Author Topic: How to Invest a lump sum if Planning to Spend within the Next Year  (Read 1978 times)

wilson2095

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Hi Everyone!

This will be my first post ever here so glad to meet you all!

I recently received a large-ish lump sum in the form of a bonus at work. However, I plan to spend it within the next year (I will be going back to school to get a MS). Putting it in the stock market doesn't seem exactly smart to me, but I hate to put it into a high yield savings only earning 1.4%. Any thoughts on this? My feeling is the answer is to just put it in the savings account, but I was wondering if there were more creative ideas out there.

Thanks,
wilson2095

trollwithamustache

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #1 on: February 15, 2018, 07:59:38 AM »
bitcoin?

:)

hodedofome

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #2 on: February 15, 2018, 08:02:55 AM »
Hi Everyone!

This will be my first post ever here so glad to meet you all!

I recently received a large-ish lump sum in the form of a bonus at work. However, I plan to spend it within the next year (I will be going back to school to get a MS). Putting it in the stock market doesn't seem exactly smart to me, but I hate to put it into a high yield savings only earning 1.4%. Any thoughts on this? My feeling is the answer is to just put it in the savings account, but I was wondering if there were more creative ideas out there.

Thanks,
wilson2095

No matter what you do, once you go outside of a bank account you are increasing your risk of loss in the short term. Over many years it's a much better decision to invest the money in higher paying assets (stocks, bonds) but over 1 year nobody can guarantee you a greater gain than 1.4%.

In any case, if you really want to, you could do a diversified portfolio of VTSMX (Vanguard Total Stock Market Fund) and VBMFX (Vanguard Total Bond Fund) in perhaps a 50/50 or 25/75 split and hope for the best.

It also depends on how much money we're talking about here. If it's $10k, it won't make much difference either way. If it's $50-100k, then yeah it could be worth it.

Mississippi Mudstache

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #3 on: February 15, 2018, 08:53:21 AM »
I've never bought individual bonds before, but aren't 6-month treasuries up to something like 1.8% now? It's not much of a premium above a 1.4% savings account, but it's something. I would steer clear of bond funds due to interest rate risk.

NoraLenderbee

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #4 on: February 15, 2018, 11:17:37 AM »
The stock market is for long-term growth, not for money you know you will need in a year. Use the savings account or find some CDs. Yes, the return is lower, but that is the tradeoff for the guarantee that the money will be safe and available when you need it.

saveysavesalot

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #5 on: February 15, 2018, 12:00:33 PM »
Can you put your schooling expenses on interest-free loans while you're in, and then pay off the lump sum once your grace period ends?  Just a thought.  That'd give you a longer investment horizon and more time to earn interest on your bonus money.

Rob_bob

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #6 on: February 15, 2018, 03:22:53 PM »
One year CD or Alley no penalty CD if you want it in less than a year.

aboatguy

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #7 on: February 15, 2018, 07:41:35 PM »
Navy Federal Credit Union has some decent interest rates on 12 month and 15 month CDs

uwp

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #8 on: February 16, 2018, 02:52:56 PM »
These questions seem to come up monthly or so around here.

There is no secret investment for short term cash.  If you are going to need the money in the next year, high interest savings accounts or CDs are the only solution that makes sense.

ePalmtrees

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #9 on: February 16, 2018, 02:57:59 PM »
I have my emergency funds in some high interest checking accounts. Consumers and Insight.

https://www.doctorofcredit.com/high-interest-savings-to-get/

Mr Mark

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #10 on: February 21, 2018, 06:28:08 AM »
It may be worth checking your local credit union if there is one. If it's FDIC insured, you might get a higher rate than the mega banks for a CD.

dabighen

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #11 on: February 28, 2018, 06:15:34 PM »
I like a balanced 60/40 stock/bond mutual fund called vanguard star fund.  It tends to be pretty stable and modest yields as balanced funds have both stocks and bonds that work against each other.

Hi Everyone!

This will be my first post ever here so glad to meet you all!

I recently received a large-ish lump sum in the form of a bonus at work. However, I plan to spend it within the next year (I will be going back to school to get a MS). Putting it in the stock market doesn't seem exactly smart to me, but I hate to put it into a high yield savings only earning 1.4%. Any thoughts on this? My feeling is the answer is to just put it in the savings account, but I was wondering if there were more creative ideas out there.

Thanks,
wilson2095

No matter what you do, once you go outside of a bank account you are increasing your risk of loss in the short term. Over many years it's a much better decision to invest the money in higher paying assets (stocks, bonds) but over 1 year nobody can guarantee you a greater gain than 1.4%.

In any case, if you really want to, you could do a diversified portfolio of VTSMX (Vanguard Total Stock Market Fund) and VBMFX (Vanguard Total Bond Fund) in perhaps a 50/50 or 25/75 split and hope for the best.

It also depends on how much money we're talking about here. If it's $10k, it won't make much difference either way. If it's $50-100k, then yeah it could be worth it.

rpr

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #12 on: February 28, 2018, 06:22:34 PM »
I like a balanced 60/40 stock/bond mutual fund called vanguard star fund.  It tends to be pretty stable and modest yields as balanced funds have both stocks and bonds that work against each other.

Unless another 2007-2009 happens, the star fund lost >30% from its peak. Depends if the OP is willing to take that risk.

dabighen

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Re: How to Invest a lump sum if Planning to Spend within the Next Year
« Reply #13 on: March 01, 2018, 07:11:02 PM »
I like a balanced 60/40 stock/bond mutual fund called vanguard star fund.  It tends to be pretty stable and modest yields as balanced funds have both stocks and bonds that work against each other.

Unless another 2007-2009 happens, the star fund lost >30% from its peak. Depends if the OP is willing to take that risk.

True it did, but it fell much softer than other higher equity funds.  I hedge this risk by holding a small portion of I bonds (15K) to hold me over until a recovery.  I was fortunate to have bought in 2008, luckily I was young and poor and only held a couple thousand which halfed but then kept buying for the next few years until I reached 6 months of expenses.  Now its grown to around $30K which is why I consider my emergency fund, which I will just keep reinvesting dividends forever.