Long-term Savings advice

[CTburns]

I'm sorry if this has been asked alot, but I'm looking for some advice on where to put long-term savings money. I was thinking of a Vanguard Life-Stratagy fund as this would be money that I hope not to need for many years. Would this be a good choice, or are there other options that are better? I appreciate all advice and opinions, as I am fairly new to managing my own money.
My wife and I already fund our 403bs and Roth IRAs and have a savings account at ING. We are trying to have a child and want to focus on stockpiling some cash and reducing our debt with the expectation that she will only return to work part-time.

Thanks

 

[travelover]

Welcome CT.

I'd advise that you read a couple of books from this list:

Investment Books

You may find them at your library or cheaply as used books, online.

 

[Ed_The_Gypsy]

What is your 'long term'? If it is less than ten years, I would suggest buying CDs or individual bonds with the expectation to hold until maturity.

 

[CTburns]

Thanks for the list Travelover. I certainly need to educate myself, and I'll take look at some of those recommendations.

Ed. I wasn't exactly clear, but I am referring to an emergency fund that I hope that I'll never have to tap into. My wife and I are committed to saving a 6 month cushion in case of job-loss or other emergency, but it seems silly to have all of that cash just sitting in a bank, or even locked in a CD. I would keep 2 months of cash in the bank, but should I do something else with the rest of it? Something low-moderate risk that would give me better returns than the bank that I could access in case of dire emergency.
FWIW, my wife and I are nurses, so it is not likely that we would suffer any long-term unemployment situation; as long as we are healthy enough to work.

 

[veremchuka]

there are 4 life strategy funds. they range from 20% to 90% in equities! this is NOT a place for an emergency fund even in the one with the lowest equity %.

an emergency fund should be liquid and not subject to changes in nav. money market, saving account, checking account, vanguard prime money market fund are where this type of cash should be. bond funds fluctuate so you may not have the same amount of cash today as you had say 6 months ago and forget equities. i hear you on the low rates but that's life in the big city.

my suggestion if you want to eek out a tiny amount of yield would be an ally no penalty cd. the yield is 1.15% for 11 months. you can cash it in at any time and not lose any interest tho you have to send them the money and if needed they take 2 days to transfer it to say a checking account you link to the cd. other than that, park it where you can access it fast... for an emergency.

 

[Ed_The_Gypsy]

I am with veremchuka on this one. Forget equities and accept the lower rates as the price of safety and liquidity.

 

[growing_older]

When I was in a similar situation, I guess I did the "wrong" thing. I went with part of the emergency fund in a money market enough to cover any reasonable emergency (about 3 months expenses) and the rest (about 9 months living expenses) in an equity income fund. I was taking a risk because if a 12-month emergency happened during that time AND the stock market was in the tank, I would have had maybe only 6-8 months funds instead of 12. But odds are such an emergency wouldn't happen, and it didn't, and now my former emergency fund is about 3 years worth of expenses. Even if an emergency happens at an inconvenient time, I'm still far ahead of where I would have been investing in low, low return safe alternatives. Your results may not be as lucky.

 

[CTburns]

Thanks for the info everyone. I just picked-up a copy of Bogleheads Guide to Retirement Planning. Scanning through, it looks like it's got some great information. I'm looking forward to reading it.

 

[Calgary_Girl]

We currently have approximately 6 months worth of our net income in a savings accounts at ING for easy access. If the "emergency" lasts longer than 6 months, we can always tap into our HELOC since the interest rate on the HELOC is less than what we're currently getting in the market .

 

[sailor]

If the "emergency" lasts longer than 6 months, we can always tap into our HELOC since the interest rate on the HELOC is less than what we're currently getting in the market .

Word of caution - read the fine print on your HELOC. It might not be suitable for real "emergency" money.
Don't know about Canada, but in US it's possible for the bank to freeze your HELOC, if your credit rating substantially changes (a job loss for example).

 

[Calgary_Girl]

Word of caution - read the fine print on your HELOC. It might not be suitable for real "emergency" money.
Don't know about Canada, but in US it's possible for the bank to freeze your HELOC, if your credit rating substantially changes (a job loss for example).

Not up here as far as I know . The Canadian banks escaped the credit crisis pretty much unscathed.