Recent Graduate investing with different goals

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robertmcd
Posts: 98
Joined: Tue Aug 09, 2016 9:06 am

Recent Graduate investing with different goals

Post by robertmcd » Wed Jan 11, 2017 12:49 pm

Age:23
Vanguard Roth: 11k in TSM
Vanguard taxable: 11k TISM, 7k mid cap growth index (don't want this but I have 4K in gains), 4k TSM
Cash: 112k earning 1%
Income: 60k no 401k, I expect my income to rise somewhat significantly over the next few years. I am a petroleum engineering graduate and was lucky to get a job period. I amassed a lot of cash working 3 summer internships for the same company (who is now bankrupt) where I was paid quite a bit more than I am making now (bummer).

I am currently sitting on a lot of cash. I want to get a set plan so I don't have to think about new contributions into my vanguard account, just invest whatever money is over my EF into my AA. My issue is that I may want to buy a house in the next few years. I don't think investing in bonds is a good idea for me at this point, watching my money lose value in bonds when I have decent CD options will upset me (although I know the role of bonds in a portfolio). A local CU has a 5 yr 2.1% CD with only a 3 mo EWP. This seems like it would have a much higher risk/return than TBM or intermediate term investment grade. I am planning on investing my estimated down payment into this (80-100k) to come close to keeping up with inflation for the next 5 yrs or so, and I can always withdraw and invest into TBM if yields continue to rise and TBM doesn't do well. This would allow me to take all my risk on the equity side and not worry/make bad behavioral decisions. Is this a good plan for both short and long term goals?

123
Posts: 2408
Joined: Fri Oct 12, 2012 3:55 pm

Re: Recent Graduate investing with different goals

Post by 123 » Wed Jan 11, 2017 1:02 pm

For a future down payment a savings account/CD is absolutely the right way to go. You might want to split your deposit into two (or more) CDs to build yourself a little CD ladder. You can have a CD ladder with common maturity dates. A CD ladder could allow you to take advantage of any rising rates without necessarily incurring a EWP, for example a 2 year and a 5 year understanding that, at maturity, the 2 year would be be rolled over intending to match the 5 year's maturity date.
The closest helping hand is at the end of your own arm.

Maverick3320
Posts: 348
Joined: Tue May 12, 2015 2:59 pm

Re: Recent Graduate investing with different goals

Post by Maverick3320 » Wed Jan 11, 2017 2:24 pm

If I'm not mistaken, you can pull up to 10k (contributions + earnings) out of a Roth that has been open for at least five years for a first-time home purchase.

Further, you can pull any contributions out at any time.

robertmcd
Posts: 98
Joined: Tue Aug 09, 2016 9:06 am

Re: Recent Graduate investing with different goals

Post by robertmcd » Wed Jan 11, 2017 2:36 pm

I know that I can pull out of my roth, but I am so limited on tax-advantaged accounts I don't want to do that. I guess my main concern is that I don't see the point in having a set AA like 90% equities, 10% bonds in my vanguard account when I have so much money on the side. I think the plan of setting aside what I want for down payment/emergencies in something guaranteed like a CD, while buying equities with the rest will prevent me from worrying about my fund performance, since that will be long term money for 15 years or more/retirement. I guess this is the same as saying I will be around 30% equities/70% fixed income? I would like advice on if I can do better than this 2.1% CD with 3 month penalty? I read about how CD's offer an advantage to the retail investor and in today's rate environment even more so.

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