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Where to put low risk money
Old 03-03-2012, 01:19 PM   #1
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Where to put low risk money

With CDs so low, what other options exist for low risk investors ?
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Old 03-03-2012, 03:08 PM   #2
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I put my low risk money in Wellington Fund, a balanced mutual fund with the goal of income & preservation of principal. That doesn't mean it won't go down in value but it seemed to me to be the best low risk option. Available through Vanguard, or Fidelity for $75 fee.
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Old 03-03-2012, 03:09 PM   #3
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Online savings accounts are paying about 1% and are FDIC insured. Better than many money market funds or short CDs.
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Old 03-03-2012, 03:37 PM   #4
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Quote:
Originally Posted by bobbee25 View Post
With CDs so low, what other options exist for low risk investors ?
Quote:
Originally Posted by Brat View Post
I put my low risk money in Wellington Fund, a balanced mutual fund with the goal of income & preservation of principal. That doesn't mean it won't go down in value but it seemed to me to be the best low risk option. Available through Vanguard, or Fidelity for $75 fee.
Wellington as an alternative to CDs?
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File Type: gif Well.gif (60.2 KB, 21 views)
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Old 03-03-2012, 03:39 PM   #5
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Penfe is offering 2.3% on 5yr CD, with inflation of 2.5% er... never mind :-)
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Old 03-03-2012, 03:41 PM   #6
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First I'd be asking - why do I need 'low risk' money, and how much? What would happen if I put it into something that could drop, and it did - end of the world?


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Old 03-03-2012, 03:43 PM   #7
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Unfortunately, there is no free lunch. The best alternatives for little or no risk appear to be online savings accounts at about 1%, 5 year Pen Fed CDs at 2.25% (6 month interest early withdrawal penalty), or perhaps I bonds (low limits on how much you can buy). Everything else requires you to accept higher levels of risk. Are you prepared to accept more risk?
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Old 03-03-2012, 03:45 PM   #8
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Wellington at 65-70% equities would not be my choice. At my point in life that's about as risky as I'll go.
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Old 03-03-2012, 06:16 PM   #9
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Wellington as an alternative to CDs?
May have meant Wellesley (VWINX).
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Old 03-03-2012, 06:29 PM   #10
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With CDs so low, what other options exist for low risk investors ?
Is this some kind of trick question?

"Low risk" means you aren't willing to take risks of losing principal. Some even mean that they're not willing to risk volatility.

By your definition, Treasuries, CDs, I bonds, annuities, and guaranteed income contracts are your only options. If you want more options then you're going to have to move away from the "low risk" definition.

We should be turning cartwheels & backflips that CD rates are so low, because it implies that inflation is also low. I'd much rather have 2.5% CDs in an era of 3% inflation than to have 5% CDs in an era of 6% inflation.

Asking for some other option for "low risk" investing is like asking for some other vowel to use for spelling "aardvark". You can have any vowel you want, but you won't get the intended result.
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Old 03-03-2012, 06:40 PM   #11
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I was just reading Barron's 3 March, they had an article suggesting emerging market bonds as less risk than developed markets. Not sure what fund(s) would fit that but something to think bout
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Old 03-03-2012, 06:53 PM   #12
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I've been happy with Fidelity's FGMNX (GNMA bonds) fund, fairly low volatility, and I'm venturing lightly into TLT, a long-term Treasuries ETF. Things that are volitile but generally move opposite to equities may be an OK risk for you if you have lots of equities.
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Old 03-03-2012, 07:24 PM   #13
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May have meant Wellesley (VWINX).
I wouldn't consider Wellesley an alternative to CD's in general either, but that's just me...
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penfed cds
Old 03-03-2012, 09:37 PM   #14
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penfed cds

Pen fed 5yr CDs are now 2% with a 365 withdrawal penalty
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Old 03-03-2012, 10:02 PM   #15
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Pen fed 5yr CDs are now 2% with a 365 withdrawal penalty
Yep, they sneaked that one-year early-redemption penalty in 6-12 months ago. But I think the three-year CDs are still 180 days.
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Old 03-03-2012, 10:17 PM   #16
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Pen fed 5yr CDs are now 2% with a 365 withdrawal penalty
I-bonds are paying 3.06%. Rate resets every 6 months, they have to be held 1 year, and if sold before 5 years the last 3 month's interest is withheld.

Limit of $10k/person/year.
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Old 03-03-2012, 10:20 PM   #17
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At home in a fire proof safe. Only good news about the absurdly low rates is I don't stress about where to park my money anymore.
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Old 03-03-2012, 11:01 PM   #18
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With bonds/CDs/notes there is both default and inflation risk. With dividend paying equities there is market risk. There is no free lunch. I think a balanced fund with a high % of dividend paying equities was the best option for my 'safe money'. But, I also have old inflation protected Fed bonds.
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Old 03-04-2012, 02:13 AM   #19
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Have you looked at municipal bonds ?
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With CDs so low, what other options exist for low risk investors ?
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Old 03-04-2012, 03:39 AM   #20
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We should be turning cartwheels & backflips that CD rates are so low, because it implies that inflation is also low. I'd much rather have 2.5% CDs in an era of 3% inflation than to have 5% CDs in an era of 6% inflation.
So would I, but think we are closer to 2.5% CDs in an era of 6% inflation. Could be amplified here in Paradise, but I have personally documented quite a few items which don't support low inflation. HOA up 8% this year, travel to mainland up 14%, fuel up 10%, HECO (not sure, but currently higher than when oil was $150/bbl), canned goods (smaller cans at noticeably, though not documented) higher prices, fast food up dramatically, health care (mine) doubled from $5K to $11K (not just more services, either), car registration up double digits, TP up 10% at Costco, dental rates up (est. 15%), co-pays on drugs up 25%, rents way up in two areas I personally know. I realize some of these (personal share of medical costs, for instance) may not be captured as dramatically in the official inflation rate, but this year was my turn to get creamed on co-pay/HC-insurance increases. Next year, it may be someone else. It does and it will add up as inflation, whether recognized officially or not. As discussed elsewhere, it really does depend on personal situations. Unfortunately, MY inflation is not recognized in current savings rates. YMMV
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