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What would you do
Old 06-06-2018, 10:54 AM   #1
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What would you do

Hi there. Long time lurker, first time poster here.

I have a cash position of about $150K which is ~20% of net worth. I keep wanting to put it in the market, but it's at all time highs so not sure that is smart or not. I don't have a very long time horizon, maybe 5 years or so I could park this. It's currently in a Marcus.com savings account earning 1.7%, but I must be leaving money on the table?

One reason I'm so hesitant to put this into the market is I lost a significant amount of money 2 years ago "gambling" in the market with triple leveraged oil and gas ETF's. At that time I received a sizeable severance package, and was out of work for about a year so had way too much time to focus on this, and I pretty much lost it all. That experience is still haunting me to this day. Currently employed again though and I'm not totally out of the market though, as there is a decent 401K balance and I don't worry too much about that with a 15 year horizon there.

So what would you do if you received a cash windfall of $150K or so with a 5 year time horizon? Keep it in a savings account ... dollar cost average into the market over X weeks regardless of where it's at ... pay off a portion of the mortgage ($270K remaining) ... or am I missing something I should be thinking of? Thanks for reading this and I appreciate the insight from forum members!
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Old 06-06-2018, 11:04 AM   #2
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I never give explicit financial advice, but rather try to point to the right direction for the individual.


"experience is still haunting me." Since you have money in the stock market with your 401K, consider how much stress you would be under should you choose to invest that $150,000. If it's too high, then the obvious answer will be to stick with cash. Another way to look at it is what would your feelings be if that $150,000 became $125,000, or less, due to a stock market correction. You should not put any money ion the stock market if you don't believe you can emotionally weather corrections.

If you do opt to keep the money in cash, you can squeeze a bit more interest by laddering a bunch of CD's.
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Old 06-06-2018, 11:04 AM   #3
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Welcome...sorry to hear of your loss, but fessing up takes courage.

Can you clarify why there is a 5 year time horizon on this $150k in cash but then a 15 year time horizon on the 401k? Are you retiring in 5 years, or 15 years, or is there something else driving these timelines?

What is the interest rate on your mortgage?

Do you have any other emergency cash account?
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Old 06-06-2018, 11:13 AM   #4
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Thanks for insight so far. Reason for a 5 year horizon is due to US immigration status ... likely need to move back to Europe in ~5 years and expect to need to use (some of) these funds to bridge the move, startup costs there, house down payment etc. Mortgage interest = 3.125% on a 30 year fixed. The $150K includes emergency cash which at 6 months expenses is ~$50K
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Old 06-06-2018, 11:15 AM   #5
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Once bitten, twice shy

Consider what else is coming up for you in the next five years. Are you going to need this money for weddings/roof/car/college/unemployment? Is this your emergency fund? If something like this is waiting around the corner, you might just want to keep your powder dry.

Many observers see the market near all-time highs and get shy about getting in. I would insert a qualified disagreement, since in the long-term the market goes up, regardless of where it is on a particular day or month. But that's the LONG TERM, which is a lot longer than five years. In the short term, it might go down - by a lot - and then you'd feel burned again.

If you don't see leaving your 150 invested for more than 5 years, then search for some interest-bearing venue and park it there.

Oh, and welcome to the forum!


Edited to add: A whole bunch of posts came in while I was writing this, so forgive me for seeming like I wasn't paying attention!
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Old 06-06-2018, 11:24 AM   #6
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No opinion at all on exactly where to put it. With a 5 year time frame I would certainly NOT put it in the stock market. But what would I do with it? I just know what I wouldn't do with it.
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Old 06-06-2018, 11:55 AM   #7
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I would not invest 150K needed in next 5 years.

I have 300K sitting in MMs at two places. Not worried that its not making much money at 1.6% interest. I like that no matter what happens every day I have money to weather the storm if a major correction occurs. I have the majority of my money at risk in the market, I see no need to have everything invested.
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Old 06-06-2018, 12:06 PM   #8
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The Federal Money Market at Vanguard is ~1.7% (Not FDIC insured)

The Prime Money Market at Vanguard is ~1.9% (Not FDIC insured)

Not in the stock market. Perhaps a CD with a 1 year duration and then roll it over. Online savings like Ally, Synchrony, Capital One 360 would be another option.
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Old 06-06-2018, 12:10 PM   #9
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My thought is keep the $50k emergency where it is and ladder $25k each into - 3 mo (1.914%), 6 mo (2.06%), 1 yr (2.35%), 2 yr (2.8%) CD's, rates based on what Schwab is showing for new issue brokered CD's, today.

Good luck!
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Old 06-06-2018, 12:13 PM   #10
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There are some worry free, on line, 5 year insured CD's making close to 3% or near it. If you need the money, you can always get out of them with a penalty.

You can always hedge your bets and put 1/2 in a CD and dollar cost average, the other 1/2 over the next 12 months, in an S&P 500 fund?

https://www.bankrate.com/cd.aspx
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Old 06-06-2018, 12:16 PM   #11
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Welcome.
I hope you have figured out why you lost all that $$ , I will suggest those commodity ETF's are vary dangerous, and you were being extremely aggressive (and greedy).

Do not be too offended, as I also lost $$ , when I first did option trading, as I had a lack of knowledge and dreams of getting rich quick. Happens to a lot of us, although not with such a large amount.

I mention all this because if you do get into the market again and even with your 401K , please keep it broad and simple, like VTI or SPY etf's, nothing exotic.

As for your 150K, since some is emergency $$ and you have employment concerns, definitely keep $50K in interest bearing accounts.
As for the other 100K, since 5 years is short and you say you will need it, I'd be tempted to go with CD's paying 2% or more.
example: https://www.ally.com/hm1/?type=cd you can get 2.25% for 12 month CD.
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Old 06-06-2018, 01:06 PM   #12
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Personally I would put it into individual bonds. If taxes don’t matter, I would do investment grade corporates. At a 5 year duration, you should be able to easily get 3.5% - 4%+. If taxes are a concern, same thing, but with Muni’s. No worry of rising rates or falling markets. With investment grade the risk of default is tiny. With 150k you should be able to diversify enough as well. Worst case, you can always sell a few bonds to raise cash.
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Old 06-06-2018, 01:37 PM   #13
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Just got an email from Pentagon Federal (easy to join for about a $20 fee) offering 3% for five year certificates.
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Old 06-06-2018, 02:25 PM   #14
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Quote:
Originally Posted by calmloki View Post
Just got an email from Pentagon Federal (easy to join for about a $20 fee) offering 3% for five year certificates.
Check out their early withdrawal penalty.
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Old 06-06-2018, 04:22 PM   #15
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I've watched the market go up since 2009. I've watched many people stay out because they thought it could not go up more. Market timing is impossible to predict accurately. I'd personally save back 2+ years of living expenses, then invest the rest in total market ETFs such as VTI. Otherwise, in 5 years, you'll have broken even, at best, with regard to inflation. I'm a bit more of a risk taker than most, with an AA of 90/5/5. But if you do invest in an ETF, and find yourself becoming uncomfortable, you can always sell instantly, hopefully while you're ahead...best of luck. You might invest this money in a separate account than you don't need to tap for the next 5 years, so even if it goes down, you have time for it to recover...
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Old 06-06-2018, 04:31 PM   #16
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Check out their early withdrawal penalty.
Well, OP was looking for a 5 year investment. Maybe that early withdrawal penalty assures they stay in the saddle the full five. Maybe OP sticks $75-100k in. Since no one has started a thread on the PenFed offer maybe I will.
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Old 06-06-2018, 04:45 PM   #17
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Lots of brokered new issue three year CD's at three percent now at Fido and the rest of the major brokerages. I am tempted with the three year-out cash in the inherited IRAs...
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Old 06-06-2018, 05:15 PM   #18
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Check out their early withdrawal penalty.

+1
They’ve gotten nasty.
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Old 06-06-2018, 06:28 PM   #19
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Just got an email from Pentagon Federal (easy to join for about a $20 fee) offering 3% for five year certificates.
I saw that. But others have already been offering those rates, and I expect that even higher rates will be available at the end of this year.
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Old 06-06-2018, 06:56 PM   #20
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The Federal Money Market at Vanguard is ~1.7% (Not FDIC insured)

The Prime Money Market at Vanguard is ~1.9% (Not FDIC insured)
Discover Online Savings Account is currently paying 1.6% and is FDIC insured.
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