Author Topic: need advice for Short-term and Safe investment  (Read 1168 times)

shortduck

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need advice for Short-term and Safe investment
« on: September 16, 2019, 08:58:33 AM »
Hello all,

I have saved approx $100,000 for down payment of my house + other new home expenses. We are looking for homes and want to buy in 6-12 months.

They are in bank earning interest of 1.90%(APY).

My question is: where do I invert my funds which gives me return and save at the same time, clearly I do no want to invert in pure 100% stocks because of short term vision and considering it is volatile ?

Thanks for reading.

RWD

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Re: need advice for Short-term and Safe investment
« Reply #1 on: September 16, 2019, 09:56:44 AM »
If you have earmarked the funds for use within a year leaving them in a savings account or CD is perfectly reasonable.

Rob_bob

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Re: need advice for Short-term and Safe investment
« Reply #2 on: September 16, 2019, 12:58:16 PM »
An ALLY no penalty CD is currently paying 2.10% on a deposit of over $25K.

CD's are the bet you can do for no risk.

bbqbonelesswing

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Re: need advice for Short-term and Safe investment
« Reply #3 on: September 16, 2019, 05:18:43 PM »
If you are looking to buy a house in 6-12 months, then a high-yield savings account or CD are your options.

Goldielocks

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Re: need advice for Short-term and Safe investment
« Reply #4 on: September 16, 2019, 05:25:16 PM »
Do NOT invest them in anything not guaranteed.  I did this in 2008.   We intended to buy a house by the end of that year -- and could not.

Your investment is great.   The only other thing you could do is look for a tax advantaged strategy, but I don't know where that would be for you.  e.g., put the annual max into a 529 to get taxes back (while you agressively save to make up the difference?).. 

Fore example...
In Canada, I would advise someone with high income to max out RRSP and look to pull the money out as a home buyer's loan next year... if they have a high marginal tax rate and lots of room available.  Of course, here, you don't have to pay back the loan immediately upon loss of employment and you don't pay interest on it, you only don't get any further investment gains on the portion borrowed.

Do you have any tax - advantaged strategy that a substantial savings account could be used for in the short term?

TomTX

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Re: need advice for Short-term and Safe investment
« Reply #5 on: September 16, 2019, 07:48:06 PM »
There are several online savings accounts paying >2%. Citibank and Alliant come to mind.

Your best return is likely to be opening bank accounts for the signup bonus. Often there is a deposit requirement. Recently got $600 for combined checking + savings from Chase, and another $500 from Bank of America.

shortduck

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Re: need advice for Short-term and Safe investment
« Reply #6 on: September 17, 2019, 05:44:30 AM »
Thanks all, for the advice and your time. I am grateful.

My saving are in Ally bank but is savings a/c. I will consider moving to a CD.

I have 2 questions after reading the above responses:

1. How about a 100% bond market, to my limited knowledge is it 99% safe + guaranteed return. : Please let me me know if this a not true.

2. Where do I find/show fir account which are paying signup bonus?

Thanks again.

Rob_bob

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Re: need advice for Short-term and Safe investment
« Reply #7 on: September 17, 2019, 03:02:12 PM »
If you were to buy a bond fund then the value of the fund will fluctuate up and down opposite of the direction of interest rates.  The longer the duration of the fund the greater the price swing in relation to interest rate movement.

Only if you buy an individual bond at issue then hold it to maturity would you be sure to get your initial investment back.  You could buy short term T Bills but off hand I believe the rates are probably less than most CD's.

TomTX

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Re: need advice for Short-term and Safe investment
« Reply #8 on: September 17, 2019, 06:52:06 PM »
If you were to buy a bond fund then the value of the fund will fluctuate up and down opposite of the direction of interest rates.  The longer the duration of the fund the greater the price swing in relation to interest rate movement.

Only if you buy an individual bond at issue then hold it to maturity would you be sure to get your initial investment back.  You could buy short term T Bills but off hand I believe the rates are probably less than most CD's.

For those who want to see the actual Treasury rates:

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=billrates

Note the inverted yield - the longer the maturity, the LOWER the rate paid. This starts to correct at the 7 year bond. Earlier this month it was inverted all the way out - the 30 year paid less than the 1 month.

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

Goldielocks

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Re: need advice for Short-term and Safe investment
« Reply #9 on: September 18, 2019, 11:00:58 PM »

1. How about a 100% bond market, to my limited knowledge is it 99% safe + guaranteed return. : Please let me me know if this a not true.

Thanks again.

Bond funds (ETFs like VAB or mutual funds) will fluctuate in value, as the fund manager buys and sells bonds before maturity dates.     As interest rates increase, in general, bond funds go down in value / lose money.  I have funds that dropped in value by 3-4%, for example, over a year or two.   If you the fund to the "Bond Duration" stated on the prospectus, you will generally receive a positive return.

Only bonds bought directly and held to maturity dates are guaranteed the stated income.   If you are interested in this, look into "BOND LADDERS".

Although -- Some companies who issue a bond may fail, or go bankrupt.  In this case, Bond holders get their money generally first (after government employee taxes are paid), as bonds are typically written against real assets .. in comparison, stock shareholders get money clost to last.  Sometimes there are not enough funds to pay out the bond holders.

Government bonds have a low risk and are usually issued against general goodwill of the government, not assets per se.

Monerexia

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Re: need advice for Short-term and Safe investment
« Reply #10 on: September 18, 2019, 11:08:33 PM »
Green dot will give you 3% for 10K of this.

shortduck

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Re: need advice for Short-term and Safe investment
« Reply #11 on: September 20, 2019, 12:26:05 PM »
For now I have moved  my money to risk  Ally 11 month free CDs earning 2.1%.