Where to invest

[Spartana]

If you had a large lump sum of money to invest (from a house sale) that you wouldn't need for 2 years, where would you invest it in the interim? Safety being more of a concern then growth.

[gadder]

A house sale means a BIG lump of dough. With that, I'd want some growth *and* safety.

With half, for safety, buy something with no charges/fees/etc., like treasury bonds, gov't savings bonds, bank GICs.
With half, for growth, buy something with little charges/fees/etc., like index funds.
Do not trust anyone else but yourself to manage your finances.
Above all, reduce debt, pay for personal capital items such as new teeth or a new car, and get done big needed house repairs.

And for G-d's sake - enjoy life a little!!

[Teacher Terry]

I agree with the above except that she won't have any house repairs-remember no house:~)

[Spartana]

A house sale means a BIG lump of dough. With that, I'd want some growth *and* safety.

With half, for safety, buy something with no charges/fees/etc., like treasury bonds, gov't savings bonds, bank GICs.
With half, for growth, buy something with little charges/fees/etc., like index funds.
Do not trust anyone else but yourself to manage your finances.
Above all, reduce debt, pay for personal capital items such as new teeth or a new car, and get done big needed house repairs.

And for G-d's sake - enjoy life a little!! New teeth? Ha Ha - that cracked me up. Well I don't need those yet but I will put about $25K of that money into a basic bank savings account to use if needed to supplement my pension while I travel for a couple of years. No debts to pay off either. So it's more about deciding where do I put the house money for 2 years or so until I decide if I want to buy another place (looking unlikely). Probably wouldn't want to lock it up any longer than that yet. Good suggestions - thanks!

[awakenedsoul]

Hi Spartana!

Bonds are what came to my mind first. I think Suze Orman recommends government municipal bonds, but my memory on what she said is a bit hazy. It sounds like you've done really well in real estate. I would probably buy a piece of land and let it sit there. But, you wouldn't have dividends and you'd have to pay property taxes. I'm just amazed at how property here in CA is going back up again!

[Spartana]

Hi Spartana!

Bonds are what came to my mind first. I think Suze Orman recommends government municipal bonds, but my memory on what she said is a bit hazy. It sounds like you've done really well in real estate. I would probably buy a piece of land and let it sit there. But, you wouldn't have dividends and you'd have to pay property taxes. I'm just amazed at how property here in CA is going back up again!

Hi Awakenedsoul - Nice to see you back here after the long absence - you've been missed! Bonds are something I know very little about (other than the old Savings Bond like I-Bonds and EE-Bonds) so will check those out. I don't need to receive dividends and would just roll them back in (if that can be done). I guess my questions are: are municipal Bonds redeemable after 2 years or so without any penalties (when I may want to cash in any investments in to buy another house), and are they tax deferred or tax free? I know I-Bonds are tax deferred, and federal tax free I believe (at least the old ones were), and you could cash them in at any time after a year without penalty. Low interest but safe.

[GeorgeParker]

Caution: If interest rates go up (and they have to since they're near 0%) the value of any bonds you own will go down. Remember that and repeat it like a mantra every morning unless you own actual bonds, not a bond fund, and are planng to hold them till maturity.

[Rogar]

Personally, I wouldn't buy any bonds that would mature any longer than the 2 years that you think you would want to get the money back. Interest rates are destined to go up (according to about all the finance guys) and if you have to sell them before maturity you will take a hit in the value of the bonds and could end up loosing money. That would also include most bond funds. There's probably a primer on bond buying somewhere on the internet. Also, as another opinion, I'd would not even want to put money in stocks for that short of a time. Maybe a small percent of the total into an index fund or two.

As boring as it might sound, I'd probably go with bank CDs or spend a little study time and buy some shorter duration government bonds. That's pretty conservative, but also pretty safe. I-bonds might not be bad. My memory says they are tax deferred and tax free for state, but not federal taxes. You can redeem them any time after a year, but suffer a quarter of a year interest penalty to redeem until you've had them for five years. You can only buy a limited amount each year and it's either a 5 or ten thousand dollars limit per year last I checked.

[awakenedsoul]

Thanks Spartana. What George and Rogar are saying makes sense. Sorry, I missed the part of your post saying "two years." Oops. I was thinking much more long term. In that case, I would probably buy CD's, even though interest rates are low.
If it were me, I would probably buy a rental property to keep through retirement. I know you don't like the hassle of home repairs, etc. Also, you're talking short term...Your expenses are so low that you could live off of the rental income. I'm just thinking out loud here. I bought my house for $89,500. and it would rent for at least $1,000. a month. It's nearly tripled in value. I know you timed things well with your home sales.

I know people who have made an excellent return on their stocks recently, but that's more risky. Suze Orman's book The Money Class has interesting investment advice. She also mentions investing in water and power companies. Needs.

[Spartana]

Roger - Yeah I think CDs will end yup being the best way to go as I am a pretty cautious person and would rather have safety and a guaranteed return even if interest rates are sooo low. Won't have to worry about high income taxes that way! And I know that I can have them locked up for very short periods of time so that if I do want them, I can get them. Right now my Credit Union actually is offering the same rates on shorter term CDs as longer term ones so why lock them in for years..

Awakenedsoul - I hear you on the land or real estate investment option. Probably a good way to go financially but I really want to keep things simple (and easy) and don't want the hassle or worry that comes with owning property (plus, taxes, insurance, maintenance, tenants, property managers, etc...). Especially if I won't be around to deal with that kind of stuff. Just kind of wanting to be totally unencumbered by anything and everything right now.

[GeorgeParker]

Yes, I was thinking the same thing. If someone isn't already comfortable with making stock/bond investing decisions and wants to park a lot of money somehwere safe for two years, FDIC-insured CDs are usually the best choice. ING Direct (now owned by Capital One) has always had good CD rates, but as always cavate emptor and shop around before you buy. URL: https://home.capitalone360.com/cds?isBus=false&customerType=1

George.

[Spartana]

Yes, I was thinking the same thing. If someone isn't already comfortable with making stock/bond investing decisions and wants to park a lot of money somehwere safe for two years, FDIC-insured CDs are usually the best choice. ING Direct (now owned by Capital One) has always had good CD rates, but as always cavate emptor and shop around before you buy. URL: https://home.capitalone360.com/cds?isBus=false&customerType=1

George.UGH! After seeing that CD's locked in for 60 months are only paying .90% I think I'll change my mind. I think my basic money market savings account at my credit union pays around 1% and I can access that when ever I want so maybe that's the way to go unless I want to actually invest part of it into mutual funds, stocks or bonds. Of course since my house hasn't sold yet, and I let the contract expire and will try again after summer, it's all a moot point until then anyways. Maybe interest rates will be up by then.

[GeorgeParker]

UGH! After seeing that CD's locked in for 60 months are only paying .90% I think I'll change my mind. I think my basic money market savings account at my credit union pays around 1% and I can access that when ever I want so maybe that's the way to go unless I want to actually invest part of it into mutual funds, stocks or bonds. Of course since my house hasn't sold yet, and I let the contract expire and will try again after summer, it's all a moot point until then anyways. Maybe interest rates will be up by then.

Yes, CD rates are low now and for that reason they are mostly a SAFE place to park money, not an investment. Money market funds, on the other hand, ask you to accept some risk in exchange for a higher interest rate.