Author Topic: 3-8 year investments  (Read 1049 times)

RJC

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3-8 year investments
« on: December 17, 2018, 06:45:04 AM »
Where do you put your money for the 3-8 year mark? I know savings/money markets for short term and equities for at least 10 years, etc. What about something intermediate that would be somewhat easy to pull out for large purchases (e.g. new business, home, etc.).

Thanks!

jc4

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Re: 3-8 year investments
« Reply #1 on: December 17, 2018, 08:05:59 AM »
I just stick it in betterment. That might be considered a wrong answer around here. But here's how I look at it.

Yes, I could lose over that timeframe (say 3 years). But I'm young, so I should have many 3 year time frames to invest and if I make it a long term policy, then I should have plenty more short term periods where I'm up than down.

I'd also be prone to find a way to leave it in if there's a crash.

And it's always with smaller amounts (<$50K). I'm not sure if I'd do the same with $200K+ sums, but I also don't know how I'd have a use that quick for that much cash unless I get into buying investment properties for cash. But now I'm starting to get away from your question.

TLDR: Betterment

matchewed

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Re: 3-8 year investments
« Reply #2 on: December 17, 2018, 08:39:23 AM »
If you can be flexible on the time frame then you can go for equities in some taxable account. If you cannot be flexible in the time frame then go for a savings account of some sort.

The flexibility is another form of how liquid do you need the money and what level of risk are you willing to take?

If you need to act fast to secure whatever asset you need to buy then selling stocks may not be awesome. Also if you need the money to score a sweet deal on that house or business that just became available, did it become available due to a general market downturn of sorts? Are you exposed to it as well and no longer have the funds?

No one can really answer this question for you because the answer is... it depends on your particulars, not your generalities.

RWD

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Re: 3-8 year investments
« Reply #3 on: December 17, 2018, 08:44:18 AM »
There have been quite a few discussions on Betterment on these forums, a lot of them negative.

3-8 years is a pretty wide range. For the shorter end savings accounts (e.g. Ally) or CDs should be fine. If you're not sure you're going to use the money within five years though you're likely better off investing it in equities. Equities are still easy enough to liquidate if necessary, you just have to be okay with taking a loss if it's an emergency. But it does come down to your personal situation, as @matchewed states.

RJC

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Re: 3-8 year investments
« Reply #4 on: December 17, 2018, 10:08:49 AM »
I just stick it in betterment. That might be considered a wrong answer around here. But here's how I look at it.

Yes, I could lose over that timeframe (say 3 years). But I'm young, so I should have many 3 year time frames to invest and if I make it a long term policy, then I should have plenty more short term periods where I'm up than down.

I'd also be prone to find a way to leave it in if there's a crash.

And it's always with smaller amounts (<$50K). I'm not sure if I'd do the same with $200K+ sums, but I also don't know how I'd have a use that quick for that much cash unless I get into buying investment properties for cash. But now I'm starting to get away from your question.

TLDR: Betterment

When you say stick it in Betterment, what does that mean? I thought Betterment was a platform, not a fund/holding.

RJC

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Re: 3-8 year investments
« Reply #5 on: December 17, 2018, 10:14:28 AM »
If you can be flexible on the time frame then you can go for equities in some taxable account. If you cannot be flexible in the time frame then go for a savings account of some sort.

The flexibility is another form of how liquid do you need the money and what level of risk are you willing to take?

If you need to act fast to secure whatever asset you need to buy then selling stocks may not be awesome. Also if you need the money to score a sweet deal on that house or business that just became available, did it become available due to a general market downturn of sorts? Are you exposed to it as well and no longer have the funds?

No one can really answer this question for you because the answer is... it depends on your particulars, not your generalities.

Good point. My hope is that there is something out there that is better than the ~2% in savings/money markets and less volatility of being in the stock market.

RJC

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Re: 3-8 year investments
« Reply #6 on: December 17, 2018, 10:21:37 AM »
What about putting the money into bond markets? Less yields than stocks but not as volatile?

OurTown

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Re: 3-8 year investments
« Reply #7 on: December 17, 2018, 10:54:36 AM »
Fidelity US Bond fund has a 10 year average of 3.63.  The 5 year average is 1.99.  In a taxable fund, you will pay taxes on the dividends as they pay out.

Fidelity Intermediate Muni Bond Fund has a 10 year average of 3.72 and a 5 year average of 2.66.  No federal income taxes on the dividends. 

Past performance is not a predictor of future results. 

Radagast

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Re: 3-8 year investments
« Reply #8 on: December 18, 2018, 10:06:14 AM »
This is the hardest period. If you are going to be continuously adding money it's okay to be 100% stock up to 10 years out, then subtract 10% for every year under that (rule of thumb).

Vanguard makes  stock/bond funds in 20/80, 30/70, 40/60, 60/40, 60/40 tax managed, 80/20, and the Wellington/Wellesley types. You can also use intermediate term corporate bond or high yield tax exempt to get a relatively safe investment that approximates a more conservative balanced fund.

There are also DIY options. Use a 60/40 US/Int'l stock allocation, and subtract 10% for every year under 10 years to do a custom glide path. Use a single date treasury STRIPS bond maturing in 3-10 years so that your bond allocation will automatically become safer as your date approaches and keep buying that same bond CUSIP.