Bonds (ETF), CDs or VG MM for house sale proceeds - 3-5 year horizon

[deserat]

I am in the process of selling my house and since it is paid for, expect a 6 figure amount once the transaction is finished. I will not need those funds for 3-5 years when I return to the USA and will most probably buy another house with the cash from the sales proceeds and investment income. So, the goal for the funds is capital preservation with some return.

I have set up a VG MM account to receive the funds but am undecided on if/where to place the funds afterward. The last time I did this, I got a three year CD. I have researched the Bonds versus CDs and it seems to depend on one's risk tolerance. I've also thought about just letting it sit in the VG MM.

So, since this group is fairly diverse and yet financially savvy, I thought I'd ask: what do you see as pros and cons of the three options and what would you do?

 

[OldShooter]

The only three options I personally would consider is buying a diversified portfolio of individual investment-grade corporate bonds, buying treasury notes or buying TIPS. I would probably end up going with the TIPS. None of these is difficult. Certainly Vanguard has a bond desk that can do the deed for you with one phone call. They can also discuss risk questions you may have about corporate bonds.

With bond funds you pay unnecessary fees and if interest rates rise your holdings may lose value.

 

[jkern]

I would probably put it into a 3 year CD. It will be there waiting for you when you get back.

 

[REWahoo]

I would probably put it into a 3 year CD. It will be there waiting for you when you get back.

+1

Your time horizon is too short to do much of anything else.

 

[pb4uski]

But VMMXX is currently yielding 2.40% and 3 year brokered CDs are yielding 2.25%... so I would go with VMMXX for better return and better liquidity... and then see if there are any CD specials in your area.

In my area in Florida a local CU was running a CD special of 3.25% for a 24-month jumbo CD... hard to beat that.

 

[RunningBum]

I'm seeing 2.70% for a 3 year CD at Capital One right now. Did not look around to see if that's best, and it's up to the OP to decide if the flexibility of VMMXX is better than locking into a CD, but it is a higher rate.

 

[pb4uski]

Fair point... I was looking at brokered CDs... bank CDs are higher but I'm not sure it is worth tying up money for 3 years for 0.3% in case a good house buying opportunity comes along sooner than the maturity of the CD.

 

[mrfeh]

Nothing that can lose value (ie bonds). CD is probably better than MM.

 

[deserat]

Thanks all for the replies - house hasn't sold yet, so can still ruminate and investigate.

"In my area in Florida a local CU was running a CD special of 3.25% for a 24-month jumbo CD... hard to beat that."

Where was that? My home of record will be FL when I go to Germany....

 

[copyright1997reloaded]

CD Rates are plateauing and starting to come down. MM deals still are around, but I'm guessing that we've just about seen the peak on these too (and they will start to trail down).

Interior FCU has a 3.14% APY on a Jumbo (min $100K) 24-month CD. That might be an option and they have easy membership requirements: https://www.depositaccounts.com/banks/interior-federal-credit-union/offers/

I've been opening a series of 24-month Flex rate (3.25%) CD's and then locking the rate. These were especially good in that they allowed an extra (up to the original amount) deposit. Unfortunately this deal was closed out a week ago.

 

[pb4uski]

Thanks all for the replies - house hasn't sold yet, so can still ruminate and investigate.

"In my area in Florida a local CU was running a CD special of 3.25% for a 24-month jumbo CD... hard to beat that."

Where was that? My home of record will be FL when I go to Germany....

Suncoast Credit Union (West coast...Tampa area)
https://www.suncoastcreditunion.com/personal/bank/savings

 

[ivinsfan]

Yes federal reserve signaling a drop in interest rates.

 

[deserat]

Suncoast Credit Union (West coast...Tampa area)
https://www.suncoastcreditunion.com/personal/bank/savings

Excellent! My business is registered in FL, so I am eligible to join....thanks for this tip. Excellent rate 3.25% for $100K+.....

 

[braumeister]

But VMMXX is currently yielding 2.40%.

Currently 2.36 and dropping steadily.

 

[pb4uski]

Currently 2.36 and dropping steadily.

2.36% is SEC 7 day yield.. compound yield is 2.39% is more relevant IMO... but you're right the yield has been creeping downward.

 

[FinallyWest]

Purepoint Financial has a 13-month no penalty CD with a 2.5% APY.