Where to Park "Extra" Money

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doitmyself

doitmyself

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Not sure where to begin. Let's say that you have an "extra" amount of money you want to keep somewhere, maybe $5,000 to $20,000 (gift, inheritance, or whatever). Assume that your general finances are in order: no debt, retirement funding in place (i.e. 401K + supplemental), kids out of college with no outstanding loans. Plan to retire in about 5 to 8 years.

Where's a good place to invest it with the following restrictions:
- needs to be low/no risk.
- needs to be somewhat available in case of extraordinary emergency (minimum withdrawal penalty), and available at retirement (5 to 8 years).
- want better interest than savings account.

Bonds, CD, money market??? I need to check with my retirement plan and/or credit union to see what other supplemental plans they offer that might meet my needs.

Kind of tough requirements above...want better interest, emergency availability,low risk.

Any ideas outside of the box? Thanks!
 
Bonds in a big stable company is where I would stash that money. Much safer than CD's or Gubmint stuff IMHO.

I would put some of it in a traditional or Roth IRA and anything I need liquid in a regular account.
 
You could consider a nice BIG oil stash loaded with FAR or clearance priced oil.

We know that oil prices will rise very soon and when they do....you'll have a nice stash to take care of your vehicles as well as your neighbors.
 
After loading your IRA to the max, I would look at 50% in 2 or 3 Mutual funds, and 50% in solid stocks that pay dividends and NO front end load.
 
The best I have found is the money market account at Ally, the rates are el sucko at around 1%, so not even sure it's worth it. You're describing a savings account, and there is no low risk investment that will provide any earnings right now. CD rates suck, and I personally wouldn't risk money that you need in an emergency in anything else.
 
I'd never buy bonds now. Unless you hold to maturity, they will lose value as interest rates rise.

I'd probably look into a stable mutual fund or etf of large high yielding companies or MLPs. If you're on the higher end of the funds range, just make your own mix of MLPs and high yield strong stable companies (and/or preferred stock)
 
Originally Posted By: LT4 Vette
What type of % return are you looking for ?

Well, my credit union best is at about 0.3% now and there are a handful of online high interest savings accounts advertizing 1.0% interest. So I guess this is my starting point.

I haven't studied the options for "short term" (5-8 years) and low risk. Is it even possible to hit the 2-3% mark with my requirements?

Just asking the collective brain trust here to see if there is some way to beat the dismal savings/money market rates while still adhering to my requirements.

Thanks for the input so far. This topic is a little better than my last one asking for "death planning" advice!
 
Originally Posted By: doitmyself

I haven't studied the options for "short term" (5-8 years) and low risk. Is it even possible to hit the 2-3% mark with my requirements?


Did you look at the PTTRX? It has returned 10.36% in the last year, 7.75%/yr. over the last 3, and 8.34% during the last 5, and 6.82% over 10 years. Yes is does fluctuate a bit from day to day and week to week, but clearly goes up steadily over time. Look at its chart.

It will blow "2-3%" out of the water over 5-8 years.
 
Originally Posted By: gfh77665
Originally Posted By: doitmyself

I haven't studied the options for "short term" (5-8 years) and low risk. Is it even possible to hit the 2-3% mark with my requirements?


Did you look at the PTTRX? It has returned 10.36% in the last year, 7.75%/yr. over the last 3, and 8.34% during the last 5, and 6.82% over 10 years. Yes is does fluctuate a bit from day to day and week to week, but clearly goes up steadily over time. Look at its chart.

It will blow "2-3%" out of the water over 5-8 years.


I'm looking at the site now. It looks too good to be true. What's the catch?
 
Originally Posted By: doitmyself

I'm looking at the site now. It looks too good to be true. What's the catch?


Bill Gross is one of the most defensive money managers around. He has a stellar reputation for capital preservation. Read his philosophy inside the Pimco website.

Not really any "catch". You do have to accept some fluctuation. Do note however, with the immense amount of Fed easing that has taken place (money printing) at some point inflation is inevitable. With that in mind, you can lose by "earning" just 2-3%, as inflation could easily erode value. So, any bank account at 0.1% or CD at 1.5% is not really as safe as it might sound.

Also notice PTTRX has Morningstars 5 Star fund rating on it.
 
Assuming you already have all the other retirement cost taken care of, I'd put it in either bond or money market. 5-8 years seems short if you MUST pull money out for retirement. If you don't need to worry about pulling it out at 5-8 years, probably invest in something you can take a bit more risk on, like an ETF fund or a rental property.
 
PTTRX minimum investment is 100k?


PTTRX is the institutional version of the fund. Pimco has several clones of it for individual investors. PTTAX is the other version, if memory serves. The expense ratios vary a bit, but fund composition is virtually identical.
 
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