Hi all. I need a few suggestions for what Vanguard fund to use as a "starter fund" in a taxable account. Looking primarily for protection of principle with some growth.
Background: I have had about $10k sitting in an "emergency fund" combo of MM and CDs for years...which I have rarely ever touched. While doing my 2013 taxes I realized I found more money walking my dog than I earned in interest from these accounts last year. (In addition to the normal pocket change I find, I also found three $20 bills last year!). So, I would like to take about $5k of my EF and put it into a Vanguard fund with additional bi-weekly contributions of $200 thereafter (or, $5,200 additional/year). I don't have a specific goal or time frame in mind for this money. That said, I am more interested in protecting the principle than growth.
Reason: I might (60% probability) need to play the "Bank of Dad" in 2 - 7 years to help out my son with a down-payment on a house or otherwise get himself established in the world. Currently, he works PT minimum wage and pays towards his education (and his xBox addiction). I pay his tuition; he pays for books, gas, and whatever else...be it lunch, games, or a new laptop. He is saving a little of each paycheck....but basically has no debt or assets at this point. His mother is not in the picture at all.
My own financial situation is solid. Happily divorced, secure job, excellent health, and no debt with the exception of primary mortgage which is currently on track to pay off concurrent with my minimum early-retirement age. My car is an almost Mustashian VW Passat wagon with 105k on the clock that I paid off years ago and which will likely last another 7-10 years. I have money 'stashed in my retirement accounts now and contribute the max to TSP (80/20 AA) and a Roth account (100% VTSAX @ Vanguard) each year. All in all, I am on track to retire at 57 with a bit over seven figures 'stached (conservatively calculated) and a sizable pension.
To the point: I have been looking pretty hard at the Vanguard Target Retirement Income Fund (VTINX) for this money. It is comprised of 70% bonds and 30% equities and historically has slightly higher performance (due to greater equity exposure) than the 60/40 conservative life strategy fund (VSCGX). I know that having bonds in a taxable account is considered a poor tax move, but again, I am more concerned with protecting the principle than paying a few percentage points in taxes. (I am in the 25% bracket.)
Once my son finally spreads his wings and is solidly in flight I will probably just change this fund to VTSAX and let it ride until I retire. My question is what to do between now and....7-ish years?....from now when he is flying steadily (more or less) on his own power.
Thanks in advance, OlDogface