Author Topic: What to do with a $120K?  (Read 2365 times)

Prchawkeye

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What to do with a $120K?
« on: December 02, 2014, 02:48:58 PM »
Hi All,

Long time MMM reader but I'm fairly new to the forum. So up to last year I had been saving for a down payment on a house, but since then changed my mind and decided to continue renting. Using current rent vs. buy calculators and my current marital status (I'm single), I felt that I was better off renting.

Any now I have a big chunk of change (120K)sitting in a money market account earning less than 1%. My plan right now is to start a 5 year CD ladder with 75% of the money and putting 25% in prosper/lending club.

The pro's of this is this is that I will preserve principal and I believe also beat inflation (I estimate I will get a 4% annual return). Also, if I do decide to buy a house within the next 5 years I can sell my prosper/lending club notes and redeem my CD's and just take the penalties.

I'm interested if anyone has any other ideas for the money, keeping in mind that I will want to buy a house in the next couple of years but that I don't know exactly when that will be. Also feel free to blast holes in my current plan.

Thanks

Threshkin

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Re: What to do with a $120K?
« Reply #1 on: December 02, 2014, 02:56:19 PM »
Assuming you have a separate emergency fund and absent any other information on your financial status, i would put 100% of it into 2 or 3 different Vanguard funds.  Forget the CD ladder, you will not make jack squat in interest.  Lending Club is IMO a high risk option.

This presupposes that you are not carrying any debt that should be paid off first.

Prchawkeye

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Re: What to do with a $120K?
« Reply #2 on: December 02, 2014, 03:06:45 PM »
Yes,

I got all the basics covered, no debt, maxing 401k, have been maxing roth contributions (as long as my income allows me to), contribute to vanguard in taxable accounts with extra money....

I had considered dumping the whole thing into vanguard but it would make me sick if the market took a dump with the money I had earmarked for buying a home. I hear you with lending club, I'm very careful with that.

NoraLenderbee

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Re: What to do with a $120K?
« Reply #3 on: December 02, 2014, 03:30:03 PM »
Divide it up according to  your asset allocation plan? For instance, if your plan says 70% stocks, 25% bonds, 5% cash, allocate this chunk the same way.

Quote
(I estimate I will get a 4% annual return)

If you know of a CD paying 4%, please tell me where. :)

Prchawkeye

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Re: What to do with a $120K?
« Reply #4 on: December 02, 2014, 03:32:49 PM »
That's something to consider. Maybe consider putting CD's into my allocation plan to reduce the volatility.

The 4% return was the combined lending club (25%) and 5 year CD (75%) yield. I estimated 10% return on lending club and GE Capital has 5 year CD's returning 2.25%.
« Last Edit: December 02, 2014, 03:35:47 PM by Prchawkeye »

Threshkin

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Re: What to do with a $120K?
« Reply #5 on: December 02, 2014, 03:33:26 PM »
While a major market crash is always possible with a 5-year time horizon you will have much better odds of better returns on a diversified set of stock funds than on a CD ladder.