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Cheflife15

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Curious if anyone has some ideas for some safer investments for a 2 year period. We have about 30 to 40 thousand that we can invest. Looking for something relatively safe as well probably combine it with some money in savings to purchase a home. 

My wife's financial advisor at her nursing job suggested a high yield savings at .5 percent which seems absurdly low. I've been doing well in the stock market but I'm debating putting more out of my investment account to find something a bit safer. 

Any and all advice is welcome and I'll continue to research after. 

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2  year period is very short time period.  I wouldn't put that money into anything other than something like CDs, high yield money market or just park it in a savings account or other VERY safe investments.  You aren't going to get any "return" but you aren't risking any of your principal.  

 

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2 hours ago, Cheflife15 said:

My wife's financial advisor at her nursing job suggested a high yield savings at .5 percent which seems absurdly low. I've been doing well in the stock market but I'm debating putting more out of my investment account to find something a bit safer. Looking for something relatively safe as well probably combine it with some money in savings to purchase a home. 

There are no high yield low risk investments anymore, thats why people and institutions have to gamble in the stock market chasing yield

Currently people are spending money hand over fist for items they don't need and really can't afford.

https://wolfstreet.com/2021/12/01/when-will-consumers-balk-at-surging-price/

The better strategy would be to accumulate cash in reserves despite the effects of price inflation on bank accounts. When a recession hits and the boom turns into a bust the wise strategy is to buy the other guy's problem at a substantial discount because you have cash.

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With inflation as it is, anything not making gains to match it, is a loss.  But what you do depends on how much you are depending on that 30 to 40k at the end of the 2 years.  If its imperative you still have it in two years then any investment with potential for gains may be too risky.  Two years is a short window.  Not much time to recover a loss.  Sure, you could get lucky with an index fund for example, but you could also lose a chunk of that money if the timing is bad.  If that’s a situation that will force you to alter your plans in two years, then it may be better just to avoid any loses and not worry about gains.

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Yeah most of the sentiment here is my thought process.  I just wanted to make sure I wasn't missing anything.  I've made great returns in the market and up a part time job just to make some extra to invest.  I might park some safe money in high yield money market and dollar cost average into the market some more. 

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1 hour ago, Cheflife15 said:

Yeah most of the sentiment here is my thought process.  I just wanted to make sure I wasn't missing anything.  I've made great returns in the market and up a part time job just to make some extra to invest.  I might park some safe money in high yield money market and dollar cost average into the market some more. 

Sound plan. 

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On 12/10/2021 at 7:08 AM, Cheflife15 said:

I might park some safe money in high yield money market and dollar cost average into the market some more. 

Go take a look at Series I Savings Bonds. They're tied to inflation and are currently paying 7.12%. As long as inflation stays up (and today's report shows that), these bonds will make you some coin. You have to hold them for at least 12 months and can buy up to $10k a year per social security number.

This rate is a lot better than the 0.5% being paid by the high yield savings accounts.

https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm

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On 12/10/2021 at 7:08 AM, Cheflife15 said:

  I've made great returns in the market and up a part time job just to make some extra to invest.  I might park some safe money in high yield money market and dollar cost average into the market some more. 

Keep this mind before putting more money into the market.

https://www.cnbc.com/2021/12/01/ceos-and-insiders-sell-a-record-69-billion-of-their-stock.html

Returns in the market aren't realized until the positions are sold and the cash in your account 

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3 hours ago, Sniper said:

Go take a look at Series I Savings Bonds. They're tied to inflation and are currently paying 7.12%.

Looks like CNBC is reading my post here...

Also, you can each buy $10K this month, then in January buy another $10K each. And if you have a business, that business can also buy up to $10K a year:

......."Another downside of I bonds is the annual purchase limits. Individuals generally can’t buy more than $10,000 in electronic assets per calendar year.

However, with the year-end approaching, an individual may buy $20,000 by purchasing $10,000 by Dec. 31, 2021, and another $10,000 on Jan. 1, 2022, or later."

This is exactly what I am doing.

https://www.cnbc.com/2021/12/10/couples-can-fight-inflation-with-7point12percent-risk-free-interest-on-40000-.html

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21 hours ago, Cheflife15 said:

Looking for something relatively safe as well probably combine it with some money in savings to purchase a home. 

Something to also consider, buy now (borrow more if you can) with the low interest rates, in a few years if rates go up, whatever you gained, you might end up paying back more. Take a 30 year loan make some extra payments, as many as you can, the money you save in interest really adds up.

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1 hour ago, Bklynracer said:

Something to also consider, buy now (borrow more if you can) with the low interest rates, in a few years if rates go up, whatever you gained, you might end up paying back more. Take a 30 year loan make some extra payments, as many as you can, the money you save in interest really adds up.

This is something to look at too. We have plenty of money to buy a house and excellent credit. We were under the impression it might be better to wait since house prices are insane now and we can pay off a 30 year loan faster with the money we have saved. We can do probably 3 extra payments a year 

1 hour ago, Bklynracer said:

Something to also consider, buy now (borrow more if you can) with the low interest rates, in a few years if rates go up, whatever you gained, you might end up paying back more. Take a 30 year loan make some extra payments, as many as you can, the money you save in interest really adds up.

This is something to look at too. We have plenty of money to buy a house and excellent credit. We were under the impression it might be better to wait since house prices are insane now and we can pay off a 30 year loan faster with the money we have saved. We can do probably 3 extra payments a yea

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3 hours ago, Bklynracer said:

Something to also consider, buy now (borrow more if you can) with the low interest rates, in a few years if rates go up, whatever you gained, you might end up paying back more.

That's an area to be careful of. One reason house prices have gone up is because rates are low. Many people buy "payments" and not 'houses". A realtor always tries to push you to the highest payment you can afford. First they qualify you based on how much you can borrow/afford, then they find the house that fits that payment. Problem is, if rates climb up, house prices will fall, to keep payments in line. You can get trapped with a high priced house you can't sell, like in 2008.

1 hour ago, Cheflife15 said:

This is something to look at too. We have plenty of money to buy a house and excellent credit. We were under the impression it might be better to wait since house prices are insane now and we can pay off a 30 year loan faster with the money we have saved.

House prices ARE nuts. That would be a good plan, save as much as you can for a good down payment, and gain some equity. If rates go up (which I don't think will happen any time soon), you'll have a good equity buffer if house prices come back down.

Also, we still haven't seen the complete fallout from the Covid foreclosure and eviction moratoriums yet, and they might have a future factor on inventory and prices.

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3 hours ago, Cheflife15 said:

Any suggestions on a favorite website or broker to buy the bonds? Treasurydirect.gov has some pretty horrible reviews. 

What bad reviews? I found it to be straight forward and easy to do. Just set up an new account and transfer from your bank. Transfer was done by the next day. No fees.

Something else, depending on your tax return status, besides the maximum of $10K a year, you can get up to $5K in tax refunds in I Series Bonds, so it can give you another area to gain the current 7.12% return.

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The Series I inflation linked bonds may be your best bet for shorter term investements to get a nominal return and also have safety.  That's not a bad choice given your situation and current market and inflationary considerations.  If inflation flatens ore decreases after next April when they reset at least your principal should be protected and you should still be earning a rate at least equal to inflation.

Per the website, " if you cash them before five years, you lose the previous three months of interest. (For example, if you cash an I bond after 18 months, you get the first 15 months of interest.)."  Something you may want to keep in mind.  Still a much sounder choice than putting money in the market for 2 years.  Especially money can not afford to lose.
 

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36 minutes ago, gleninjersey said:

The Series I inflation linked bonds may be your best bet for shorter term investements to get a nominal return and also have safety.  That's not a bad choice given your situation and current market and inflationary considerations.  If inflation flatens ore decreases after next April when they reset at least your principal should be protected and you should still be earning a rate at least equal to inflation.

Per the website, " if you cash them before five years, you lose the previous three months of interest. (For example, if you cash an I bond after 18 months, you get the first 15 months of interest.)."  Something you may want to keep in mind.  Still a much sounder choice than putting money in the market for 2 years.  Especially money can not afford to lose.
 

Yeah I saw that. I'm thinking it'll be about 18 months or so. Regardless, I'm comfortable knowing 7 percent for 15 months is better then a high yield savings account for 18 months.

 

Thank you all!

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42 minutes ago, gleninjersey said:

" if you cash them before five years, you lose the previous three months of interest. (For example, if you cash an I bond after 18 months, you get the first 15 months of interest.)."  Something you may want to keep in mind.

I saw that too, so for a short time investment, you could lose a point or two. But, if the current 7% rate holds for a while, you'd get hit for 1.5% over a year (0.5% a month). Still not bad for a 5.5% or so net return. Still beats a high yield savings account at 0.5% for the year.

And, like you said, all your initial investment stays intact, instead of a  potential loss in the market.

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49 minutes ago, gleninjersey said:

If inflation flatens ore decreases after next April when they reset at least your principal should be protected and you should still be earning a rate at least equal to inflation.

Or conversely, if inflation screams even higher (most likely), the reset in April could be even higher.

I'm actually thinking about gaming the system, and overpaying my taxes by $5K this year, then taking the tax refund the beginning of next year in I bonds. Will get me another $5K in bonds..

Hmmm, if I list poochie as a dependent, and get him a TIN number, I get also pull $10K in his name.... :scratchhead:

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1 hour ago, gleninjersey said:

The inflationary part resets.  So in April that part of your return will change depending on what inflation rate is in April.

Yep. The true rate by Treasury Direct is actually a 6 month rate, adjusts every 6 months based on inflation. They advertise it as a yearly return, currently at 7.12% as of Nov. 1.

And based on how the Brandon administration is handling the economy and supply lines, my bet it stays at this level or goes up in April.

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On 12/10/2021 at 11:34 AM, Sniper said:

Go take a look at Series I Savings Bonds. They're tied to inflation and are currently paying 7.12%. As long as inflation stays up (and today's report shows that), these bonds will make you some coin. You have to hold them for at least 12 months and can buy up to $10k a year per social security number.

Just a Public Service reminder. You only have a few days left to get into this game, and purchase up to $10K in savings bonds to get that 7.12%. Then, in the beginning of January, you can purchase up to another $10K. The reports recently are that higher inflation is with us for a while, so this rate should stay up.

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I've used Treasury direct for years and just opened a new account fire the Mrs.  The website is pretty basic, but very easy to use.  I am not crazy about the password input method (I guess it's to foil keystroke loggers? but can't cut/paste into it).

And in low inflation environment (like we've had since 2008) it's guaranteed to double if held for the 20 year maturity. Which translates to about 3.5% annual guaranteed.

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15 minutes ago, leahcim said:

I am not crazy about the password input method (I guess it's to foil keystroke loggers? but can't cut/paste into it).

Yeah, I thought that input method was a little weird too, but it must keep the bad guys out.

For someone who has some idle cash sitting around or has some money parked in Money Markets, this current return on the I bonds can make some coin in the near future.

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26 minutes ago, Sniper said:

Yeah, I thought that input method was a little weird too, but it must keep the bad guys out.

For someone who has some idle cash sitting around or has some money parked in Money Markets, this current return on the I bonds can make some coin in the near future.

They used to send you a little card with a 2d matrix of letters. Every time you login they'd ask for the value of an arbitrary cell (they'd give you the row and column) of that matrix. Basically was an early authenticator.

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I'm all set up. Me and the wifey put in 10 k each and we'll do the same tomorrow. Always nerve racking moving around money like that. 

I'm thinking of having her speak to a financial advisor as well. She has too much money losing money in her savings account. 

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7 minutes ago, Cheflife15 said:

I'm all set up. Me and the wifey put in 10 k each and we'll do the same tomorrow.

Nice... One tip, if you put in $10K each today, you'll have to wait until after Jan. 1st to do the next $10K.

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