Recommendations to invest $1000/month (Non Retirement)

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darthvader747
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Recommendations to invest $1000/month (Non Retirement)

Post by darthvader747 » Mon Apr 30, 2012 12:28 pm

What advice would you give to a 30yr old individual who has $1000 to spare a month.
The goal of this investment is to get a better return than the 2% some high interest savings/checking accounts give.
The money will most likely be withdrawn in about 4years to pay toward a down payment for a house.
So this investment is not toward retirement.

It would be very helpful if you could share fund names etc

Thanks in advance.

KyleAAA
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by KyleAAA » Mon Apr 30, 2012 12:29 pm

CDs or short-term bonds are about as risky as I'd go with that time-horizon.

darthvader747
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by darthvader747 » Mon Apr 30, 2012 1:02 pm

Thanks!
I am a newbie. Which firm do you recommend I use to purchase CD's or short term bonds?
Typically what interest rates can I expect from these instruments?

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tetractys
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by tetractys » Mon Apr 30, 2012 1:10 pm

darthvader747 wrote:Thanks!
I am a newbie. Which firm do you recommend I use to purchase CD's or short term bonds?
Typically what interest rates can I expect from these instruments?

Vanguard has good short term bond funds. For CDs, you should shop around. I think there's a web site called bankrate.com or something like that. Also PenFed(?) is mentioned on this forum often. There are regular CD buyers here that likely can give you better answers. You'll want to study the CD prospectus, since CDs can be complicated just like any investment.

Best of luck, Tet

shashi
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by shashi » Mon Apr 30, 2012 1:30 pm

Have you looked into i-bonds. You will be locked for one year but definitely good option for 4-5 years kitty.

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Re: Recommendations to invest $1000/month (Non Retirement)

Post by Grt2bOutdoors » Mon Apr 30, 2012 1:34 pm

darthvader747 wrote:Thanks!
I am a newbie. Which firm do you recommend I use to purchase CD's or short term bonds?
Typically what interest rates can I expect from these instruments?


Funds that are needed with certainty within a 3-5 year window should be placed in safe (read: low risk) instruments. Correspondingly, low risk instruments in this low rate enviornment will likely pay out no more than 1 - 2% and I'd be inclined to think of about 1.5% on average. If you reach for yield, you must be prepared to be "burned". CD's can be purchased from any institution that offers FDIC insurance.
Short-term bond funds can be purchased from Vanguard or any other fund company, though Vanguard is one of the lowest cost providers. I bonds are another, though no guarantee on yield you will earn over the next 3-5 years.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Jerilynn
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by Jerilynn » Mon Apr 30, 2012 1:38 pm

tetractys wrote:
darthvader747 wrote:Thanks!
I am a newbie. Which firm do you recommend I use to purchase CD's or short term bonds?
Typically what interest rates can I expect from these instruments?

Vanguard has good short term bond funds. For CDs, you should shop around. I think there's a web site called bankrate.com or something like that. Also PenFed(?) is mentioned on this forum often. There are regular CD buyers here that likely can give you better answers. You'll want to study the CD prospectus, since CDs can be complicated just like any investment.

Best of luck, Tet

+1 Vanguard has good short term bond funds, but you probably won't get the 2% that you can get in your checking acct.

As far as checking CD rates, I use Emoney Central. http://www.emoneycentral.com/cd-rates/ And if you look there, the CD rates can't touch what you are already getting.

I-bonds are reasonable, but you have to set up an account at treasury direct in order to buy them.
I'd take the 2% in your checking acct and be happy with that. Is there a max amount that they will pay the 2%. Mine is $30k
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)

thomasbayarea
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by thomasbayarea » Mon Apr 30, 2012 1:51 pm

Here is something to get you started:

CDs: Penfed
High yield savings: TIAA Direct
Short term bond funds at Vanguard
Tax exempt, short term bond funds: VWSTX, PRFSX, STSMX

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runner9
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by runner9 » Mon Apr 30, 2012 1:56 pm

I'd vote for Ally.com for CD rates. though some are concerned about its future though it is FDIC insured.

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Jerilynn
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by Jerilynn » Mon Apr 30, 2012 1:58 pm

thomasbayarea wrote:Here is something to get you started:


High yield savings: TIAA Direct


Is this available to anybody? Any fees/costs/minimums?
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)

thomasbayarea
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by thomasbayarea » Mon Apr 30, 2012 2:06 pm

Jerilynn wrote:
thomasbayarea wrote:Here is something to get you started:


High yield savings: TIAA Direct


Is this available to anybody? Any fees/costs/minimums?


Yes, anybody can sign up. $25 minimum, $0 fees.

Keep in mind that the 1.25% APY rate is not guaranteed. Their rates may go down (or up) anytime.

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Jerilynn
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by Jerilynn » Mon Apr 30, 2012 2:16 pm

thomasbayarea wrote:
Jerilynn wrote:
thomasbayarea wrote:Here is something to get you started:


High yield savings: TIAA Direct


Is this available to anybody? Any fees/costs/minimums?


Yes, anybody can sign up. $25 minimum, $0 fees.

Keep in mind that the 1.25% APY rate is not guaranteed. Their rates may go down (or up) anytime.


Thanks for the info, thomas. I wonder why TIAA doesn't show up when I do a search for best saving acct rates. Have they consistently been this much higher than places like Ally, Capital One and AMEX or is this just probably a teaser rate?
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)

Raven2
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by Raven2 » Mon Apr 30, 2012 2:20 pm

As an alternative to the original question: What Vanguard Index funds would you advise for a single 30 year old individual who has $1000 to spare each month, and wants to invest it entirely toward retirement? The money will not begin to be withdrawn for 30 years and then it will occur over a lifetime. Of that amount $5000 yearly will be placed in a Roth IRA and the remainder in a taxable account. This individual currently has funds for two years living expenses, a secure steady job, but no company retirement plan. Living expenses have been accounted for separately. The goal is capital appreciation with a fairly high risk assumption.

thomasbayarea
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by thomasbayarea » Mon Apr 30, 2012 2:28 pm

Jerilynn wrote:Thanks for the info, thomas. I wonder why TIAA doesn't show up when I do a search for best saving acct rates. Have they consistently been this much higher than places like Ally, Capital One and AMEX or is this just probably a teaser rate?


TIAA Direct is a new (Feb 2012?) Internet bank, subsidiary of TIAA-CREF.
Current 1.25% APY may well be a teaser rate, we don't know.
Deposits are FDIC insured upto $250k

Needless to say, please mitigate your specific risk & perform due diligence.

thomasbayarea
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by thomasbayarea » Mon Apr 30, 2012 2:30 pm

Raven2 wrote:As an alternative to the original question: What Vanguard Index funds would you advise for a single 30 year old individual who has $1000 to spare each month, and wants to invest it entirely toward retirement?


That question cannot be answered without understanding ALL your other retirement investment choices and options (401(k)s, IRAs, Roths, etc). You do mention some of them, but a complete portfolio analysis is recommended. See this link: Asking Portfolio Questions

darthvader747
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by darthvader747 » Mon Apr 30, 2012 2:54 pm

First of all, this is an absolutely amazing forum with some very knowledgeable contributors - Thanks!
Sounds like just keeping my money parked in the bank @2% in what the bank calls a smart checking account is not such a bad idea.
Would you guys agree that that is not such a bad option given the scenario we are considering?

If I were to say that I wanted to invest this money for 10years to what extent would your advise change?
What would be your recommendations then? Mutual funds from vanguard?

thomasbayarea
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by thomasbayarea » Mon Apr 30, 2012 3:09 pm

darthvader747 wrote:Sounds like just keeping my money parked in the bank @2% in what the bank calls a smart checking account is not such a bad idea.
Would you guys agree that that is not such a bad option given the scenario we are considering?

If I were to say that I wanted to invest this money for 10years to what extent would your advise change?
What would be your recommendations then? Mutual funds from vanguard?


Which bank offers 2%? Seems like a good deal. I know of this bank, but cannot get myself to meet all their conditions, every month.

Burton Malkiel, in A Random Walk Down Wall Street wrote:A specific need must be funded with specific assets dedicated to that need


What are you saving for: house, college, retirement, etc?

beach.rocks
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by beach.rocks » Mon Apr 30, 2012 7:27 pm

I have a 5 year CD from the good old days maturing soon and been shopping around for cash and short term bond options myself. I recommend that people check local options as well as the usual suspects (Penfed, Ally, etc..) you may be surprised by what you find. Here are a couple examples from my area.

http://www.melrosecoop.com/deprates.asp

http://www.belmontsavings.com/home/prom ... singratecd (PlatinumBlue checking account required but that is no big hurdle) PlatinumBlue High Yield Savings account pays 1.15.

--David

yb
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by yb » Mon Apr 30, 2012 8:39 pm

Another vote for I-Bonds. If you are buying every month, I-Bonds provide a flexible way to invest your money safely with relatively little penalty for early withdrawal, which you need when you decide to make a downpayment for a home purchase. The only limitations are that, if you are single, you will only be able to buy $10,000/year and you will need to hold them for at least 1 year.

darthvader747
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by darthvader747 » Mon Apr 30, 2012 10:58 pm

Thanks! I bonds sounds like a good option.

Couple of clarifications around I-Bonds:

1. Is the current composite interest rate 3.06%? Does composite interest rate mean effective interest rate that I will get? This is better than the 2% I am currently getting. That is if I am understanding this correctly.

2. I realize I have to open an account with the treasury (http://www.TreasuryDirect.gov) to buy these bonds. I take it this can be done electronically (no paper bonds)? Also is there a way to automatically buy every month? The automation would make life easier

3. How do I sell these bonds when I need the money? Do I sell it at the same site I bought it from. Do they just deposit the money into my bank account? How does the selling work?

4. What is the easiest way to regularly purchase these bonds? Is there a third party service provider who can keep doing this on a regular basis?

5. Is this option better than the vanguard low yield bond funds?

6. I know the interest rate changes every couple of months. If I buy a bond is my interest rate locked for 30 years (based on the interest rate when I purchased)?

FYI- The provident bank provides a smart checking account with 2% interest (Uptop 25,000). I believe they allow you to have more than one account.

Furynation
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by Furynation » Tue May 01, 2012 11:01 am

I'll throw in some different advice. First, do you have to precisely buy your home in 4 years or could you wait another year or two if need be? When I have a short term savings window, I generally invest in something with a low stock to bond ratio, IE 20% stocks and 80% bonds - this allocation may change either way depending on the time frame. I'm not scared of the principal loss, which in the 20/80 scenario could be up to 10% of what I've invested in that mix, because I can afford to wait for a rebound or I can pull money from elsewhere. Not to mention if I have a loss... I can tax loss harvest. More risk, more reward!

It depends on your willingness to take on risk, so if you consider this as an alternative, be sure you can rest easy knowing that there will be some swings :mrgreen:

darthvader747
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by darthvader747 » Tue May 01, 2012 11:55 am

Furynation wrote:I'll throw in some different advice. First, do you have to precisely buy your home in 4 years or could you wait another year or two if need be? When I have a short term savings window, I generally invest in something with a low stock to bond ratio, IE 20% stocks and 80% bonds - this allocation may change either way depending on the time frame. I'm not scared of the principal loss, which in the 20/80 scenario could be up to 10% of what I've invested in that mix, because I can afford to wait for a rebound or I can pull money from elsewhere. Not to mention if I have a loss... I can tax loss harvest. More risk, more reward!

It depends on your willingness to take on risk, so if you consider this as an alternative, be sure you can rest easy knowing that there will be some swings :mrgreen:


At this time I am evaluating my options so thanks for your suggestion.
So that I can do some specific research could you recommend some funds that meet the criteria that you outlined above?


Thanks

darthvader747
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by darthvader747 » Tue May 01, 2012 11:55 am

darthvader747 wrote:Thanks! I bonds sounds like a good option.

Couple of clarifications around I-Bonds:

1. Is the current composite interest rate 3.06%? Does composite interest rate mean effective interest rate that I will get? This is better than the 2% I am currently getting. That is if I am understanding this correctly.

2. I realize I have to open an account with the treasury (http://www.TreasuryDirect.gov) to buy these bonds. I take it this can be done electronically (no paper bonds)? Also is there a way to automatically buy every month? The automation would make life easier

3. How do I sell these bonds when I need the money? Do I sell it at the same site I bought it from. Do they just deposit the money into my bank account? How does the selling work?

4. What is the easiest way to regularly purchase these bonds? Is there a third party service provider who can keep doing this on a regular basis?

5. Is this option better than the vanguard low yield bond funds?

6. I know the interest rate changes every couple of months. If I buy a bond is my interest rate locked for 30 years (based on the interest rate when I purchased)?

FYI- The provident bank provides a smart checking account with 2% interest (Uptop 25,000). I believe they allow you to have more than one account.


No responses yet. Did I ask too long a question :)

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Re: Recommendations to invest $1000/month (Non Retirement)

Post by jasonlitka » Tue May 01, 2012 12:29 pm

darthvader747 wrote:
darthvader747 wrote:Thanks! I bonds sounds like a good option.

Couple of clarifications around I-Bonds:

1. Is the current composite interest rate 3.06%? Does composite interest rate mean effective interest rate that I will get? This is better than the 2% I am currently getting. That is if I am understanding this correctly.

2. I realize I have to open an account with the treasury (http://www.TreasuryDirect.gov) to buy these bonds. I take it this can be done electronically (no paper bonds)? Also is there a way to automatically buy every month? The automation would make life easier

3. How do I sell these bonds when I need the money? Do I sell it at the same site I bought it from. Do they just deposit the money into my bank account? How does the selling work?

4. What is the easiest way to regularly purchase these bonds? Is there a third party service provider who can keep doing this on a regular basis?

5. Is this option better than the vanguard low yield bond funds?

6. I know the interest rate changes every couple of months. If I buy a bond is my interest rate locked for 30 years (based on the interest rate when I purchased)?

FYI- The provident bank provides a smart checking account with 2% interest (Uptop 25,000). I believe they allow you to have more than one account.


No responses yet. Did I ask too long a question :)


1. The rate on I Bonds changes every 6 months and is made up of a fixed rate (currently 0.00%) and an earnings rate (currently 2.20%). The former is fixed for the life of the bond, the latter changes every 6 months.
2. You can automate purchases with TreasuryDirect.
3. Sell the same way as you buy, through the TD web site. Mind the 1 year mandatory hold and the <5 year redemption penalty though.
4. See #2.
5. Depends on what you expect to see in CPI-U changes or shifts upwards in the rates offered on short-term bonds. Personally, I'd use a mix of Tax-Exempt Short- & Limited-Term and just shift the mix closer and closer to short as you get closer to your target withdrawal date, though if you're looking for absolute protection of your principal then these are out and you should stick to I Bonds, CDs, etc.
6. No, see #1.
Jason Litka

Furynation
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by Furynation » Tue May 01, 2012 6:50 pm

darthvader747 wrote:
Furynation wrote:I'll throw in some different advice. First, do you have to precisely buy your home in 4 years or could you wait another year or two if need be? When I have a short term savings window, I generally invest in something with a low stock to bond ratio, IE 20% stocks and 80% bonds - this allocation may change either way depending on the time frame. I'm not scared of the principal loss, which in the 20/80 scenario could be up to 10% of what I've invested in that mix, because I can afford to wait for a rebound or I can pull money from elsewhere. Not to mention if I have a loss... I can tax loss harvest. More risk, more reward!

It depends on your willingness to take on risk, so if you consider this as an alternative, be sure you can rest easy knowing that there will be some swings :mrgreen:


At this time I am evaluating my options so thanks for your suggestion.
So that I can do some specific research could you recommend some funds that meet the criteria that you outlined above?


Thanks


Vanguard's Life Strategy Income Fund - https://personal.vanguard.com/us/funds/snapshot?FundId=0723&FundIntExt=INT is a 20/80 stock/bond allocation. You could look at some of the Target Retirement funds or Wellesley Income Fund https://personal.vanguard.com/us/funds/snapshot?FundId=0027&FundIntExt=INT as well if you want a bit more exposure to stocks. If you want less exposure to equities, you will have to build your allocation out of the Total Stock Market and Total Bond Market funds.

darthvader747
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by darthvader747 » Wed May 09, 2012 11:03 pm

1. The rate on I Bonds changes every 6 months and is made up of a fixed rate (currently 0.00%) and an earnings rate (currently 2.20%). The former is fixed for the life of the bond, the latter changes every 6 months.
2. You can automate purchases with TreasuryDirect.
3. Sell the same way as you buy, through the TD web site. Mind the 1 year mandatory hold and the <5 year redemption penalty though.
4. See #2.
5. Depends on what you expect to see in CPI-U changes or shifts upwards in the rates offered on short-term bonds. Personally, I'd use a mix of Tax-Exempt Short- & Limited-Term and just shift the mix closer and closer to short as you get closer to your target withdrawal date, though if you're looking for absolute protection of your principal then these are out and you should stick to I Bonds, CDs, etc.
6. No, see #1.

In reference to the above comment can someone please explain what was meant by the following:

" Personally, I'd use a mix of Tax-Exempt Short- & Limited-Term and just shift the mix closer and closer to short as you get closer to your target withdrawal date"

Which instruments are taz exempt short & limited term? I presume thats the recommendation. Can anyone elaborate or share an example?

Thanks - all this information has been very helpful.

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market timer
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Re: Recommendations to invest $1000/month (Non Retirement)

Post by market timer » Wed May 09, 2012 11:11 pm

I bonds, obviously.

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