Investing Retained Earnings

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djpeteski
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Joined: Fri Mar 31, 2017 9:07 am

Investing Retained Earnings

Post by djpeteski » Mon Jul 10, 2017 10:35 am

I run a (very) small LLC and have some ideas on how to expand it.

My goal is to build retained earnings to a certain level, then to open a new line of business.

How does one "invest" RE in the meantime. Currently these are my options:

1) Keep the money in my business checking: 0%
2) Keep the money at the business bank in a separate savings account: .1% (suspiciously close to zero)
3) Open an online high interest account in the business name. (Most of the ones I checked with only do personal accounts.)
4) Invest some of the money with a brokerage. (Which brokerages allow for business accounts?)

Any other ideas?

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Hayden
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Joined: Tue Apr 16, 2013 5:13 pm

Re: Investing Retained Earnings

Post by Hayden » Mon Jul 17, 2017 10:30 am

My business has an account at Vanguard where I invest RE

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patrick013
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Re: Investing Retained Earnings

Post by patrick013 » Mon Jul 17, 2017 11:43 am

I think you'd want something conservative and liquid. No more
than 25% stocks if any. ST bonds, CD's.

Schwab usually has a good selection of ST AAA Corp bonds where
you can buy set maturity dates. 5 year CD's any place, or perhaps
an iShares iBond target date Corp bond fund.
age in bonds, buy-and-hold, 10 year business cycle

lazyday
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Joined: Wed Mar 14, 2007 10:27 pm

Re: Investing Retained Earnings

Post by lazyday » Mon Jul 17, 2017 12:50 pm

If you can't find a good FDIC or NCUA account ($250,000 max) that accepts you, a brokerage would allow you to buy Treasury bills. The 3 month bill is over 1%: https://www.treasury.gov/resource-cente ... data=yield

Vanguard lets you buy bills for free at auction, and cheaply otherwise.

Maybe a short term TIPS fund could also be appropriate? Like VTIP. In a shock like 2008, it would probably lose some money.

I don't have any corporate finance experience so there may be other considerations.

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