Author Topic: Safe Parking  (Read 2423 times)

pjm123a

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Safe Parking
« on: November 03, 2015, 05:46:46 AM »
I've read lots of good things about investing with Vanguard. I am about to receive a lump sum distribution check from a prior employer that will be transferred to a new Vanguard account. This lump sum is a pretty substantial amount (at least for me). It is being distributed as a traditional IRA roll-over. This is a direct distribution as the check is actually made out to Vanguard For Benefit Of Me. As indicated, I have already opened an account with Vanguard (current balance of zero). As part of the rollover Vanguard wants to know what the funds should initially be invested in. Specifically they are asking for "Clear instructions on how you'd like to invest the assets". So that is what I am asking for advice on here. I need some time to analyze things and figure out what to do. I am thinking of over time spreading things around various mutual funds. In the meantime I need a place to "park" this money in the Vanguard account. I'm looking for something with a low risk but some growth (even if it is not lot).

Any suggestions?

ShoulderThingThatGoesUp

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Re: Safe Parking
« Reply #1 on: November 03, 2015, 06:04:49 AM »
On average it's better to simply invest the lump sum in your preferred asset allocation than to parcel it out while the bulk of it sits making 0.10%.

Another Reader

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Re: Safe Parking
« Reply #2 on: November 03, 2015, 06:37:04 AM »
Safe would mean something like the Treasury Money Market Fund, VUSXX.  Unfortunately, it is closed to new investors and the nominal expense ratio exceeds the yield anyway.  The default investment is probably Prime Money Market, VMMXX, but the nominal expense ratio again exceeds the yield.  There is nothing that is safe, i.e. no risk to principal, other than treasury instruments and the like.

If this is retirement money that's to be invested for a long time, a target date fund will have some risk attached, but woud be an appropriate choice that you can tweak after you decide on your asset allocation.

Retire-Canada

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Re: Safe Parking
« Reply #3 on: November 03, 2015, 09:56:03 AM »
On average it's better to simply invest the lump sum in your preferred asset allocation than to parcel it out while the bulk of it sits making 0.10%.

Yes. Why not pick a basic conservative AA? Put your money into say 3 ETFs and take your time to come up with a plan. You might find you are happy with the simple AA you started with and if not you can move funds to the new AA down the road on a schedule that makes sense to you. That way your money is invested and working for you now. You'll face no pressure to work out a plan.

pjm123a

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Re: Safe Parking
« Reply #4 on: November 03, 2015, 03:25:55 PM »
The check came today and I did not want it to sit around. Sending it to Vanguard tomorrow. I decided to park the whole thing in the 2020 Retirement Target Fund (VTWNX) for now. I have some research and reading to do now. Thanks for the thoughts.

tonysemail

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Re: Safe Parking
« Reply #5 on: November 03, 2015, 03:43:13 PM »
The default investment is probably Prime Money Market, VMMXX, but the nominal expense ratio again exceeds the yield. 


I almost choked when I read this. 
I read the prospectus and found this note, so it doesn't seem to be true.

1 Vanguard and the Fund's board have voluntarily agreed to temporarily limit certain net operating expenses in excess of the
Fund's daily yield so as to maintain a zero or positive yield for the Fund. Vanguard and the Fund's board may terminate the
temporary expense limitation at any time.