Short Term Low Risk Investing Options

[jpvt128]

Hi everyone, I have recently discovered MMM and after reading the forum for a month or so, I felt like it was time to join. I have been re-organizing my savings/investments since following the site, and would like a little input from the MMM community. I am purchasing a second rental property in the summer/fall of next year and already have the cash designated for the purchase. I would like to still manage to earn a return on this cash over the next 12 months or so. The obvious play to me would be putting the cash into VBTLX- minimizing the risk while earning a small return and keeping the cash fairly liquid. The only hesitation I have is that I have recently read about the negative effects taxes can have on your returns when investing in bonds in a taxable account. Is there a smarter option out there, or should I just be happy with (hopefully) a 2-3% after tax return?

Thanks for any input and advice!

[FI40]

Taxes are one thing, but the average maturity of VBTLX is 7.7 years. You could certainly lose money on that position in one year if interest rates go up. With such a short horizon, you are pretty limited in what returns you can expect if you really want to guarantee that the principal will be there (CDs, short term treasuries, etc).

Unfortunately there's no free lunch that I'm aware of - you'll have to pay tax on a very low return in this scenario in order to guarantee your principal.