Short term investments?

[Smawgunner2]

We moved my mother into a retirement home and have sold her house. The money will be needed for her future care when the time comes. The question is, what do we do with it so it earns as much as possible yet be liquid enough to be able to use it in a year? Anyone been where I’m at?

 

[Jamie]

Money market savings account. I opened one at Heartland Bank a month ago earning 4.3% APY for similar reasons. My mother is dead now but I need to keep some of my inheritance liquid until we sell her condo and her estate is settled. This was a special offer for March, but for $100K investment, you will earn some real money in interest in a year, and the money is totally liquid. I would guess that most banks are doing similar things with rising interest rates. Also, this is 8X what I was earning in a regular savings account.

 

["J"]

 

[Fletch]

I believe Chase bank has some short term CDs for around 4%.... These are I believe 3 month CDs.. Surprisingly 12 mo. CDs are paying less...

 

[5Cent]

Agreed, money market or CD. Just watch early withdrawal fee on CD depending on how ya structure them. You could have a continous 80-90% in CDs, with 1 maturing each year to give you more liquidity.

 

[Iowa_Buckeye]

Open a Vanguard brokerage account (real easy to do on Vanguard site). Then stick half of it in VTSAX and the other half in VFIAX. The overall market is still a bit down, so chances are you will do fine. Just don’t panic and sell if it does dip a bit.

 

[Iowa_Buckeye]

I also think a certain beer company may be a good buy right now!

 

[Bighoun52]

Open a Vanguard brokerage account (real easy to do on Vanguard site). Then stick half of it in VTSAX and the other half in VFIAX. The overall market is still a bit down, so chances are you will do fine. Just don’t panic and sell if it does dip a bit.

Dead on. Exactly what to do.

 

[5Cent]

I personally would not invest in the market right now if looking to sell within 1 year.

Honestly, I'd be surprised to see anyone recommend that level of risk with what I assume to be a decent amount of $, for such a short time. Guaranteed 4-5% return on 100% safe investment are available, with minimal fees vs. the risk, taxes, etc. with market investments

I'm not familiar with either of the 2 investments above, how have they fared over the last 1Y, 3Y, etc.?

 

[Jamie]

Lots of good investment products out there. Since liquidity is the fundamental criteria here, Wall Street is not the place to put the money. Short-term capitol gains tax is a mother fucker. Good deals on short term (6 or 12 month) CD's and money market accounts. Banks want your money more than they have in a long time and are willing to pay for it. Call you bank and see what they can do for you. With money market accounts your money is completely liquid. You can deposit or withdraw at will. The best rates will require some minimum investment, like $25k or something.

 

[Iowa_Buckeye]

I personally would not invest in the market right now if looking to sell within 1 year.

Honestly, I'd be surprised to see anyone recommend that level of risk with what I assume to be a decent amount of $, for such a short time. Guaranteed 4-5% return on 100% safe investment are available, with minimal fees vs. the risk, taxes, etc. with market investments

I'm not familiar with either of the 2 investments above, how have they fared over the last 1Y, 3Y, etc.?

Yea agree with your point. If you will NEED ALL the money in the next year, that may be a bad approach.
But if you know not all will be needed in the short time horizon, I would put it in the market.
And you can just google the funds to see performance (they are just total market and S&P 500 index funds). But pretty much everything has done bad over the past 2 years, therefore a good time to buy.

Current prices. And we can come back in a year (if anybody remembers....) to see how things went!

VTSAX - $100.29 - dividend of 1.59%
VFIAX - $383.51 - dividend of 1.60%
Apple - $166.47 - dividend of 0.56%
Anheuser Busch - $64.36 - dividend of 1.28%

 

[Iowa_Buckeye]

Lots of good investment products out there. Since liquidity is the fundamental criteria here, Wall Street is not the place to put the money. Short-term capitol gains tax is a mother fucker. Good deals on short term (6 or 12 month) CD's and money market accounts. Banks want your money more than they have in a long time and are willing to pay for it. Call you bank and see what they can do for you. With money market accounts your money is completely liquid. You can deposit or withdraw at will. The best rates will require some minimum investment, like $25k or something.

I am pretty sure short term capital gains and any interest on a CD are taxed at the same rate (as ordinary income). Now if you leave the money in the market for 366 days, you will actually do better on your tax bill. The market is at least (if not more) liquid than a CD, but of course you have the risk of the balance going down.

 

[hickslawns]

I would go the CD or money market account myself. Maybe shop for a local credit union? At a minimum, shop.the best local rates in CD. Not all banks are the same.

I'd probably consult my accountant or investor before putting it in the market. They would know the tax implications better than me. Investor may start drooling. Accountant probably would be the first call.

 

[Mickey Merrie]

Can be bought and sold nearly any day the dealer is open...

 

[Mickey Merrie]

Can be bought and sold nearly any day the dealer is open...

Recognize I am not saying this is your best, or only option. All the options above are viable and have their plusses and minuses. And you can do some of each for diversification.

 

[Jamie]

I am pretty sure short term capital gains and any interest on a CD are taxed at the same rate (as ordinary income).

the point is that GUARANTEED earnings for a short amount of time with ZERO risk (unless your bank fails and your money is not FDIC insured) is pretty hard to compete with.

 

[Iowa_Buckeye]

That is rather inaccurate. Short term capital gains tax rate is 37%, period. Long term capital gains and income tax (wages, interest income, dividends, etc.) is 0%-37% based on your income tax bracket. I'm pretty sure the most of us fall in that 12%-24% range. I just went through all of this tax rate crap to determine the amount of mandatory beneficiary IRA distributions I could take and stay within our current tax bracket. I think we had to stay below $189K or so to be in the 22% bracket.

Your statement is only accurate if you are single and earn $539,900, married filing jointly $693,750, putting you in the top marginal tax bracket.

All of that notwithstanding, the point is that GUARANTEED earnings for a short amount of time with ZERO risk (unless your bank fails and your money is not FDIC insured) is pretty hard to compete with. Having said that, I admit that I am heavily invested in stocks and have been for over a decade, but that is not money that I will ever need to access until I retire.

Not sure where you are getting your data from? If you google 'short term capital gains rate' every result will state it is taxed at your ordinary income tax bracket rate. Therefore only at 37% if you are in that tax bracket (which I am unfortunately not......). And if you hold it longer than a year, your tax rate on the gain will drop.

Here is one link from Investopedia.

Long-Term vs. Short-Term Capital Gains

Understanding the difference between long- and short-term capital gains ensures that the benefits of your investment portfolio outweigh the tax costs.

www.investopedia.com

 

[Jamie]

Ok, my mistake.

 

[jagermeister]

Another vote for the money market or CD approach from me. Don't get me wrong, I'm all in favor of investing in the stock market... But I'm not a short-term stock market investor. If we were at the onset of a new pandemic and another crash right now, I'd be singing a different tune.

If you're an existing Edward Jones customer, their CD rates are really competitive... currently pushing 5%. I opened a 9-month CD a couple months ago at a rate of 5.3%. That's a pretty tough return to beat in 9 months time.

 

[Jackalope]

I concur with the money market account statements. I have one with Wright Patt CU and I want to say it's around 4.6%.