Short term ~3-5yr investing options confusion

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amarkle
Posts: 9
Joined: Tue Aug 06, 2013 1:07 pm

Short term ~3-5yr investing options confusion

Post by amarkle »

Hi Everyone!

I have around $50k sitting in my savings account. This savings is not currently earmarked for anything. The most bogleheady thing, I imagine, is to treat this as additional retirement savings to invest in a taxable account. However, I'm fairly comfortable with my current retirement savings ($900k at 42yo) and continue to contribute at a healthy rate ($37k / year including my employer match).

I did recently buy a home, but I was thinking about keeping this money for a potential upgrade a few years down the road. At a minimum I would like to protect it against inflation.

I did put 10k into iBonds, which seems the most obvious choice, but clearly I need to find a home for the remaining $50k.

I'm fairly confused about the pros/cons of other options, like Vanguard's short term treasury, short term federal, and short term bond indices.

Also, I'm in the 24% tax bracket and live in NYC, in case a tax-exempt fund might make sense.

Can anyone help me sort out how I should be thinking about these different options?
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retired@50
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Location: Living in the U.S.A.

Re: Short term ~3-5yr investing options confusion

Post by retired@50 »

I'd put some of the money in the New York municipal bond fund at Vanguard, and keep some as cash.

Keeping up with inflation and not being prepared for potential losses isn't really possible.

See link: https://investor.vanguard.com/mutual-fu ... file/VNYTX

Regards,
This is one person's opinion. Nothing more.
dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: Short term ~3-5yr investing options confusion

Post by dbr »

There is nothing productive spending time wondering which of all the melange of cash and short bond fund you could put 5% of your assets into.

Leave it where it is or invest it in stocks in your taxable account.

If you have to sell those stocks to spend the $50k in a few years and stocks are down, then sell them and go over to your tax deferred accounts, sell bonds, and buy the stocks type assets back.

If you really, really know both a date and an amount to the penny that are going to need after inflation find a TIPS and buy enough to match that amount at that date.
sycamore
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Joined: Tue May 08, 2018 12:06 pm

Re: Short term ~3-5yr investing options confusion

Post by sycamore »

I used to do "bucketing" of expenses based on spending horizon: short-term, medium-term, retirement. Eventually realized I could consolidate things into a single portfolio and a checking account (for next few months of spending). My portfolio is now simpler and I don't have to spend time on managing the buckets.
dbr wrote: Thu Jun 10, 2021 1:32 pm If you have to sell those stocks to spend the $50k in a few years and stocks are down, then sell them and go over to your tax deferred accounts, sell bonds, and buy the stocks type assets back.
^^ is a good way to think about it. It even has wiki article: https://www.bogleheads.org/wiki/Placing ... ed_account
go2run
Posts: 115
Joined: Wed Mar 08, 2017 1:34 pm

Re: Short term ~3-5yr investing options confusion

Post by go2run »

dbr wrote: Thu Jun 10, 2021 1:32 pm There is nothing productive spending time wondering which of all the melange of cash and short bond fund you could put 5% of your assets into.

Leave it where it is or invest it in stocks in your taxable account.

If you have to sell those stocks to spend the $50k in a few years and stocks are down, then sell them and go over to your tax deferred accounts, sell bonds, and buy the stocks type assets back.

If you really, really know both a date and an amount to the penny that are going to need after inflation find a TIPS and buy enough to match that amount at that date.
^^^This. Other than what I need for current on-going expenses, I invest the rest in VTSAX in our taxable account. If I know I'm going to have a larger purchase come up, I plan appropriately by selling what I need and transferring the money to my checking account. The process takes about a week to clear all the hurdles.
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