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need input with short term investment
Old 06-18-2017, 08:14 AM   #1
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need input with short term investment

I have $14,000 to invest. The money is to be used in approximately 4 - 5 years toward a down payment on a home for my daughter. I have been weighing the pros and cons of CD(s), index bond fund and index stock fund. Trying to find the sweet spot of risk versus earnings.

I would appreciate other's opinions.
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Old 06-18-2017, 08:20 AM   #2
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Given the relatively short timeframe, I'd probably do a short CD ladder, but it would also depend on my overall portfolio allocation and the availability of other cash sources in care of a downturn.
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Old 06-18-2017, 08:51 AM   #3
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Just buy government or agency bonds that mature around your target date. There is no reason to pay bond fund fees and take interest rate risk. If it were me I would probably buy TIPS. As long as you stick to govvies, there is essentially no risk hence no need to worry about diversification.
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Old 06-18-2017, 09:17 AM   #4
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Since your time frame is short and the money is for a home purchase I agree with the other posters that recommend a laddered risk free investment such as CDs or government bonds. You might look at some of the online banks and consider a CD ladder that splits the $14k into one year, two year, three year, and five year CDs. If interest rates rise you will capture the higher interest as the one and two year CDs expire and you reinvest these CDs at higher interest rates.
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Old 06-18-2017, 10:36 AM   #5
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All 3 above answers +1. Where can you buy a house with 14k down?
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Old 06-18-2017, 12:19 PM   #6
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Originally Posted by Blue Collar Guy View Post
All 3 above answers +1. Where can you buy a house with 14k down?
You can get 95% or even 98% ARV mortgages again pretty readily these days, so you can cover up to say 700k. Enough in most parts of country (though perhaps not in YOUR neck of the woods, BlueCollarGuy )
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Old 06-18-2017, 12:37 PM   #7
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Some only requires less than 4% down payment.
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Old 06-19-2017, 01:50 PM   #8
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Where can you buy a house with 14k down?
About 30 minutes from us I recently saw a "starter home" (two bedroom, one bath) for $99k. The land was either 1/2 acre or one acre, I forget. It was a bit "out there" in mostly farming area but in the photo it looked pretty nice.

Not everywhere are home prices crazy like SCAL and NYC.
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Old 06-20-2017, 12:38 AM   #9
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Originally Posted by Ohio Tealady View Post
I have $14,000 to invest. The money is to be used in approximately 4 - 5 years toward a down payment on a home for my daughter. I have been weighing the pros and cons of CD(s), index bond fund and index stock fund. Trying to find the sweet spot of risk versus earnings.

I would appreciate other's opinions.
You may want to look into PONDX.
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Old 06-20-2017, 07:19 AM   #10
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How about Deeds of Trust? We just bought some on farmland that pay 4% and mature in 3 years. No fees.
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Old 06-20-2017, 02:13 PM   #11
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You may want to look into PONDX.
+1
PONDX / PIMIX is where I keep my buckets of dedicated savings. I would
consider 4-5 years to be intermediate term, not short term and be willing to
accept a little volatility for a little more return. PIMIX is the institutional class
shares of PONDX and requires a higher minimum buy in.

One interesting comparison is looking at PIMIX verses Wellesley and Wellington
(two very good and often recommended low volatility balanced funds). PIMIX
is a straight bond fund. You can't buy the past, of course, but it has been a
good run for PIMIX so far. I've been happy with my PIMIX position since 2009.


PIMIX vs VWINX vs VWELX


YMMV
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Old 06-20-2017, 02:22 PM   #12
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Originally Posted by Ohio Tealady View Post
I have $14,000 to invest. The money is to be used in approximately 4 - 5 years toward a down payment on a home for my daughter. I have been weighing the pros and cons of CD(s), index bond fund and index stock fund. Trying to find the sweet spot of risk versus earnings.
By definition, the "sweet spot" is unique to your own situation.

How important is the number 14,000? How much would it help if it was more? What if it were less?

Your risk tolerance should drive your decision. CDs probably make sense, but will increase the amount by only a small amount.
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Old 06-21-2017, 09:08 PM   #13
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Is it important to 1) keep these funds segregated? 2) insure against any loss? If answer to either question is "yes" then options are very limited (pretty much discussed above.)

If you can co-mingle and your goal is simply to be able to offer your daughter a certain amount of money in a few years, then you can simply add the $14K to your portfolio. When the time comes, extract what you need from your portfolio, just as you would if you needed to replace a roof, for instance. Naturally, YMMV.
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Old 06-22-2017, 05:04 AM   #14
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This is an awesome tool, thanks for sharing. I've only spent about an hour with it and already see it will be incredibly useful.
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Old 06-23-2017, 02:45 PM   #15
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While I own a fair chunk of Pimix I would not suggest it for the home down payment goal stated by the op. This go anywhere fund owns a fair share of emerging MKT bonds as well as other higher risk elements. I like the steady high payout but realize there are substantial risks as well.
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Old 06-23-2017, 02:52 PM   #16
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Ibdl or similar would be my choice. It is a pool of bonds that all mature by year end 2020 and then the fund liquidated.
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Old 06-30-2017, 10:10 AM   #17
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Originally Posted by Koolau View Post
Is it important to 1) keep these funds segregated? 2) insure against any loss? If answer to either question is "yes" then options are very limited (pretty much discussed above.)

If you can co-mingle and your goal is simply to be able to offer your daughter a certain amount of money in a few years, then you can simply add the $14K to your portfolio. When the time comes, extract what you need from your portfolio, just as you would if you needed to replace a roof, for instance. Naturally, YMMV.


Thank you for all the feedback. I considered CD, bonds or bond fund, and just putting the money into my investment account as suggested by Koolau. I've opted to put the money into my investment account. When it is needed in five years or so as a gift for my daughter's first house, I'll withdraw it. Hopefully I can grow the initial gift of $14,000 in the next five years.
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