Cash: To invest/preserve for 4 years.

[MichealKnight]

Hello Everybody.... was hoping to get some opinions.

I have some cash (400k) that I've sort of earmarked to start being used, 4 years - 5 yearsfrom today. This money will be part living expenses, part college expenses. And I'm mulling where to put these funds - where of course there's minimal risk - but with chance of decent returns. Decent is subjective - in this case - at least beating CD's....but not investing in ARK funds


CD: Approx 3.65%
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Keep it simple, it's locked up for 4-5 years and 3.65 doesn't look horrible.


MUNI: 2.94% Yield
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VPAIX for Pennsylvania. If I do the 2.94% - with zero taxes..... the total balance at the and is within 1% of CD. I feel that I'm adding risk for no return.

HOWEVER, is it possible rates start to drop next year? If so - would I vet some price appreciation because if so - then it beats CDs. They say these are 6-10 year durations. FWIW - the VPAIX share price - is 7% less than what it was pre-pandemic.


VWINX Wellesley
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Bond-Heavy - but not wild junk stuff. 7.4 year duration avg.

Stocks - as everyone here knows - Blue Chip stuff. Doesn't mean they don't go down, but to me it just means - there's lesser risk than investing in ZOOM-ish stuff.

Again if rates drop a bit or even level off - then would that not be good for the bond appreciation? Also, as an admitted layman I'm looking at their bonds -- - Amazon, BMW credit, BOA, Comcast - I dunno - it maybe simplistic but I foresee those guys, paying their bills.


Right now, I feel like putting 70% into CDs @3.65% - - and 30% into VWINX feels suitable. (maybe wait a few months and 3.65 goes to 3.9?)


I've done the cursory $20k in I-BONDS

Would really appreciate any opinions or ideas, even question, comments and insults are good too.

 

[Al18]

Divide by 4 and do a CD ladder. At Fidelity, 1 year is 3.15%, 2 year is 3.45%, 3 year is 3.55% and 4 year is 3.60%. If interest rates creep up, you'll be able to take advantage of the higher rates.

 

[monte1022]

VWIAX/VWINX


Dropped 290k (taxable ) in this over last 24-36mo, now at 285k after being up to 310k. It's not needed for 4-5yr after I turn 59.5 and other funds will also be available. These funds do move both ways and spit off lots of dividends. Once our income drops this won't be such a problem.

 

[DawgMan]

Divide by 4 and do a CD ladder. At Fidelity, 1 year is 3.15%, 2 year is 3.45%, 3 year is 3.55% and 4 year is 3.60%. If interest rates creep up, you'll be able to take advantage of the higher rates.

+1

If you truly need the whole $400K, then not sure it is worth taking any more risk here. If part of the $400K is being used in say year 6 or 7, you could possibly carve those $$ out and get a little more aggressive, but it you would have to get comfortable with the risk/reward analysis... which is personal to you.

 

[pb4uski]

You can do more than $20k in I Bonds but it won't make much of a dent in $400k. You can buy gifts for each other for 2023, 2024 and 2025 delivery... that would be $60k on top of the $20k that you currently have. You can do $5k as a tax refund. We have his, her and joint trusts that buy I Bonds and adds $30k to our annual allowances increasing our annual allowance to $55k (the trusts can't buy gifts though).

Instead of CD's I've bought 2 and 3 year GSE bonds yielding 4% over the past week or so. They are callable so there is some risk that if rates decline that they might be called but YTC is 4% because I have bought them at par. You could use GSE bonds in a ladder and might squeak out a little more yield... when I'm doing my ladders I look across CDs, USTs and GSE bonds and generally chose the ones that are highest yielding.

 

[mountainsoft]

Maybe keep some in an online savings account (Discover is paying 1.7% now) and the remainder in some combination of VFIAX and VTAPX (balance risk vs return):

https://www.portfoliovisualizer.com...ocation2_3=60&symbol3=VWINX&allocation3_1=100

 

[Dash man]

I wouldn’t expect interest rates to drop in the next 2-3 years. At best they’ll level off. Individual bonds you’re willing to hold to maturity are better than a fund with bonds. Other than that, CDs, treasuries, HYS accounts or money markets are your best bets. I’ve been doing a little of each.