Best investment vehicle for timeline of 5-10 years?

[Moleskin Moyer]

I want to start contributing to a pot of money that I want to keep very liquid. I may tap into it anywhere between five to ten years from now for any type of expenses like down payment, health care, etc. What investment vehicles do you suggest I use?

 

[Spanky]

money market fund or short-term bond fund.

 

[Senator]

5-10 years is a long time. I like the Fool's recommendation.

Rule 1: If you need the money in the next year, it should be in cash.
Rule 2: If you need the money in the next one to five (or even seven) years, choose safe, income-producing investments such as Treasuries, certificates of deposit (CDs), or bonds.
Rule 3: Any money you don't need for more than five to seven years is a candidate for the stock market.
Rule 4: Always own stocks.

Fool's Rules for Asset Allocation

 

[Moleskin Moyer]

Spanky and Senator, thanks for your suggestions!

 

[nun]

A balanced fund....so VBINX or......psst Wellesley or Wellington

 

[pb4uski]

CDs or target maturity bond funds. Or if you're less sensitive to what it earns or want more liquidity, perhaps an online savings account.

 

[MBAustin]

If income taxes are a concern, a limited-term tax-exempt fund might work. I use VMLTX for this - the share price has varied in a 2.5% range over the last 5 years ($10.95-11.22) so the principal is pretty stable. I get the interest in cash as part of our normal budget and the principal is there for spending as needed.

 

[DrRoy]

5-10 years is a long time. I like the Fool's recommendation.

Quote:
Rule 1: If you need the money in the next year, it should be in cash.
Rule 2: If you need the money in the next one to five (or even seven) years, choose safe, income-producing investments such as Treasuries, certificates of deposit (CDs), or bonds.
Rule 3: Any money you don't need for more than five to seven years is a candidate for the stock market.
Rule 4: Always own stocks.

Fool's Rules for Asset Allocation

+1 Another vote for Senator's post.

 

[walkinwood]

I can give you the correct answer in 5-10 years.... till then..

It depends on what you need. Will you need a portion of the money or the entire amount for one expense within that 5-10 year period? Or will you need portions throughout the 5-10 year period. What volatility can you tolerate on the funds? ie. will you be okay if the funds are 10% less at the moment you want them? 20% 30%?

There are so many variables that it is hard to have a definite answer.

I think any money you need in 5 years belongs in a very safe investment like an FDIC insured CD.

 

[Turn_the_Page]

I'd stick to my asset allocation and drop this money into that pool. This is assuming that you have an emergency fund etc. You didn't say what % of your net worth this money represents. This, obviously, wouldl change the decision.

 

[Moleskin Moyer]

If income taxes are a concern, a limited-term tax-exempt fund might work. I use VMLTX for this - the share price has varied in a 2.5% range over the last 5 years ($10.95-11.22) so the principal is pretty stable. I get the interest in cash as part of our normal budget and the principal is there for spending as needed.

MBAustin, does VMLTX's interest get deposited in your bank account as cash? Is it on a monthly basis?

 

[mrfeh]

MBAustin, does VMLTX's interest get deposited in your bank account as cash? Is it on a monthly basis?

You can have them treat the dividends howevery you want - reinvest or send them to your bank account. And yes, it's monthly.

At this moment, I'd prefer VFSUX over VMLTX. Even after taxes, the VFSUX dividend is higher.

 

[MBAustin]

Correct, we get our dividends deposited monthly directly into our bank savings account.