Author Topic: Searching safe short-term investment  (Read 4996 times)

fep

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Searching safe short-term investment
« on: October 14, 2012, 04:51:33 PM »
Hi Mustachians,

I currently have around $200K which I need to invest for a short-term period (from 6 months to a year). This is some money I reserve for a future house downpayment and it currently sits in a .75% interest account i.e. basically losing money when considering inflation. How can I do better (maybe at Vanguard) while staying on the safe side ?

Thanks.

arebelspy

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Re: Searching safe short-term investment
« Reply #1 on: October 14, 2012, 09:36:11 PM »
You can't.  Yield and risk are two sides of the same coin.  If you don't want risk, you won't get a good yield.  If you want a good return, you'll have to accept some risk.
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fep

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Re: Searching safe short-term investment
« Reply #2 on: October 15, 2012, 06:25:26 AM »
Thanks for your answer. Yes I understand that's how things work ;)

Where are people keeping there house future down payment usually? Are there any vanguard bonds funds that would be considered good enough for putting money in? I guess I am willing to take a small risk / bet if it means having a chance to get a better return...

hoppy08520

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Re: Searching safe short-term investment
« Reply #3 on: October 15, 2012, 07:01:21 AM »
Within Vanguard, you might look at Vanguard Short-Term Bond Index. Fairly stable, yielding 1.51%. Given your short (6-12 months) horizon, however, I would not get too aggressive.

arebelspy

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Re: Searching safe short-term investment
« Reply #4 on: October 15, 2012, 07:31:11 AM »
Where are people keeping there house future down payment usually?

Equities.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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fep

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Re: Searching safe short-term investment
« Reply #5 on: October 16, 2012, 06:45:50 PM »
Thanks hoppy08520. I might just do that... considering it.

grantmeaname

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Re: Searching safe short-term investment
« Reply #6 on: October 19, 2012, 12:18:14 PM »
Equities.
This. It's not that equities will do worse over the long run... obviously, it's to the contrary. It's just that there's a greater variation in their returns. If you're willing to wait and buy a house a bit later if the market's down (which most people are), then there's no reason not to keep it in stocks. It's only if you know that you need to buy "in 2014, no matter what the economy does, end of story" that you need to be looking at stability.

arebelspy

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Re: Searching safe short-term investment
« Reply #7 on: October 19, 2012, 03:58:22 PM »
Equities.
This. It's not that equities will do worse over the long run... obviously, it's to the contrary. It's just that there's a greater variation in their returns. If you're willing to wait and buy a house a bit later if the market's down (which most people are), then there's no reason not to keep it in stocks. It's only if you know that you need to buy "in 2014, no matter what the economy does, end of story" that you need to be looking at stability.

Absolutely.  Too many people, IMO, think that it's going to be a fixed time frame, so they don't want to "risk" it.. nor get the potential gains.  So down market, you add 6 months to your 5 year plan to buy a house.  No big deal.  The more likely scenario, IMO, is you make more than you would have otherwise and can buy a house even earlier, if you want!

In any case, you're spot on that if your time frame is flexible, it's often worth investing in slightly riskier assets, IMO.

YMMV based on personal risk tolerance preferences.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

alwayscurious

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Re: Searching safe short-term investment
« Reply #8 on: October 22, 2012, 10:09:01 AM »
I normally use Investment Savings Accounts for this purpose, as they're risk-free (more or less) but return a bit higher than you're getting. I'm currently getting 1.25% using this product, although I've used similar products from other companies before when they had the best return I could find:

http://www.rbcroyalbank.com/products/isa/

Otherwise you could hunt around for the best possible rate on a 6 or 12 month GIC or term deposit.