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8k to invest( will need in 4-5 years)
Old 05-14-2010, 04:07 PM   #1
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8k to invest( will need in 4-5 years)

Guys,

I need your help. I will have around 8k to invest in a TAXABLE account, I do not have an immediate need for it but will probably need it to buy another used 20k car in about 4 to 5 years. I like to pay cash each time I buy a car.

What would you recommend me investing in? ETF's, stocks, bonds, CD's? I would like around 10% growth on average for this 4 to 5 year period.

ETF's- which ones
Stocks- which ones
Bonds- which ones?

Thanks,

Delco
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Old 05-14-2010, 05:13 PM   #2
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Delco, I don't think there's an investment around that you can expect to deliver "10% on average" for the next few years. The only way to achieve those returns would be to take on enough risk to lose your shirt, e.g. venture capital. I think you should focus on getting 4-5% real return after inflation.

Given that you know you will need this money in 5 years, capital preservation is key. In your shoes I would avoid equities. Personally (and I live in Canada so YMMV) I would put some of it in provincial short term bonds (e.g. I have one maturing in late 2012 that has a yield of 5.85%), some of it in a 1 year GIC (same as a CD). You can usually get the best rates with 5 year CDs, but interest rates are going up so I would want to take advantage of the ability to roll it over.
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Old 05-15-2010, 04:49 AM   #3
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CD and 10K used car. I just got a 4 yr/3% CD at the credit union yesterday.
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Old 05-15-2010, 07:46 AM   #4
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I vote with jayc.
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Old 05-16-2010, 10:43 AM   #5
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I would only consider investing with a 10% goal if you could put the $ away for a minimum of 10 years, and even then you have a risk of loss. Maybe a short term government bond fund like SHY, with a 1-3 year maturity, would be something you could consider, but even here, you have a risk.

Recommendation: pay less for car; save more; and invest with safety paramount in your mind.

Jim
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Old 05-16-2010, 12:17 PM   #6
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Originally Posted by frequenttraveler View Post
I would only consider investing with a 10% goal if you could put the $ away for a minimum of 10 years, and even then you have a risk of loss. Maybe a short term government bond fund like SHY, with a 1-3 year maturity, would be something you could consider, but even here, you have a risk.

Recommendation: pay less for car; save more; and invest with safety paramount in your mind.

Jim

what about something like this:

3k in PEMDX
2k in BJBHX
3k in DODIX

They all are bonds that have a track record of producing year in and year out.

If interest rates rise, which I believe that they will by next year this time, will the values of these bond funds decrease?
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Old 05-16-2010, 08:05 PM   #7
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Quote:
Originally Posted by delcocarolina View Post
Guys,

I need your help. I will have around 8k to invest in a TAXABLE account, I do not have an immediate need for it but will probably need it to buy another used 20k car in about 4 to 5 years. I like to pay cash each time I buy a car.

What would you recommend me investing in? ETF's, stocks, bonds, CD's? I would like around 10% growth on average for this 4 to 5 year period.

ETF's- which ones
Stocks- which ones
Bonds- which ones?

Thanks,

Delco
for starters, 10% return over 5 years is next to impossible to predict.

If you had to choose between
a) 4k car in 5 years (because you lost 50% or more)
or
b) 12k car in 5 years (because I think this is best you can do with just 8k upfront)
c) 20k car in 14 years (because if you really want the 20k car, you need more time with just 8k upfront)


If it were me, I would shoot for b)
I would start with 40% equities and 60% bonds/cash year 1.
Each year I would liquidate at least 10% of the equities- so year 2 is 30-70; year 3 is 20-80, year 4 is 10-90 and year 5 is 100% cash. The equity exposure should allow for some moderate returns around 4-5% from that portion of portfolio.
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Old 05-19-2010, 12:05 PM   #8
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Quote:
Originally Posted by delcocarolina View Post
Guys,

I need your help. I will have around 8k to invest in a TAXABLE account, I do not have an immediate need for it but will probably need it to buy another used 20k car in about 4 to 5 years. I like to pay cash each time I buy a car.

What would you recommend me investing in? ETF's, stocks, bonds, CD's? I would like around 10% growth on average for this 4 to 5 year period.

ETF's- which ones
Stocks- which ones
Bonds- which ones?

Thanks,

Delco
If I needed money in 5 years I would put it into a bank CD. You are only going to get around 2% interest I would imagine. I am not up on the CD rates.
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