[What Should I Invest In? Bank Investment Plans or On My Own?]

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[What Should I Invest In? Bank Investment Plans or On My Own?]

Post by arca »

[Title was "Whats the Best Investment for My Money Without Investing in Stocks?", thread updated with new info
here --admin LadyGeek]

[Another new thread (May 14, 2024 update) by arca viewtopic.php?p=7867962#p7867962 has been merged into this on-going discussion as well (see below). Moderator Pops1860]

Hi guys.. I have $200,000 to invest. Naturally, I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.

Annuities and bonds are a good idea. An annuity at a bank is offering 4.6% with withdrawals. The coupon rate on a 2 year treasury is going for 4.3%. I'm also thinking of Vanguard bond funds but don't have enough info on them. My goal is not long term for the moment, more like 2 - 3 years.

1) Would you guys tell me the best investment to make right now without investing in the stock market?

2) Conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?

.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by jebmke »

If your time horizon is a couple of years, either a money market fund or treasury bills.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by cbs2002 »

What do you plan to do with the money in 2-3 years?
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by Sandtrap »

arca wrote: Thu Oct 27, 2022 6:42 am Hi guys.. I have $200,000 to invest. Naturally, I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.

Annuities and bonds are a good idea. An annuity at a bank is offering 4.6% with withdrawals. The coupon rate on a 2 year treasury is going for 4.3%. I'm also thinking of Vanguard bond funds but don't have enough info on them. My goal is not long term for the moment, more like 2 - 3 years.

1) Would you guys tell me the best investment to make right now without investing in the stock market?

2) Conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?

.
To OP:

for 2-3 years
a very short time frame
your money must have the following:

1. Security of Principle
IE: Treasuries, CDs, High Yield accounts, etc)
Zero Volatility and zero fees or penalties, etc.

2 Liquidity
iE: No penalties or fees to access

3. Accessibility
IE: not locked in, no withdrawal delays or time frames, etc.

I hope this helps you.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by homebuyer6426 »

arca wrote: Thu Oct 27, 2022 6:42 am I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.
This should make you less leery of the stock market, not more.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by nisiprius »

arca wrote: Thu Oct 27, 2022 6:42 am Hi guys.. I have $200,000 to invest. Naturally, I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.
There is always dynamic tension between the idea that stocks are "falling," and therefore it must be a bad time to buy, and the idea that stocks are "down," and therefore must be a bargain, cheap, "on sale," and a good buying opportunity. There is no way to resolve this. People interpret the same data differently and make different predictions based on the same data. Because the stock market is an auction market, the price always represents a transaction in which one participant is willing to sell, and possibly thinks the stock is overvalued, and another is willing to buy, and possibly thinks the stock is undervalued.

According to the efficient market hypothesis, stocks may be not be correctly priced, but they follow an unpredictable random walk around the correct price.

All this is just to say that you really cannot tell whether this is a good, bad, or indifferent time to buy stocks. For this reason, Bogleheads advocate staying the course and not timing the market.

I'm not urging you to buy stocks. I'm fairly risk-averse myself. I'm just saying that we are apt to project our emotions into our investing. If stocks are down and we just feel like buying stocks we perceive them as being "cheap" and we mutter "buy low, sell high," and expect "mean reversion." If stocks are down and we don't feel like buying them, or want to sell them, we perceive them as being "falling" and we mutter "don't catch a falling knife" and expect "momentum."
2) Conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?
Your use of the word "safe" creates difficulties. As you know, "All investments involve risks including possible loss of principal." So I would prefer to avoid the word "safe" and talk about "moderate and lower risk."

The standard Boglehead advice, which is also my advice and also what I do, is to invest in an overall portfolio that includes both stocks and bonds, and choose a percentage of stocks that does not exceed our personal risk tolerance. Doing this by buying a balanced fund is a very good idea, because psychologically it encourages you to see how the whole portfolio is doing, and avoid being alarmed or stressing over individual parts.

Within the family of Vanguard funds, here are the obvious suggestions.

None of them are suitable for a 2-3 year time frame. Even Total Bond, 0% stocks, 100% bonds, is described by Vanguard with the language "may be appropriate for investors with medium-term investment horizons (4 to 10 years)."

The degree of risk--goes along directly with the percentage of stocks in them. Other mutual fund companies have similar offerings. Vanguard's website shows a little indicator for every fund that gauges risk on a scale of 1 to 5. These are very rough, crude categories and I think they are quite helpful.

LifeStrategy funds

In order not to be evasive, I am going to start by mentioning one particular fund, the Vanguard LifeStrategy Conservative Growth fund, VSCGX. It has a 40/60 stock-bond allocation, is simply a portfolio of four index funds, and has a low expense ratio of 0.12%. To my Boglehead mind, it is a nice, boring, plain vanilla fund that matches Boglehead principles.

It's one of a family of four LifeStrategy funds, which are similar but offer a choice of four different percentages of stock, and thus four degrees of risk:

Vanguard LifeStrategy Growth, VASGX, 80/20, risk category 4
Vanguard LifeStrategy Moderate Growth, VSMGX, 60/40, risk category 3
Vanguard LifeStrategy Conservative Growth, VSCGX, 40/60, risk category 3
Vanguard LifeStrategy Income Fund, VASIX, 20/80, risk category 2

All of them are globally diversified, investing in both US and international stocks, and both US and international bonds.

So a reasonable suggestion is look carefully at the four, which are similar apart from their stock allocation and risk, and pick the one that fits best.

Fidelity has a similar suite of funds, the Fidelity Asset Manager Series, which are broad all-purpose balanced funds with a range of different stock allocations and risk levels.

Actively managed balanced funds

I'm an indexer. Vanguard has two funds that have been around for a long time--one of them, the Wellington Fund, was founded in 1929. They are actively managed. They have outperformed their indexes most of the time. Active versus index is a steady topic of discussion in the forum. I am going to name the funds but not say much more.

The Vanguard Wellington Fund, VWELX, is currently about 65/35. Over its history, the ratio has varied, but has mostly been close to 60/40. Vanguard puts it in risk category 3. It's all US.

The Vanguard Wellesley Income Fund, VWINX, is currently about 40/60. It, too, is in risk category 3, although by almost every measure it is somewhat less risky than Wellington. It, too, is all US.

Vanguard Balanced Index Fund, VBIAX

This is the simplest balanced fund imaginable: a 60/40 index fund, equivalent to 60% Total Stock and 40% Total Bond. It's all US. One reason to like it is that it has a lower expense ratio, 0.07%, than the others although it's not really enough to matter much. Because it's all-US, it has been outperforming the LifeStrategy Moderate fund for the last ten years or so, because the US has been outperforming the rest of the world for about ten years or so. Advocates of global diversification would prefer LifeStrategy Moderate.

Vanguard Target Retirement funds

These are very similar to the LifeStrategy funds except that, like other target-date funds, they have a year in their name, and the stock percentage and risk level gradually declines as the target retirement year approaches.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by vineviz »

cbs2002 wrote: Thu Oct 27, 2022 7:08 am What do you plan to do with the money in 2-3 years?
This is an important question.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by Bearcat78 »

Nisiprius. This is not a big deal Wellington actually holds 6.1% in foreign stocks and Wellington holds 3.9% in foreign stocks. Thanks for all your good advice!
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by DoubleComma »

Now is my preferred time to be buying equities, not as the market is heated up and climbing. Sure it could fall another 20%, but it could also turnaround and climb 30%.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by White Coat Investor »

arca wrote: Thu Oct 27, 2022 6:42 am Hi guys.. I have $200,000 to invest. Naturally, I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.

Annuities and bonds are a good idea. An annuity at a bank is offering 4.6% with withdrawals. The coupon rate on a 2 year treasury is going for 4.3%. I'm also thinking of Vanguard bond funds but don't have enough info on them. My goal is not long term for the moment, more like 2 - 3 years.

1) Would you guys tell me the best investment to make right now without investing in the stock market?

2) Conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?

.
So you buy less of something when the price for it goes down? Really? Are you expecting that to be a successful approach for you?

You need a comprehensive investing plan for the long term. First set your goals, then choose your accounts, then select your asset allocation, and finally select your investments. Step 4 is really easy if you do the first three steps first. But really hard when you jump straight to step 4. You're jumping straight to step 4. Let me attempt to answer the questions you actually asked.

1) Impossible to know without a functioning crystal ball. It may even be the stock market. Really depends on your time horizon.
2) Vanguard Target Retirement Income Fund or Wellesley Income Fund. Those are about as "safe" as balanced funds get.

I leave short term money in cash and certainly not stocks or real estate. That means a Vanguard money market fund (federal vs municipal depending on your tax bracket) or a high yield savings account. Right now the former is better than the latter, but that changes frequently.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by Doctor Rhythm »

Pre-pandemic, you posted that you had $80K in savings (not counting an emergency fund) and wanted to hold 20-30% in stocks. Does the $200K you’re now looking to invest reflect your whole portfolio, or is it a separate “bucket” that you want to invest differently for just a 2-3 year horizon?

It feels like a very large fraction of your wealth to earmark for spending in a few years. But to answer the question you asked, if you cannot suffer a loss of principal 2 years from now, then CD/HYSA or treasuries seem your best option.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by er999 »

Do you have any debt you can repay? Depending on the interest rate that could be a good opportunity if you don't want any stocks. Otherwise, I'd suggest ibonds. If you are a couple, you could put $20k in for this year, $20k in the gift box for delivery in 2024 and buy $20k in January 2023. That would take care of $60k of your $200k. All that money could be withdrawal in January 2024 if needed. Rest of the money if you need in 2 years I'd look at a CD or high yield savings account. But better would be to have a comprehensive finance plan rather than looking at only how to invest for 2-3 years. If you posted more info on here I'm sure you'd get a lot of suggestions.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by arca »

cbs2002 wrote: Thu Oct 27, 2022 7:08 am What do you plan to do with the money in 2-3 years?
Will reinvest it in safe investments, maybe invest a bit into stocks but that depends on the state of the economy in 2 - 3 years.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by arca »

Sandtrap wrote: Thu Oct 27, 2022 7:09 am.
for 2-3 years
a very short time frame
your money must have the following:

1. Security of Principle
IE: Treasuries, CDs, High Yield accounts, etc)
Zero Volatility and zero fees or penalties, etc.

2 Liquidity
iE: No penalties or fees to access

3. Accessibility
IE: not locked in, no withdrawal delays or time frames, etc.
Thanks for the reply but I'm confused by your answers. For your #2 answer, I had asked about names of investments for mixed investments. And I dont think I posted a 3rd question so I dont know where your #3 answer came from.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by arca »

nisiprius wrote: Thu Oct 27, 2022 7:33 am In order not to be evasive, I am going to start by mentioning one particular fund, the Vanguard LifeStrategy Conservative Growth fund, VSCGX. It has a 40/60 stock-bond allocation, is simply a portfolio of four index funds, and has a low expense ratio of 0.12%. To my Boglehead mind, it is a nice, boring, plain vanilla fund that matches Boglehead principles.

Vanguard LifeStrategy Growth, VASGX, 80/20, risk category 4
Vanguard LifeStrategy Moderate Growth, VSMGX, 60/40, risk category 3
Vanguard LifeStrategy Conservative Growth, VSCGX, 40/60, risk category 3
Vanguard LifeStrategy Income Fund, VASIX, 20/80, risk category 2
Appreciate the advice but I looked at your recommended vanguard funds and it seems they have all been doing poorly for a year out whereas a simple annuity going for 4.6% seems like a better deal in return terms. Unless I’m not seeing exactly what youre seeing?
All of them are globally diversified, investing in both US and international stocks, and both US and international bonds.
Yeah, I'm not friendly to international investing f I ever decide to invest in equity. I'd rather keep focus on domestic investing within out borders.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by arca »

DoubleComma wrote: Thu Oct 27, 2022 9:14 am Now is my preferred time to be buying equities, not as the market is heated up and climbing. Sure it could fall another 20%, but it could also turnaround and climb 30%.
Yes I agree with you. But given that the fed is inching to boost rates again soon do you think thats wise to invest in equity now?
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by arca »

White Coat Investor wrote: Thu Oct 27, 2022 9:51 am You need a comprehensive investing plan for the long term. First set your goals, then choose your accounts, then select your asset allocation, and finally select your investments.
I agree. But I checked on the performance of mixed investments that nisiprius posted and they dont look good compared to annuities.
I leave short term money in cash and certainly not stocks or real estate. That means a Vanguard money market fund (federal vs municipal depending on your tax bracket) or a high yield savings account. Right now the former is better than the latter, but that changes frequently.
High yield savings rates float around 3% and Vanguard money market fund is returning less than 1%. But an annuity I've seen is currently going for 4.6% and the 2-year treasury is going for 4.3%. So it makes sense to invest in the latter investments. Let me know what you think.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by arca »

er999 wrote: Thu Oct 27, 2022 11:48 am Do you have any debt you can repay? Otherwise, I'd suggest ibonds. If you are a couple, you could put $20k in for this year, $20k in the gift box for delivery in 2024 and buy $20k in January 2023. That would take care of $60k of your $200k. All that money could be withdrawal in January 2024 if needed. Rest of the money if you need in 2 years I'd look at a CD or high yield savings account.
I have no debts. When it comes to ibonds the current rate is 9% which is good. But interest on bonds can change when its interest rate changes, unless I'm wrong. So I may get 9% worth of interest until 6 months from now interest rates can dip which means less return on my ibonds. iBonds are not locked in a specific rate forever, again, unless I'm wrong about that.
But better would be to have a comprehensive finance plan rather than looking at only how to invest for 2-3 years.
Given my current unemployment I cant risk much now. If I were gainly employed I'd splurge a bit. This is why I'm thinking of investing in "safer" investments like annuities or treasuries. Let me know what you think.

.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by whodidntante »

Long term investors don't need to worry that much about volatility. Unless we become disabled or human capital drops to nearly nothing or we get smacked with a deep risk like persistent high inflation or confiscation, we tend to do alright with volatility. It can actually be a good thing for accumulators with the guts to buy into a downtrend because you get a better price.

But if you want a place to squirrel some money and you're a volatility chicken, I recommend short duration TIPS and I bonds. TIPS have a great positive real yield now. You would probably still do better with stocks in the long term, but in exchange for taking more risk.

You can also consider managed futures if you prefer that brand of volatility.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by KingRiggs »

So, it sounds like you have no intended use for the money in 2-3 years, only want to sit out of the market during its current "volatility".

That is the definition of market timing, and a sure way to lower returns. Treasury bills sound "great" at 4%, until you realize that inflation is double that. By the time you sit out 2-3 years, I expect there is a high likelihood that we will be in a bull market again, and you may well have missed the gains.

Find an asset allocation that fits your need, ability, and willingness to take risk and STAY THE COURSE.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by Raycpact »

Education. Hands down. Consistent dividends, inflation proof, very secure.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by Stinky »

OP -

You’ve been posting in the MYGA mega-thread on this Forum. You’ve suggested that you’re a New York State resident, which limits the choices in annuities (for reasons I’ve described in the MYGA thread).

Currently, you could get 4.60% in New York State on a three year MYGA from Mass Mutual, one of the strongest companies out there. You could compare that to the rates on brokered CDs, Treasuries, etc.

Of course, when the three year period is up, you’ll need to figure out where to go next…..
Last edited by Stinky on Sun Oct 30, 2022 8:58 am, edited 2 times in total.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by lakpr »

arca wrote: Sun Oct 30, 2022 3:06 am I have no debts. When it comes to ibonds the current rate is 9% which is good. But interest on bonds can change when its interest rate changes, unless I'm wrong. So I may get 9% worth of interest until 6 months from now interest rates can dip which means less return on my ibonds. iBonds are not locked in a specific rate forever, again, unless I'm wrong about that.
Just saying, that 9.62% rate ship has sailed already. You are posting this, today, October 30th, 2022; that 9.62% rate on I bonds was available only for bonds bought before October 28th, 2022, 11:59 PM Eastern time.

Given your unemployment status, aversion to loss of principal and the short term duration, I agree that either CDs or annuities are the best choice.

You could play some bank bonuses game and potentially juice up the returns up to 6%. Look at Doctor of Credit site for best bank bonuses (but stay away from any Citi offers)

https://www.doctorofcredit.com/best-ban ... t-bonuses/
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by White Coat Investor »

arca wrote: Sun Oct 30, 2022 2:56 am
White Coat Investor wrote: Thu Oct 27, 2022 9:51 am You need a comprehensive investing plan for the long term. First set your goals, then choose your accounts, then select your asset allocation, and finally select your investments.
I agree. But I checked on the performance of mixed investments that nisiprius posted and they dont look good compared to annuities.
I leave short term money in cash and certainly not stocks or real estate. That means a Vanguard money market fund (federal vs municipal depending on your tax bracket) or a high yield savings account. Right now the former is better than the latter, but that changes frequently.
High yield savings rates float around 3% and Vanguard money market fund is returning less than 1%. But an annuity I've seen is currently going for 4.6% and the 2-year treasury is going for 4.3%. So it makes sense to invest in the latter investments. Let me know what you think.
First, you need to learn to accurately find past returns and current yields and understand the difference. Also know the difference between past returns and expected returns. You can't get past returns and you're working with incorrect data and it is likely affecting the decisions you make.

Over any reasonable long term time period, a typical traditional portfolio is walloping the performance of a typical annuity and should continue to do so going forward.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by ruralavalon »

Why the 2 - 3 years time frame? What do you want to do with this money in 2 - 3 years?
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by nisiprius »

arca wrote: Sun Oct 30, 2022 2:47 am Appreciate the advice but I looked at your recommended vanguard funds and it seems they have all been doing poorly for a year out whereas a simple annuity going for 4.6% seems like a better deal in return terms. Unless I’m not seeing exactly what youre seeing?
I may have misunderstood your question. You asked "conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?" I gave you some obvious reasonable choices if you want to invest in a relatively safe "mixed fund (bonds and stocks)" (usually referred to as a "balanced fund.")
I looked at your recommended vanguard funds and it seems they have all been doing poorly for a year out whereas a simple annuity going for 4.6% seems like a better deal in return terms. Unless I’m not seeing exactly what youre seeing?
I'm not recommending them at all. And I'm not saying they are anything extra-special. or way better than balanced funds offered by Vanguard's competitors. I even mentioned some Fidelity funds. I mentioned Vanguard mostly because I'm familiar with their line.

Balanced funds are what they are. The ones I've suggested are good solid funds, and I indicated a range of choices based on how much risk tolerance you have, how you feel about US/international investing, and whether you prefer indexing or active management.

If I understand you, you believe that funds that have done poorly for "a year" in the past are all but certain to return less than 4.6% over the next "2-3." I'm going to be blunt: that is a common but foolish idea. It is likely to lead you to performance chasing, and mild exploitation by people trying to sell you products. It is better to accept the uncertainty and be willing to shrug off a few years of lousy performance, instead of hoping to avoid it altogether by constantly shifting investments based on your predictions of what's ahead for the next few years. In most cases, it's probably a mistake to focus on 2-3 year time frames unless you have a specific reason to need the money within that time frame.

Quit looking for "the best," and focus on "good enough to meet my goals." Focus on "good enough to meet my goals without the need to always be right."

One other detail: you haven't spelled the specifics of "with withdrawal." All mutual funds offer daily liquidity--you can sell them in any amount you like, including all of them, on day's notice. I suspect your annuity is much less liquid--which may or may not matter to you.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by Outer Marker »

arca wrote: Thu Oct 27, 2022 6:42 am Hi guys.. I have $200,000 to invest. Naturally, I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.

Annuities and bonds are a good idea. An annuity at a bank is offering 4.6% with withdrawals. The coupon rate on a 2 year treasury is going for 4.3%. I'm also thinking of Vanguard bond funds but don't have enough info on them. My goal is not long term for the moment, more like 2 - 3 years.

1) Would you guys tell me the best investment to make right now without investing in the stock market?

2) Conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?
I think the best investment you could make is Jack Bogle's "Little Book of Common Sense Investing." $13.95 on Amazon. https://www.amazon.com/Little-Book-Comm ... 8136&psc=1
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by GreenLawn »

homebuyer6426 wrote: Thu Oct 27, 2022 7:26 am
arca wrote: Thu Oct 27, 2022 6:42 am I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.
This should make you less leery of the stock market, not more.
I'm a bit leery when the stock market has been high. That's when I consider selling some stock and rebalancing into fixed income.

I missed doing that during the last record high, I won't miss the next one.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by the_wiki »

good luck with that market timing. When do you decide it’s the peak when it is a long bull run? You are just as likely to lose 50% more returns as you are to save losses.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by GreenLawn »

Don't ever need the ultimate peak or trough, just need a nice high or big dip. It's manual rebalancing instead of by the calendar like so many folks seem to prefer.

Eventually I might set up rebalancing bands to automate it, but for now it's a judgement call.

I missed out on the last high partly because fixed income was offering abysmal returns so it was hard to pull the trigger. I'll be selling at VTI = 244 for sure, and probably before that on the way up. Easier now that I've discovered I bonds, at least I won't be dinged by inflation.
kvdecide
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by kvdecide »

arca wrote: Thu Oct 27, 2022 6:42 am Hi guys.. I have $200,000 to invest. Naturally, I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.

Annuities and bonds are a good idea. An annuity at a bank is offering 4.6% with withdrawals. The coupon rate on a 2 year treasury is going for 4.3%. I'm also thinking of Vanguard bond funds but don't have enough info on them. My goal is not long term for the moment, more like 2 - 3 years.

1) Would you guys tell me the best investment to make right now without investing in the stock market?

2) Conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?

.
1) Keep 176k in a 12 week Tbill (yield is around 4%).
2) For the next 12 weeks invest the remaining 24k into QQQ, VGT, VOO, VUG -- $100 per day per fund. 5 trading days per week, so 60 trading days of $400 investment per day (give or take a few holidays).
3) After 12 weeks, take out 24k from the just-matured 176k Tbill and put the remaining back into another 12 week Tbill
4) Invest the new 24k by following step 2.
5) Continue until you run out of your 200k.

Of course this is DCA on a daily basis - DDCA -- Daily Dollar Cost Averaging. It appears painstaking to do -- but only costs you few minutes daily. If you see a bull market in early-mid 2023, you will not gain as much as you would have, had you invested all 200k today. And Vice-versa - if bear market continues into 2024, you will not lose as much as you would have, had you invested all 200k today.

Market is very volatile. If you invest all 200k in one day, you will be in agony or ecstasy within a week. And then your feelings will reverse the next week. Some investing sages will tell you that you have to take the emotion out of investing. But let us accept that 95% of the people just cannot !

P.S: I assumed that your 2-3 years is only a psychological comfort timeline and that you are not expecting to buy a house or something in 2-3 years. If its the latter, as many suggested, put 200k in Tbills and forget them.
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by climber2020 »

arca wrote: Sun Oct 30, 2022 2:47 am Appreciate the advice but I looked at your recommended vanguard funds and it seems they have all been doing poorly for a year out whereas a simple annuity going for 4.6% seems like a better deal in return terms. Unless I’m not seeing exactly what youre seeing?
You're basing your decisions on what happened in the past. This is not the correct way to do it.
Example (and a very comical one): viewtopic.php?t=339971
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ruralavalon
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by ruralavalon »

climber2020 wrote: Mon Oct 31, 2022 10:29 am
arca wrote: Sun Oct 30, 2022 2:47 am Appreciate the advice but I looked at your recommended vanguard funds and it seems they have all been doing poorly for a year out whereas a simple annuity going for 4.6% seems like a better deal in return terms. Unless I’m not seeing exactly what youre seeing?
You're basing your decisions on what happened in the past. This is not the correct way to do it.
Example (and a very comical one): viewtopic.php?t=339971
+ 1. Basing an investment decision on recent past performance ("have all been doing poorly for a year") is a very bad idea.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by wolf359 »

arca wrote: Sun Oct 30, 2022 3:06 am
er999 wrote: Thu Oct 27, 2022 11:48 am Do you have any debt you can repay? Otherwise, I'd suggest ibonds. If you are a couple, you could put $20k in for this year, $20k in the gift box for delivery in 2024 and buy $20k in January 2023. That would take care of $60k of your $200k. All that money could be withdrawal in January 2024 if needed. Rest of the money if you need in 2 years I'd look at a CD or high yield savings account.
I have no debts. When it comes to ibonds the current rate is 9% which is good. But interest on bonds can change when its interest rate changes, unless I'm wrong. So I may get 9% worth of interest until 6 months from now interest rates can dip which means less return on my ibonds. iBonds are not locked in a specific rate forever, again, unless I'm wrong about that.
But better would be to have a comprehensive finance plan rather than looking at only how to invest for 2-3 years.
Given my current unemployment I cant risk much now. If I were gainly employed I'd splurge a bit. This is why I'm thinking of investing in "safer" investments like annuities or treasuries. Let me know what you think.

.
At this point, I suggest that you ask for a portfolio review. It's clear that when people are providing suggestions, that the responses aren't appropriate because we're operating under incomplete information.

It's unclear from your initial post that you're currently unemployed and currently need the money. That's relevant information, because your initial responses sound like someone who is just uncomfortable investing when the market is down.

Whereas I'd advise someone who is skittish of the market that they should be taking advantage of the opportunities to invest in a down market, an unemployed person needs liquidity.

You also seem enamored of annuities, which may or may not be a good idea if you need liquid funds. That depends on how many you have, and if you can support your current spending requirements.

I don't think you're going to get very good answers unless you follow the question format below and provide sufficient background information.

https://www.bogleheads.org/wiki/Asking_ ... _questions
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Re: Whats the Best Investment for My Money Without Investing in Stocks?

Post by ruralavalon »

arca wrote: Thu Oct 27, 2022 6:42 am Hi guys.. I have $200,000 to invest. Naturally, I'm a bit leery of the stock market especially when its been down about 20% for the year despite recent rallies.

Annuities and bonds are a good idea. An annuity at a bank is offering 4.6% with withdrawals. The coupon rate on a 2 year treasury is going for 4.3%. I'm also thinking of Vanguard bond funds but don't have enough info on them. My goal is not long term for the moment, more like 2 - 3 years.

1) Would you guys tell me the best investment to make right now without investing in the stock market?

2) Conversely, would you tell me about a safe mixed fund (bonds and stocks) to invest in, out of curiosity?

.
wolf359 wrote: Mon Oct 31, 2022 2:01 pm
arca wrote: Sun Oct 30, 2022 3:06 am
er999 wrote: Thu Oct 27, 2022 11:48 am Do you have any debt you can repay? Otherwise, I'd suggest ibonds. If you are a couple, you could put $20k in for this year, $20k in the gift box for delivery in 2024 and buy $20k in January 2023. That would take care of $60k of your $200k. All that money could be withdrawal in January 2024 if needed. Rest of the money if you need in 2 years I'd look at a CD or high yield savings account.
I have no debts. When it comes to ibonds the current rate is 9% which is good. But interest on bonds can change when its interest rate changes, unless I'm wrong. So I may get 9% worth of interest until 6 months from now interest rates can dip which means less return on my ibonds. iBonds are not locked in a specific rate forever, again, unless I'm wrong about that.
But better would be to have a comprehensive finance plan rather than looking at only how to invest for 2-3 years.
Given my current unemployment I cant risk much now. If I were gainly employed I'd splurge a bit. This is why I'm thinking of investing in "safer" investments like annuities or treasuries. Let me know what you think.

.
At this point, I suggest that you ask for a portfolio review. It's clear that when people are providing suggestions, that the responses aren't appropriate because we're operating under incomplete information.

It's unclear from your initial post that you're currently unemployed and currently need the money. That's relevant information, because your initial responses sound like someone who is just uncomfortable investing when the market is down.

Whereas I'd advise someone who is skittish of the market that they should be taking advantage of the opportunities to invest in a down market, an unemployed person needs liquidity.

You also seem enamored of annuities, which may or may not be a good idea if you need liquid funds. That depends on how many you have, and if you can support your current spending requirements.

I don't think you're going to get very good answers unless you follow the question format below and provide sufficient background information.

https://www.bogleheads.org/wiki/Asking_ ... _questions
I agree.

The fact of arca's current unemployment changes a lot. Additional information will be critical.

I think that arca needs to post their complete financial information in this format: Asking Portfolio Questions.

In addition, what kind of annuity is the bank offering?

arca, please simply add all this to your original post using the edit button (the pencil icon near the upper right corner of your post),it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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What are Good Investments for Someone with Low Risk Tolerance?

Post by arca »

[Thread merged into here --admin LadyGeek]

Hi guys.. I'd like to invest in US government bonds and index ETFs as in spiders. But my risk tolerance is low. A few questions...

1) Are there any zero coupon government US bonds that mature after 2025 but before 2026? This is important.

2) What index ETFs do you recommend?

3) Is it too late to invest in AI related stock funds?
core4portfolio
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by core4portfolio »

Iam thinking this way

20% VTI and 80% SPXXX
If its taxable then 20% VTI 80% Treasury Bills
VTI contains 3000+ stocks and include AI as well :)
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Nohbdy
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by Nohbdy »

arca wrote: Thu Feb 15, 2024 11:32 pm Hi guys.. I'd like to invest in US government bonds and index ETFs as in spiders. But my risk tolerance is low. A few questions...

1) Are there any zero coupon government US bonds that mature after 2025 but before 2026? This is important.

2) What index ETFs do you recommend?

3) Is it too late to invest in AI related stock funds?
I’m not sure if there is enough time in-between 2025 and 2026 for a bond to mature.

I don’t recommend anything, but if I did it would be stuff like SCHB, VTI, SPTM. For low risk, SGOV.

I think they probably would take your money now and in the future.
jaMichael
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by jaMichael »

AI stocks and low risk tolerance don’t go together. Have you read a primer on investing, such as the Bogleheads Guide to Investing? That might be a good place to start.

https://www.bogleheads.org/wiki/Boglehe ... _Investing
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by 22twain »

arca wrote: Thu Feb 15, 2024 11:32 pm index ETFs as in spiders
Sounds creepy to me. :shock:
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by ApeAttack »

jaMichael wrote: Fri Feb 16, 2024 12:30 am AI stocks and low risk tolerance don’t go together. Have you read a primer on investing, such as the Bogleheads Guide to Investing? That might be a good place to start.

https://www.bogleheads.org/wiki/Boglehe ... _Investing
That was my first thought too. Many stocks and low risk tolerance don't go together, let alone AI related stocks.
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by Fallible »

ApeAttack wrote: Fri Feb 16, 2024 2:06 am
jaMichael wrote: Fri Feb 16, 2024 12:30 am AI stocks and low risk tolerance don’t go together. Have you read a primer on investing, such as the Bogleheads Guide to Investing? That might be a good place to start.

https://www.bogleheads.org/wiki/Boglehe ... _Investing
That was my first thought too. Many stocks and low risk tolerance don't go together, let alone AI related stocks.
Also my first thought re the AI-related stock. Yikes.

OP, what do you mean by low risk tolerance? The book, Bogleheads' Guide to Investing as recommended above, nicely explains RT and there's also an RT page in the wiki, both of which can help determine one's personal, emotional risk tolerance:

https://www.bogleheads.org/wiki/Risk_tolerance
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by gavinsiu »

arca wrote: Thu Feb 15, 2024 11:32 pm Hi guys.. I'd like to invest in US government bonds and index ETFs as in spiders. But my risk tolerance is low. A few questions...

1) Are there any zero coupon government US bonds that mature after 2025 but before 2026? This is important.

2) What index ETFs do you recommend?

3) Is it too late to invest in AI related stock funds?
If you are risk averse, why would you pick an individual stock in a volatile sector?
When you say index ETF, what index do you mean? You can get index for bonds and for stocks.
Why do you want specific bond maturing after 2025?
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by White Coat Investor »

The secret to low risk tolerance is usually to increase your risk tolerance, not tolerate having low tolerance. Education helps a lot with that.

But if this is money needed in the next 2 years, I think I'd just park it in Federal money market fund. It's paying 5.3% and is essentially guaranteed to not lose principal.

Your suggestions of SPDRs and "AI stocks" suggests you could use some more investing knowledge. Read books and keep asking questions. This stuff isn't that complicated even if it seems that way in the beginning.
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by dbr »

White Coat Investor wrote: Fri Feb 16, 2024 8:03 am The secret to low risk tolerance is usually to increase your risk tolerance, not tolerate having low tolerance. Education helps a lot with that.

But if this is money needed in the next 2 years, I think I'd just park it in Federal money market fund. It's paying 5.3% and is essentially guaranteed to not lose principal.

Your suggestions of SPDRs and "AI stocks" suggests you could use some more investing knowledge. Read books and keep asking questions. This stuff isn't that complicated even if it seems that way in the beginning.
This is a very astute comment. I think too often we assume risk tolerance is a given. I sometimes think of it as making a commitment to accept the risk is one intends to hold a risky investment.* The alternative is the impossible situation of trying to take risk without taking risk.

I do agree a naive investor does not appreciate when risk is reasonable and when risk is foolish. "Education helps a lot with that." is apropos.

*All investments are risky to some degree or another in some way or another. Investing is not safe.
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by beyou »

You should post some anonymous facts about your financial situation.

There is a preferred format that people here are used to and find helpful, to help you.
https://www.bogleheads.org/wiki/Asking_ ... _questions

Also add some goals (short, intermediate, long term).

You will get better, more useful help with better information provided.

Regarding your question about zero coupon bonds maturing in 2025, yes. They are calls Treasury bills, a new 1 year Treasury bill would mature in 2025 at this point. Not saying I would recommend this or anything, without above info.

AI stocks are NOT something you should be thinking about at all. You should be figuring out an overall financial plan and get some ideas to implement them based on best practices that stand the test of time, not latest fads.
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by TimeIsYourFriend »

Low risk tolerance doesn't mean anything without more information. One question would be what type of drawdown would be acceptable to you? If you have say $500k invested and it drops to $250k within a year and may not recover for several years or more, would that cause you to panic? What level of loss can you tolerate in this example?
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by nisiprius »

arca wrote: Thu Feb 15, 2024 11:32 pm 2) What index ETFs do you recommend?
For low risk, the obvious ones.

Vanguard Total Bond Market Index Fund, BND; or AGG.
Vanguard Intermediate-term Bond Index, BIV, if you want to avoid mortgage-backed bonds
Vanguard Intermediate-term Treasury ETF, VGIT, if you prefer 100% Treasury issues
iShares TIPS Bond ETF, TIP, if you like TIPS (I do but I use VAIPX)
3) Is it too late to invest in AI related stock funds?
Good grief, if you think you have "low risk tolerance" that's crazy. I don't know where to begin.

"Low risk" does not mean "high risk for everyone else, but not high risk for me because I can see the future and can dodge any downturn."

For starters, the reasoning "AI is sure to experience incredible growth THEREFORE, stocks in companies in the AI business are sure to boom" is just plain wrong. It's never that simple. If everyone can see that AI will boom, that's already reflected in the price people are willing to pay.

The other problem is that if the field is booming, new companies are constantly entering, so the total earnings from all of AI are being divided up among a larger and larger number of AI companies. If total earnings are booming, but total number of shares of all companies in the business is also growing quickly, you can have a booming business category but stagnant earnings per share. When the inevitable shakeout happens, the AI fund may be holding all the winners but it will also be holding all the losers.

Second, nobody really knows what "an AI related stock" is. It's the old question, "who makes the money? The gold miners or the Ames Shovel Company?"

Third, the Bogleheads Investment Philosophy says
Rather than trying to pick the specific stocks or sectors of the market that may outperform in the future, buy funds that are widely diversified, or even approximate the whole market. This guarantees you will receive the average return of all investors.
But AI isn't even a whole sector! In fact, in the GICS standard classification, it isn't even an industry group, or an industry, or a subindustry. It's too small to be on the chart.

Fourth, you are talking about a "thematic" ETF. Read the transcript of the Rational Reminder podcast, Lighting your Money on Fire with Thematic ETFs for an explanation of why thematic ETFs suck.
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by delamer »

Your level of risk tolerance should go hand-in-hand with your timeline for spending the money, assuming that by risk you mean volatility.

You shouldn’t tolerate risk if you need to spend the money in two years. If you need to spend it in 10 years, then you should tolerate a moderate amount of risk.

If you aresaving for a retirement that will begin in 25 years, then your risk tolerance should be high.
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Re: What are Good Investments for Someone with Low Risk Tolerance?

Post by arca »

gavinsiu wrote: Fri Feb 16, 2024 7:55 am
If you are risk averse, why would you pick an individual stock in a volatile sector?
When you say index ETF, what index do you mean? You can get index for bonds and for stocks.
Why do you want specific bond maturing after 2025?

What are you talking about? I never mentioned an individual stock.

ETF as in one that tracks the S&P.

I have my reasons for specific bonds maturing before 2026 that I will not disclose.
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