What to do with $50K


Thinks s/he gets paid by the post
Oct 18, 2002
Have approx. $50K after tax money just sitting around in a Vanguard MM account. The thought was to use it as a new auto fund account, in reality probably won't buy any vehicles for at least two years. Been there for a couple of years and it grates me to leave it earning a safe 4-5% return. Any thoughts on putting it into balanced index or wellington fund and maybe trying to do a little better. Also have a years worh of income in the local bank drawing too little, but DW feels a bit more secure with the cash cow near by.

Any thoughts ?
You could ladder your year of income into CDs.  That would probably prop it up a little but your local bank may not make it worthwhile.  Vanguard has CDs available that you could write checks on the funds as the CDs mature.

If your $50K is "emergency money," getting 4-5% isn't bad.  If its just "money," put it into your regular asset allocation plan.
Although it grates you to leave it earning a safe 4-5% return, just think that if you put it into a balanced index fund, that 40% of it would be earning 4-5% anyways.

So figure out your asset allocation of equities:fixed and just count your cash as part of the fixed.
Look at it like this. The stock market has had a good run. If you keep it in MM, you have locked in the value. If you put the money in play, there is a chance of a correction. Since you need the money in two years for a planned extraordinary expenditure, I would advise keeping it in MM.
If $50k is your emergency fund plus you plan to buy a vehicle in a couple of years, then 5% in PMMF is the best place for it. Don't let it burn a hole in your pocket, just consider it as part of your overall portfolio.
If you need the money in 2 years for sure, I'd avoid stocks with risk of correction - unless you can have a "Plan B" around car acquisitions and can push purchases out additional years.

$50K is a decent car fund - maybe you put some in stocks and "vary the car you buy" depending on the market.
Correction: Kia
Stable Market: Toyota
Bull: Mercedes

But don't listen to me - I've never spent more than $8K on a car - actually adding up all the cars I've ever owned might sum below 50K.....(I'm almost 50).
We have a couple of cash accounts; a local credit union MM where we park expense money for the next 6-9 months for easy access and another account with Vanguard for longer term money. Any more than 2 years of expense cash goes into index funds. I want the security of the MM funds for 2 years of living expenses and can live with some market swings with the next couple of years of expenses. Beyond that we are in liquidation mode of our after stock portfolio for a couple of years and by then I can then draw on my IRAs or sell more after tax stock.

I just like having a number of options for raising cash for living expenses. I also like having a solid 2 years of cash in a MM fund where it will continue grow over inflation yet is easy to get to when needed.
Delawaredave said:
$50K is a decent car fund - maybe you put some in stocks and "vary the car you buy" depending on the market.
Correction: Kia
Stable Market: Toyota
Bull: Mercedes
I was thinking along these lines as well. Mercedes could be good for a pop if they unload Chrysler. I would also put a big chunk in Honda, buying on weakness. Mazda is chasing Honda right now for share and I think that is a temporary phenomenon. I think it would be a perfect outcome to buy a new car with the proceeds of either of these investments. 8)
FWIW, not into big expensive cars and currently drive a 99 Taurus and 99 Explorer and a FJR 1300 motorcycle. Both cars with less than 80K miles on them. When I do break down and buy another car or two, I will probably go for a small truck and a small SUV. I hate spending money on vehicles and am not one to try to impress people with a fancy car.
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