safe approach, you earn nearly nothing – $900 per year, or 1% on $90,000 – which won’t buy much.   It’s hardly worth the effort of opening up the bank savings account.  Interest rates are on the rise now, but from such a historically low base that they’ve got a way to rise before return on traditional savings will be “worth it.”

On the other hand, investing it ‘in the market’ or in another risky asset like real estate means that your $90,000 could be a lot smaller by the time you try to actually get it back.  It very well might be larger too, but that’s just one possibility, not a guarantee.  If you have to have at least $90,000 when you want it back, then ‘Risk’ isn’t the right place to put the money.

So, now, to D’s particular situation.

If she’s a starving artist in LA, without a steady income right now, then it’s likely she’ll need to access at least some of that $90,000 in the short run, in less than 5 years.  To the extent she might need this money for living expenses anytime in the next 5 years, it needs to be in ‘No Risk.’  The return will be terrible, somewhere between 0% and 2%, but that’s just where we’re at.  It probably doesn’t matter where you invest.  Just stick it in a stupid bank savings account, earn the 0.9%, and be content.  Don’t even bother tying it up in a 2 year CD offering 1.9%, because it just doesn’t matter.  Another $900 per year won’t compensate for the fact that she can’t access all the money if she really needs it.

When would it make sense to invest in something Risky?  It depends on her time horizon for accessing the money.

Less than 3 years, no way.  ‘No Risk’ bucket only.

Over 5 years, start to lean towards Risky.

Over 10 years, put all of it in Risky.

If D’s music royalties or other income can reasonably cover her monthly expenses for the next 5 years, so she knows she doesn’t have to access the money, then it seems fine to pick something risky.  Put it in a low-cost, all-stock mutual fund and watch it grow.  Or use your real estate savvy to get involved in a rental building.

I wouldn’t bother with sexier higher-risk situations like oil royalties, film-financing, hedge funds, start-up businesses, or art unless she can blow the whole wad without missing it.  It might make 10X your money.  But it probably won’t.

Is there a course in between ‘Risk’ and ‘No Risk’ buckets?

Yes, for example, D may know she’ll only need a maximum of $30,000 to cover emergencies over the next 5 years.  In that scenario, make two allocations –  $30,000 into the stupid ‘No Risk’ bank account earning bupkis, and up to $60,000 in something that might earn a positive return over the long haul, like stocks or real estate.

The longer her $60,000 has to stay tied up in that Risky bucket, the higher the probability that the money will be larger when she needs it.  The key here, though – the really essential point – is to know ahead of time which money she can’t afford to lose because she’ll need it, and which money she can afford to risk, because she won’t need it, ideally until retirement.

For you and your husband K, the equation might be different.  I’m presuming you’re much more likely to have your monthly expenses covered in the next few years, so you can afford to make much riskier choices.  If you lost some of your $90,000 in a risky situation that didn’t work, you’re still less likely to depend on the principal for daily living.

Your time horizon for choosing risky investments is probably better than D’s.  For K and you, putting the money ‘in the market,’ or in a real estate opportunity seems perfectly reasonable to me, if you can weather the volatility.  It makes sense to me that you’d invest the $90,000 differently than D should.

I know I’m not giving creative investment ideas that offer both safety and good return, but the fact is that usually – and certainly now – we can get safety or good return, not both.

I hope this helps.

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