Dear Mr. Berko: 

My wife passed away 10 years ago, so I continued to work into my early 70s before finally deciding to retire. I have a generous retirement package, which includes royalties on several patents I own. I have no debts and a portfolio worth $2.7 million, which mostly consists of many of the stocks you’ve recommended and which I designed to provide a stable income and moderate growth through the ups and downs of the market. However, because of my retirement package and royalties, I can’t imagine that I would ever need any of the income or principal from this portfolio during my retirement years. It’s my intent that upon my death, the income from this portfolio (currently $111,000) will be divided equally among my three children after they reach a certain age and the principal will be left to my grandchildren after they reach a certain age to help them for their retirement years. Because it’s impossible to know whether AT&T, Exxon Mobil, Johnson & Johnson, Microsoft and Procter & Gamble will still be suitable investments 20 or 30 years from now, I need to know what to do with this portfolio before I’m gone. My attorney suggested that I direct that all the stocks in my portfolio be sold upon my death and have the proceeds be invested in several mutual funds to ensure a reliable source of principal growth and dividend income. 

J.S., Port Charlotte, Fla.



Dear J.S.: 

You’re right, Caesar; it’s impossible to know what’s coming 20 or 30 years from now. In fact, the coming decades will witness profound changes in world demographics, economics, technology and politics that will figuratively and literally knock your socks off. And in the process, the investment landscape will change so dramatically that AT&T, Exxon Mobil, Procter & Gamble, et al. may have less impact on our daily lives than the advent of another fly to a slaughterhouse. In a milieu where the amount of knowledge doubles every 18 months (and soon it will be sooner), the old yardsticks we used to measure investment performance, suitability and potential may become useless. Just 35 years ago, stalwart investments such as Polaroid, Sears, Zenith, Chrysler, McCrory Stores, New York Central Railroad and Eastern Air Lines were considered long-term blue-chip investments for portfolios seeking income and stable growth. And even though I believe that most issues in your portfolio have multigenerational staying power, I think you would be wise to make the following changes in your portfolio: (And they should be made after you pass so there are no capital gains taxes due when your shares are liquidated. )

Invest half of your portfolio in Vanguard, Fidelity, T. Rowe Price or a similarly large no-load fund group. I recommend investing in the following sectors with the following percentages of your money: biotechnology (10 percent), health sciences (10 percent), emerging markets (10 percent), real estate (10 percent), energy (10 percent), small-cap growth (10 percent), low-priced stock (10 percent), media and telecommunications (10 percent), large-cap growth (10 percent) and the Standard & Poor’s 500 index (10 percent). Those sectors will give the portfolio professional management and excellent representation across the critical components of the economy.

Then take the remaining half and hire a private trust company or bank to manage this portion. Most major banks employ a cadre of carefully chosen professional advisers and analysts to manage customer portfolios on a fee-only basis. These institutions provide portfolio continuity and trust administration for family generations, and their personal service and advice are often a cut above the best that Wall Street has to offer. I suggest you consider Sabal Trust. This private Florida trust company employs the high-quality professionals you would probably select to provide the portfolio management and trust administration services for your family. They’re serious money managers who build long-term portfolios. They’re easy-to-talk-to folks, and I think your progeny will be glad if you take this advice.