Uh oh! Your "little green employees" (the money you've saved) are in serious danger of being underpaid!
> The general consensus from what I have read is that money which might be needed within 5 years should not be invested.
That's terrible advice.
There is a popular myth (banks profit from it) that there are only two kinds of investments, (1) totally riskless bank accounts (that give you crap interest) and (2) the confusing, risky, but maybe profitable world of "investing" BUY BUY BUY SELL SELL SELL BULL BEAR PUT CALL RAH RAH
This is bullshit.
Investing and saving are two words for the same thing.
There are many kinds of investment aka savings vehicles. You have a lot of choices you don't yet seem to know about, that fit any level of risk and any level of expected duration till you need the money.
In your case, you have a bunch of money that you need for a specific period of time, but the period of time is long (more than a year).
Learn about bonds and other fixed income instruments.
Bonds are not like stocks. The interest rate is guaranteed. It's important, though, that you pick bonds whose "duration" matches the amount of time you plan to keep the money before you need it. That way, the interest rate is effectively guaranteed. Just like a CD, you may have to pay a penalty if you sell early. Unlike a CD, the penalty is fairer -- you can actually make money if you sell early and interest rates fell. Like a CD, the penalty is relatively small, and fear of this penalty should never be a reason to avoid investing in bonds. It should, however, be a reason to always select the duration you actually need, not be stupid and pick a longer duration because of attractive rates. (Those rates are attractive for a a reason.)
The only risk in bonds, therefore, is from credit risk -- risk of the bond issuer going bankrupt. So if you want absolutely no risk, pick someone who can't go bankrupt because they can legally print as much money as they want: the government.
If you want absolutely no risk, learn about US Treasury bills and such. Look it up. If you know you need the money in 5 years and refuse to accept any risk whatsoever, then don't waste your time on a CD from your merely FDIC insured bank. Go straight to the source of that risk-protection and deposit your money directly with the US government! Even plain old US Series I savings bonds are at about 1.9% right now, with just 3-months interest penalty for early redemption before 5 years -- and they include inflation protection.
If you are willing to bear a small amount of risk, then pick an issuer with a small risk of going bankrupt -- even better, diversify among several such issuers.
In other words, invest in a low-cost bond index fund whose average credit rating is quite high and whose duration matches your needs.
For example, VBMFX, Vanguard's total bond market index fund has an average duration of 4.57 years and returned almost 4% over the last year.
Over 5 years, that difference would add up to....
$100,000 in a 1.5% 5-year CD will become 107,728
$100,000 yielding 4% in a bond index fund will become 121,665
That extra $14k could feed, clothe, and house a Mustachian for a whole year in some locations.
And I haven't even mentioned tax implications -- The interest earned on US treasury instruments is state/local-tax free. (If you live in NYC like me, with high state and high city income taxes, that's nothing to sneeze at)
And municipal bonds can be free of federal, state, and local income taxes. Depending on where you live and how much you will be making over the next 5 years, this could make a big difference. Plain old CDs are fully taxed at state, local, and federal levels.
You also could probably stand more risk than that, and make and even higher return, while still keeping the overall risk quite low. Remember, if you're saving to buy a house, you have no idea _exactly_ what it will cost in 5 years. If there's a tiny chance you'll end up with 90,000 instead (or rather, with "only" $101,000 say, instead of the expected $135,000....) that's just not that bad a risk, and is probably worth the much higher rewards, no?
Oh, finally -- how about putting it in a Roth IRA? Then you don't have to pay ANY taxes on the interest!
Wait, but you say you need the money in 5 years, not at age 59 (or as early as you want to retire with the 72(t) rule), right?
No problem, you can withdraw the principal in a Roth IRA after 5 years! So put your $100k in, invest it, after 5 years you take out the principal
but the few dozen thousands you earned in interest have done so tax-free and can continue to grow tax free (and as you earn them you can shift them into higher-return, riskier investments since you only need the $100k principal to be safe in 5 years)
So you really have a lot of options that let you choose any risk and duration level you need and are comfortable with, and just sticking it in a CD is basically the worst option. 5 years isn't the minimum horizon for "investing", 2 months is.
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Disclaimer:
I don't really know anything. I just might have read something, somewhere, sometime.
Look up the facts for yourself. You may regret it if you don't.
My liability for you hurting yourself with my advice is limited to what you paid me for it, which is zero.