Earn 2% kind of safely?

[redduck]

There's this fellow I know who owns his own business (and apparently is doing quite well). He maxes out his tax-advantaged account(s) and puts a bunch of money into an S&P ETF. However, it seems he has about $1M floating around in a fund or two that exist mainly just to hold money. He makes very little interest in these funds. He'd like to put about $400K into
a fund that could earn him about 2% (or a bit more). Safety (as in let's not try to lose principal) is a concern. Any ideas?

 

[jetpack]

Ally 11 month no penalty CD's are 1.5% ... what term does he need?

if you can find something at 2%, but less safe, would you take that?

 

[RE2Boys]

Vanguard short term investment grade corporate bond fund, VSUX,, just under 2% yield but with some interest rate risk. It's where I park brokerage account money but need fairly quick access.

Edit to correct typo

 

[fosterscik]

It's VFSUX. I also use this to hold "cash". There is interest rate risk, but historically the risk is small. It lost 7% of its value during the 2008 crash but recovered in less than a year.

 

[Fedup]

VCSH lost about 4% in 2008. I think it's best to put in CDs.

 

[brewer12345]

Either CDs or if it must be easily tradeable in a brokerage account something like IBDL. This is a 2020 investment grade corporate fund that turns into cash in 2020. Not very exciting, but a small amount of interest rate risk is about the only material risk.

 

[OldShooter]

Looks like the 5-year treasuries are running about 2%. TIPS, though the rate is a little less certain, will probably turn out even better.

 

[JohnnyBGoode]

Either CDs or if it must be easily tradeable in a brokerage account something like IBDL. This is a 2020 investment grade corporate fund that turns into cash in 2020. Not very exciting, but a small amount of interest rate risk is about the only material risk.

Note the Ally CD running at 1.5% is a "No Penalty" CD that you can withdrawal at any time after 6 days of opening it. So it basically is easily tradeable if you need quick access to the money. The only downside would be the entire CD must be liquidated. But when opening them you can decide to open multiple (minimum balance $25K) if you want ultimate flexibility.

 

[redduck]

Ally 11 month no penalty CD's are 1.5% ... what term does he need?

if you can find something at 2%, but less safe, would you take that?

I don't know what sort of term he's looking for. I'll ask. I'll also ask about the "less safe" option (which is hard to define).

 

[Ready]

A five year CD yields 2.25% FDIC insured. If he needs it before five years, he only pays 6 months interest to terminate early. Just make sure he goes with a bank that caps the early term penalty at six months.

 

[Texas Proud]

I think that 5% safe investment that you can get back within a day with a phone call on the other thread is the best....


Only if he would tell us what it is!!!!

 

[ERD50]

I think that 5% safe investment that you can get back within a day with a phone call on the other thread is the best....


Only if he would tell us what it is!!!!

If he ever comes back! Hasn't been that long, but he has been MIA.

I still think he is/was a "pay off the mortgage" troll.

-ERD50

 

[OldShooter]

... I'll also ask about the "less safe" option (which is hard to define).

SAMBX has been yielding 3% for us over the last three years. Buy and sell any time.

 

[street]

Interesting information and thanks.

This may sound stupid but if I was guaranteed 2% clear every year for the next 20 years I would be happy. Lol

 

[jetpack]

If you're looking at 20 year, a US EE series savings bond earns 3.5%

 

[Texas Proud]

Since he is only putting in 40% I would assume that he would not need it on a moments notice...


If so, then read up on the preferred investing thread... there are many very high rated preferred shares that would yield 5% to 6%.... some are high volume trading...

Having a mix of them would likely mute any price swings.... I just looked at my holdings and my principal is .24% different than what I invested... some are higher and some are lower...

Then again, my weighted avg is a B+ rating and an 8% yield... but I replaced my high yield fund with these so I am OK with the rating.... and on about $90K invested that is pretty good...

 

[Montecfo]

mwcrx. 2.18% yield. 1.66 duration

 

[RISP]

Interesting information and thanks.

This may sound stupid but if I was guaranteed 2% clear every year for the next 20 years I would be happy. Lol

Stupid may be a bit strong, but that doesn't sound too ambitious with inflation at 1.9% and (IMO) likely rising. Or did you mean 2% in real terms?

 

[RobLJ]

I have about 20% of my bond allocation in the Fidelity Floating Rate Fund and am fine with the risk. But I would note that SAMBX (and the Fidelity fund was similar) was down about 20% in 2008 and also had a 6-7% down hiccup a few years back.

The Fidelity Fund has done what I bought it for, however; yield at the price of risk and will do better if the Central Bank keeps raising (I bought it as an interest rate hedge in part).

 

[NW-Bound]

Interesting information and thanks.

This may sound stupid but if I was guaranteed 2% clear every year for the next 20 years I would be happy. Lol

Stupid may be a bit strong, but that doesn't sound too ambitious with inflation at 1.9% and (IMO) likely rising. Or did you mean 2% in real terms?

And then, you may have to pay income tax on that. So, you are not even keeping up with inflation.

 

[redduck]

I talked to the guy today. At my suggestion, he had checked out the Vanguard website (he's with Fidelity). He seemed interested in Wellesley Admiralty. Any thoughts about this? It's not quite what he originally discussed with me, but I understand all this is a process.

By the way, there are a whole bunch of people in this area (West Los Angeles) who make and have a whole bunch of money (I'm obviously not one of these people--and let me tell you right now, I just hate it when that happens). Anyhow, for a lot of these people, researching investing is a low priority. At least this guy is trying to figure something out.

 

[Fedup]

Is that the same as Wellesley fund except higher balance?

 

[redduck]

Yep, that's correct, Fedup. ($50K minimum).

 

[Fedup]

That fund has 40% stocks and went down about 9-10% in 2008.

 

[redduck]

I recall having an emerging market fund back then. It's OK with me if you don't check out what emerging market funds did in 2008.