Where should I park money I wont need for 3.5 years?

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TexMexIndex
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Where should I park money I wont need for 3.5 years?

Post by TexMexIndex » Wed Aug 22, 2018 1:13 am

I was keeping it in a stock/bond mix but tapped out, I don't want that risk for a time horizon. Money will go towards a down payment for a house.
Right now its in in a Vanguard Prime Money Market fund. Should I do CD laddering? Around 75K.

Jablean
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Re: Where should I park money I wont need for 3.5 years?

Post by Jablean » Wed Aug 22, 2018 1:57 am

I like CD laddering. Easy to do, no unexpected problems.

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randomizer
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Re: Where should I park money I wont need for 3.5 years?

Post by randomizer » Wed Aug 22, 2018 2:00 am

CDs or treasuries would work for me. In my case (needing money in 1 year) I did individual treasuries, held to maturity.
87.5:12.5, EM tilt — HODL the course!

strafe
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Re: Where should I park money I wont need for 3.5 years?

Post by strafe » Wed Aug 22, 2018 5:08 am

If you’re hoping to avoid risk, why not leave it in the money market fund?

(Personally I would put it in something like LifeStrategy Income fund (80% bonds/20 stocks))

student
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Re: Where should I park money I wont need for 3.5 years?

Post by student » Wed Aug 22, 2018 5:14 am

I would put it in a CD ladder, as you have planned, or a money market mutual fund. If you are willing to take a bit more risk, then an ultra short bond fund.

mega317
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Re: Where should I park money I wont need for 3.5 years?

Post by mega317 » Wed Aug 22, 2018 5:17 am

If you're certain about the timeline I'd go with one or several CDs. No need to ladder but it might make sense to split it up a little in case you want to get some of the money out.

noco-hawkeye
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Re: Where should I park money I wont need for 3.5 years?

Post by noco-hawkeye » Wed Aug 22, 2018 6:52 am

I moved from a CD ladder into the money market. The rates are going up more quickly than trying to time a CD ladder, from what I saw.

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David Jay
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Re: Where should I park money I wont need for 3.5 years?

Post by David Jay » Wed Aug 22, 2018 7:41 am

A Short Term Bond fund would also be appropriate.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Call_Me_Op
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Re: Where should I park money I wont need for 3.5 years?

Post by Call_Me_Op » Wed Aug 22, 2018 8:07 am

David Jay wrote:
Wed Aug 22, 2018 7:41 am
A Short Term Bond fund would also be appropriate.
Maybe - but something with a defined maturity (CD or treasury) is better because you are guaranteed not to have lost nominal value at the time you need the money.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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hdas
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Re: Where should I park money I wont need for 3.5 years?

Post by hdas » Wed Aug 22, 2018 8:12 am

VanguardLife-strategy 20/80. H
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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David Jay
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Re: Where should I park money I wont need for 3.5 years?

Post by David Jay » Wed Aug 22, 2018 8:54 am

Call_Me_Op wrote:
Wed Aug 22, 2018 8:07 am
David Jay wrote:
Wed Aug 22, 2018 7:41 am
A Short Term Bond fund would also be appropriate.
Maybe - but something with a defined maturity (CD or treasury) is better because you are guaranteed not to have lost nominal value at the time you need the money.
True, your are guaranteed not to lose nominal value. But you substitute maturity risk (matures before home purchase, you lose the interest from maturity until date of closing. Home purchase before maturity, early withdrawal penalties).

The maximum drop in VBIRX is 1.3%, fully recovered within 60 days. In the depths of the financial crisis in 2008. In contrast, 6 months out-of-the-investment (i.e. actual house closing occurs 6 months after 3% CD matures) is 1.5%.

Take your pick. I like the simplicity of not needing to shop for CDs or guess the exact date of the house closing.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Call_Me_Op
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Re: Where should I park money I wont need for 3.5 years?

Post by Call_Me_Op » Thu Aug 23, 2018 4:39 pm

David Jay wrote:
Wed Aug 22, 2018 8:54 am
Call_Me_Op wrote:
Wed Aug 22, 2018 8:07 am
David Jay wrote:
Wed Aug 22, 2018 7:41 am
A Short Term Bond fund would also be appropriate.
Maybe - but something with a defined maturity (CD or treasury) is better because you are guaranteed not to have lost nominal value at the time you need the money.
True, your are guaranteed not to lose nominal value. But you substitute maturity risk (matures before home purchase, you lose the interest from maturity until date of closing. Home purchase before maturity, early withdrawal penalties).

The maximum drop in VBIRX is 1.3%, fully recovered within 60 days. In the depths of the financial crisis in 2008. In contrast, 6 months out-of-the-investment (i.e. actual house closing occurs 6 months after 3% CD matures) is 1.5%.

Take your pick. I like the simplicity of not needing to shop for CDs or guess the exact date of the house closing.
There are many options around this, such as reinvesting is 30 day Tbills after the CD matures. When you are ready to buy the home, you just take the money out.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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