Where can I invest 8,000 cash for a year?

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eleandre
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Where can I invest 8,000 cash for a year?

Post by eleandre » Fri Feb 14, 2020 12:15 pm

Hi,

This is not related to my portfolio. I think I have that figured out somehow. So I have an 8,000 saved for my roof replacement. But the contractor offered us to get a 12months/0% financing. That being said, I took out a loan of 10,000 dollars that I need to pay next year. That means I have an extra 8000 cash at hand that I want to put somewhere and pull out next year.

What would be the best option for me to put the money to earn a little bit before I get it out next year?

Risk wise I'm willing to go 3 out of 10 where 10 being the highest risk.

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Wiggums
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Re: Where can I invest 8,000 cash for a year?

Post by Wiggums » Fri Feb 14, 2020 12:21 pm

Let me see if I understand:

You took out a $10,000 loan to pay for the roof. The roofer offered you zero percent, so you need to hold the 8k for 12 months. What is the rate on the 10k loan?

stocknoob4111
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Re: Where can I invest 8,000 cash for a year?

Post by stocknoob4111 » Fri Feb 14, 2020 12:29 pm

I would not "invest" borrowed money... this is just me but I would pay off the loan ASAP if I did not need it. The highest savings accounts are paying 1.7% gross and that's much lower net after taxes, so unless your loan is below 1.2% APR (which I doubt) it's pointless. Also how do you get to "pay it next year", doesn't the loan have fixed installment payments? Strange.
Last edited by stocknoob4111 on Fri Feb 14, 2020 12:32 pm, edited 1 time in total.

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anon_investor
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Re: Where can I invest 8,000 cash for a year?

Post by anon_investor » Fri Feb 14, 2020 12:30 pm

Go find the highest rate CD you can get.

Blue456
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Re: Where can I invest 8,000 cash for a year?

Post by Blue456 » Fri Feb 14, 2020 12:43 pm

anon_investor wrote:
Fri Feb 14, 2020 12:30 pm
Go find the highest rate CD you can get.
+1 on that if OP wants to make few bucks otherwise just pay off the loan. Although at least with CD he can make $160 before taxes.

robphoto
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Re: Where can I invest 8,000 cash for a year?

Post by robphoto » Fri Feb 14, 2020 1:00 pm

Be careful of your zero percent loan. A lot of them are structured so that if you don't pay in full by the due date, you owe credit-card level interest on the loan (like 20 or more percent). If you needed to save up to get the 8,000., and you've got to pay 10,000 back next year, I'd suggest that you pay off the $8,000. now and get the 2,000 together and pay that off. As people have said, you've got to have that 8,000 (plus another 2,000) at hand before the due date, so you can't risk any investment more risky than a short-term (now, less than a year) CD, at 2% or less.

Basically, you're trading a gain of maybe 150. minus taxes (maybe 100. net) versus a penalty that could be $2,000.

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dm200
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Re: Where can I invest 8,000 cash for a year?

Post by dm200 » Fri Feb 14, 2020 1:17 pm

Either:

1. Put in a 12 month federally insured (NCUA or FDIC) CD; or

2. Ask/offer whether you can get a discount for cash

Pick whichever is better

Jack FFR1846
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Re: Where can I invest 8,000 cash for a year?

Post by Jack FFR1846 » Fri Feb 14, 2020 1:20 pm

Ask your roofer what your $12,000 roof will cost if you pay him cash. I'd expect he'll say $10k or $11k. Either of which is way more than you're going to make doing anything.
Bogle: Smart Beta is stupid

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Ramjet
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Re: Where can I invest 8,000 cash for a year?

Post by Ramjet » Fri Feb 14, 2020 1:44 pm

Ally savings account

tsohg
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Re: Where can I invest 8,000 cash for a year?

Post by tsohg » Fri Feb 14, 2020 1:47 pm

Taking out a loan and investing in a CD or similar seems like a lot of work to make a small amount of money.

retire57
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Re: Where can I invest 8,000 cash for a year?

Post by retire57 » Fri Feb 14, 2020 2:48 pm

tsohg wrote:
Fri Feb 14, 2020 1:47 pm
Taking out a loan and investing in a CD or similar seems like a lot of work to make a small amount of money.
+1

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BolderBoy
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Re: Where can I invest 8,000 cash for a year?

Post by BolderBoy » Fri Feb 14, 2020 3:30 pm

eleandre wrote:
Fri Feb 14, 2020 12:15 pm
I took out a loan of 10,000 dollars that I need to pay next year. That means I have an extra 8000 cash at hand that I want to put somewhere and pull out next year.
So in essence, you took out a loan so you could [perhaps] invest the money?

I think this is unwise. True investing isn't the same as gambling, but looking for a quick in-the-market / out-of-the-market profit making scheme is the same as day trading and that is gambling.

As many others have suggested, put this $8k in a safe, secure, FDIC insured savings account until you need it.

Oh and BTW, inflation is going to eat whatever "profit" you think you will have made doing this deal. Consider it the cost of learning a valuable lesson.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

mega317
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Re: Where can I invest 8,000 cash for a year?

Post by mega317 » Fri Feb 14, 2020 3:37 pm

I'm lost on the setup here. You have 8k saved for the roof. You have 8k cash at hand that you want to put somewhere for a year.

Where does the 10k come from? Is that completely unrelated? And then Jack comes in asking about your 12k roof? What?
https://www.bogleheads.org/forum/viewtopic.php?t=6212

Unladen_Swallow
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Re: Where can I invest 8,000 cash for a year?

Post by Unladen_Swallow » Fri Feb 14, 2020 4:39 pm

This is penny wise pound foolish - a warped version of credit culture, even when it was not required.

Use the 8000 and pay down the loan to 2000. And then pay that off immediately too.



eleandre wrote:
Fri Feb 14, 2020 12:15 pm
Hi,

This is not related to my portfolio. I think I have that figured out somehow. So I have an 8,000 saved for my roof replacement. But the contractor offered us to get a 12months/0% financing. That being said, I took out a loan of 10,000 dollars that I need to pay next year. That means I have an extra 8000 cash at hand that I want to put somewhere and pull out next year.

What would be the best option for me to put the money to earn a little bit before I get it out next year?

Risk wise I'm willing to go 3 out of 10 where 10 being the highest risk.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

Independent George
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Location: Chicago, IL, USA

Re: Where can I invest 8,000 cash for a year?

Post by Independent George » Fri Feb 14, 2020 6:20 pm

Do not put the money anywhere but a 12-month CD, savings account, or money market account. I would have included treasury bills in this list, except the 12 month yield is currently less than you can get in the other three accounts.

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