Income from cash...where to invest?

[tightasadrum]

I've been away from this group for quite a while. DW had serious health issues, now better, and then she had a car accident taking surgery, now getting better. I also had to do cpr on a rental house after long-term tenant moved out. Retirement for me has been anything but relaxing.

Anyway, here's my question: where are you guys putting cash these days? I'm sitting on what is for me a lot of cash after two CD's expired. With bond returns so low, CD interest almost nothing and MM returns less than nothing I am at a loss of what to do next. A few years back I took some cash and bought another rental house and renovated it. My thinking at the time was that I would hold it a couple of years, get a 9% return from leasing it, and then sell it for a nice return. The last step in that plan was hijacked by the housing mess, so I'm sitting tight until...

I could buy another rental house, cheap, but that's a hole I'm already pouring too much time into. Any ideas for cash investment for income? Or should I just forget it and look for more bargains in equity investments? Any thoughts?

 

[rescueme]

As someone older (and wiser) has said many times, "Psst - Wellseley".

VWIAX Vanguard Wellesley Income Adm, mutual funds, quote, price - Morningstar

I/DW have more than a bit invested there, and are quite satisified over the pittance our respective CD/MM funds returns...

As former landlords, we don't wish to persue "possibilites" at our age. We're looking for less than perfect, more than CD/MM rates. VWIAX fits our needs, at this time of life.

As for you? Only you can determine what is best...

 

[Chuckanut]

How much risk are you willing to take? Wellsely is certainly less volatile than many funds, but it still responds to the market, going up and down.

 

[rescueme]

Wellsely is certainly less volatile than many funds, but it still responds to the market, going up and down.

Take a look at the dividends. Quarterly payments (checks) to me/DW are quite nice. Since we hold the account in Roth IRA's, what we receive is what we can spend.

It's a bit more than simple accumulation/returns on net value.

Just another view....

 

[Chuckanut]

I am not arguing against Wellsely, just want to make sure that people realize it invests in securities that can go up and down while they enjoy the income they produce.

 

[tightasadrum]

I can't say I'm surprised about the Wellesley recommendations. That's been a strong core fund for this group for as long as I've been lurking around. I'll look at it again, and thanks. My only concern with any bond fund at the moment is, with interest rates so low, the NAV will take a hit as rates eventually rise. I suppose you have to take the good with the bad.

 

[GregLee]

I'm keeping what little cash I have in a short/intermediate tax-free bond fund. It's getting over 3% and is equivalent to over 5% taxed.

 

[tightasadrum]

The key appears to be short to intermediate duration right now. Does anyone invest in actual bonds instead of bond funds?

 

[Mulligan]

I can't say I'm surprised about the Wellesley recommendations. That's been a strong core fund for this group for as long as I've been lurking around. I'll look at it again, and thanks. My only concern with any bond fund at the moment is, with interest rates so low, the NAV will take a hit as rates eventually rise. I suppose you have to take the good with the bad.

I would be fired quickly if I was ever hired as a financial advisor, but you seem to be reluctant to risk your capital, and interest rate spikes appear to worry you. I would be careful about going against your gut and dumping it all into the market if that is not your nature. Some small potato ideas you might think about 1) Explore a 7 year CD and see what early termination fees are. Penn Fed has a 2.75% rate. One year interest penalty, but if rates spike in 2 years you are still better off taking the penalty than having a one year cd. Plus if rates don't budge you continue to get the better payout waiting. 2) Several local banks in my area anyway offer 3% and 4% interest on your checking account ($30k max) if you do direct deposit and make 8 or so debit transactions. 3) If you are married you can get 20k in I Bonds that currently pay 4.6% for next 6 months and 3.06% the following 6 months if you purchase before Oct. 31. Pickings are slim in the guaranteed world, but it is better than 1% 1 year CD, and it keeps you from beating your head against the wall if you put it all in the market and it goes down. If someone else has 100% ideas that pay better please speak up, because I'm ready to try it also!

 

[W2R]

I just invest in mutual funds (whether bond or equity). I moved much of my money market balance to Vanguard's Total Bond Market. That way it gives my monthly income a little extra boost. Of course when interest rates go up I may wish I had left it in money market or bought a CD as others suggest. I don't think there is a perfect solution to your dilemma, or if there is then I don't know about it yet.

 

[captiva]

prosper.com, check it out

 

[Animorph]

I parked my spare cash in FGMNX, a GNMA bond fund. Less volatility than most of the other options I looked at (particularly 2007-2009) and a decent current yield. Up a few percent in price from when I bought it, plus dividends. Much better than the 0% I was trying to beat. But I'm no bond investor, so maybe someone has a better current recomendation.

 

[Donzo]

Vanguard Life strategy fund is good - 10% stock and the rest bonds/cash. Decent yield and pretty darn safe....

 

[Koolau]

You didn't indicate how much money we are talking about, but here would be my free suggestion (remember free advise is worth every penny you pay for it!)

Search these threads for details, or see Treasury Direct (or start by going to a Federal Reserve Bank) and check out I-Bonds. For another couple of weeks (I think) the set point, based on the 6-month inflation rate is over 4.5%. The next set point (for the next 6 months) is (I think) over 3%. So, for a year, you could get a half decent rate on 20,000 of your cash ($5K for you and $5K for your wife in paper form and the same amounts from Treas. Direct).

Again, do you research, but this is what I did and the major downside is that you will lose some of the interest if you cash in after the 1 year (drop dead) waiting period. Still, seems like the best deal in town, based on safety and interest rate.

Otherwise, I'd go with rescume's suggestion (borrowed with love from unclemick.)

Good luck with this. These are tough times for cash!! Oh, and YMMV.

 

[tightasadrum]

I'm just back from dealing with a plumbing issue. I thought I would watch football this afternoon,but...ah, the life of a landlord.

So many suggestions. thank you. I'll be looking into each of them. I prefer to spread the cash around anyway. Bernie Madoff could have never crippled me.

 

[tightasadrum]

prosper.com, check it out

I have to ask, captiva: have you invested in this peer-to-peer organization yourself?

 

[W2R]

Captiva, also please post an introduction in the 'Hi, I am..." section so that we can get to know you. Thanks!

 

[justplainbll]

The key appears to be short to intermediate duration right now. Does anyone invest in actual bonds instead of bond funds?

We have a muni portfolio of 13 issues with a current yield of 4.48%.
Yields to first call range from 3.15% to 5.48%.
The earliest purchase in the muni portfolio was done in 2002, the most recent in 2010.
The first call dates range from 2012 to 2023.
20% is in AA3 rated, 11.5% in AA2 rated, and 68.5% in AA1 or better.
If you have several brokerage accounts, it pays to shop around because the markups can vary substantially.

 

[tightasadrum]

I suppose I should mention, for clarity, that I do have other investments in equities, mostly index funds, and commodity futures fund (pcrix), and a managed fund with a broad 60/40 collection. But since I'm trying to delay social security for at least one more year for full benefits, I miss that 4.5% the CD's were paying when I pay bills each month. I wanted to make it clear that I don't fear volatility in the market for my long-term investments, but we still have to feed the pets, gas up and pay the light bills every month. So, more income is more better.

 

[brewer12345]

I would pursue the options listed above nd also look into a modest slice in junk. While not totally embarassingly good a deal, junk has sold off with equities and yields are reasonably attractive. You could also look at some floating rate loan funds or closed end funds. But these things are considerably more risky than a CD (but less than equities).

 

[clifp]

I suppose I should mention, for clarity, that I do have other investments in equities, mostly index funds, and commodity futures fund (pcrix), and a managed fund with a broad 60/40 collection. But since I'm trying to delay social security for at least one more year for full benefits, I miss that 4.5% the CD's were paying when I pay bills each month. I wanted to make it clear that I don't fear volatility in the market for my long-term investments, but we still have to feed the pets, gas up and pay the light bills every month. So, more income is more better.

It sucks to be a saver or a retiree depending on a portfolio right now. (Of course it sucks worse to be unemployed.)

In addition to the good suggestions above, if you want to keep your money pretty liquid to do as you say pay the utilities. It maybe worth looking at some the 1%+ saving accounts offered by internet banks. Costco has been having a promotions with Capital for 1% saving account (plus a rebate) for a long time. I know several other internet banks offering similar rates.

 

[justplainbll]

The key appears to be short to intermediate duration right now. Does anyone invest in actual bonds instead of bond funds?

In addition to my previously described investments in individual muni bonds, we have muni bond mutual funds in an amount equal to 20% of the individual bonds held. The current yields on the muni bond mutual funds range from 1.3 to 4.0% with holding periods from as early as 10.7 years ago.

 

[obgyn65]

I only have CDs and munis. Have you thought having a ladder-CD approach ?

Anyway, here's my question: where are you guys putting cash these days?

 

[obgyn65]

Sorry I forgot to say that it is nice to read your wife is doing better. Take care.

DW had serious health issues, now better, and then she had a car accident taking surgery, now getting better.

 

[Fishingmn]

I know you said you were scared off by your experience with rental/investment property but that's exactly what I've been doing lately. In the last year I've purchased 5 rental properties with cash. All of them were bank owned or short sales and I'm getting them at prices of less than 50% of what they sold for 5-6 years ago. I'm only buying townhouses (no yard maintenance) and newer units built since 2000 (less upkeep). Earning 9%+ and plenty of appreciation options down the road. I project those 5 units will bring an income stream of over $30k/year which is almost half of what I'll need when I do ER in 3-5 years.