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Where would you put 500K for 6-18 months?
Old 01-29-2008, 09:07 PM   #1
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Where would you put 500K for 6-18 months?

I have recently sold my house in Pennsylvania, and now renting, waiting on the sidelines before I buy again in Southern California, if the market ever settles down!
Where would you put 500K for 6-18 months, without taking a big risk. Can I do better than the 4.5% I am getting in my moneymarket?
Thanks
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Old 01-29-2008, 10:13 PM   #2
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Originally Posted by zandrajohn View Post
I have recently sold my house in Pennsylvania, and now renting, waiting on the sidelines before I buy again in Southern California, if the market ever settles down!
Where would you put 500K for 6-18 months, without taking a big risk. Can I do better than the 4.5% I am getting in my moneymarket?
Thanks
Thats where I would leave it for that time frame.
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Old 01-29-2008, 10:23 PM   #3
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With interest rates not going up anytime soon, you can do better than 4.5% in some short term bond funds. We own VFSUX and VFIIX with yields of around 5% nowadays in tax-deferred accounts.

Treasuries are exempt from state income tax, so look at those as well. I would avoid TIPS funds. Vanguard is the place for all these short-term and intermediate-term bond funds.

With a bond fund you have the possibility of capital gains and, of course, capital losses.

Also consider your tax bracket. Maybe a tax-exempt fund gives you more after-tax income.
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Old 01-29-2008, 10:36 PM   #4
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If you are going to need the funds on short notice (which it sounds like, less than a few months), then you need to keep it somewhere you can get to it quickly. You also don't want to risk any of the principal for such as short term.
I would keep it where it is. Nowadays (is that a word?), 4.5% is not bad for a risk free (almost) holding place.
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Old 02-01-2008, 03:53 PM   #5
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No principal risk, 4.5% sounds good. I might look at jumbo CDs and see if they can up that some.

If you had 3-5 years, I would suggest a 10% allocation to equities for every year the money could be invested. So 3 years is 30% equity and 70% bonds/cash. Then each year sell 10% of equities to bonds/cash. By end of year 3 you should have original amount (plus a little extra) in bonds/cash, and another smaller allocation in equities.

If 5 years, go 50-50, selling 10% equities every year with same idea. By year 5, you have your original amount in bonds/cash, plus a little left in equities.
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Old 02-01-2008, 05:56 PM   #6
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Your money market rate WILL go down very shortly. That's because of the recent Fed rate cuts.

Audrey
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Old 02-04-2008, 11:44 PM   #7
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Are there any CD's or liquid CD's that would give you a little more? I have one that is 5%, but it was mid-Dec when I opened it. That 4.5% MM is probably going to be lower real soon if not already.
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Old 02-05-2008, 04:01 AM   #8
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Are there any CD's or liquid CD's that would give you a little more? I have one that is 5%, but it was mid-Dec when I opened it. That 4.5% MM is probably going to be lower real soon if not already.
I think my mm(s) is at or sub 4% now. It's only going to get worse (less) before it gets better. IMO lock what you can now.
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Where would you put $500K for 6-18 months
Old 02-05-2008, 11:11 PM   #9
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Where would you put $500K for 6-18 months

Zandra, I am looking for the same thing as you - and for the same reason. I am looking at Countrywide Personal CD currently paying 5% for 6 months. Countrywide has its problems but this is FDIC insured. I think I'll put $95K in and open their $1000 checking acct. That way, when the CD matures, they can put the money directly into my checking acct without a week wasted while I wait for a check to come from Texas in the mail. I have to decide by Thurs and I am going to check Countrywide out more before I do anything. :confused:

Right now, I'm juggling a bunch of $95K CD's and looking for SAFE places to put the money. ( I know I could have much worse problems than this - so I'm not complaining! ) Most CD's are paying only 3.15- 3.68% - taxable, but I think that's where I'll put the rest of the money for now. Keeping the principal safe is more important to me than making a little more interest for the near future. I do have some in a money market fund - but that will be dropping soon too I'm told - and it's not insured.
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Old 02-05-2008, 11:28 PM   #10
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If you have access to a large "international" financial institution, you should be able to get a deposit in a currency other than USD. You can get close to 8% on Kiwis and 7% on AUD's. If foreign currency exposure scares you, the bank should be able to create a currency hedge for you, which should still yield more than a USD deposit, minus the hedge charge. Just a thought...
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