Originally Posted by GSMAN
Been thinking lately about my "liquid" assets that I will be using to fund the gap between the ages of 55 -59. I am currently dumping money into two funds knowing that I will have to draw on them in about 3 or 4 years down the road. One fund is more risky/volatile than the other but it is a mix so that was my rationale for using both. Anyway, the funds are Vanguard Dividend Growth fund and the other is Vanguard Inflation Protected Securities Fund Investor shares. My question is should I be putting this cash into something more conservative like a CD or MM account or am I being too paranoid? Thanks!
If it were me, I would be concerned about a couple things with this strategy. The Dividend Growth fund holds a bunch of blue-chip stocks, so it certainly has the potential for losing value over the next few years. If something like the previous crash happened again, would you be OK? Of less concern, but still not ideal, is that it appears the Vanguard Inflation Protected Securities fund has an average bond duration of 8.5 years. That suggests to me the potential for losing principal even in this fund when you withdraw, should interest rates go up in the next few years. I don't know how comfortable you are with the possibility of losing value in these investments, so what you should do depends on your situation. But if I absolutely needed this money over the next few years, I would put the funds in a bunch of long term CDs that have not more than a 6 month of interest penalty for early withdrawal.