Is there any Low Risk 4 % Return

[ssvincent]

I 've kinda pulled out of the general US stock market until things settle, just wondering if there are places to park your money that are offer a decent return for the short term...

in Prime Money Market (VMMXX) is offering 2.4

and Ultra Short Bond (VUBFX) is 2.6

I do not want to do CDs .....

Is the other options REITs or GLD or am I missing anything ?

[whodidntante]

You excluded the one investment that would get you there, so no.

[ssvincent]

i thought about using 2x margin and buying ultra short bonds etfs...even with the interest charge i'd be around 4

of course 4 % is the magic number that gets us past inflation for the year

[CaliJim]

I 've kinda pulled out of the general US stock market until things settle, just wondering if there are places to park your money that are offer a decent return for the short term...

in Prime Money Market (VMMXX) is offering 2.4

and Ultra Short Bond (VUBFX) is 2.6

I do not want to do CDs .....

Is the other options REITs or GLD or am I missing anything ?

“Until things settle”
rofl

What do you know that millions of other market participants do not know.

This may be the bottom of the next bull market!!!

Nobody knows nothing about the future. Dont let fear drive your strategy. Fear is the path to the dark side.

[Carol88888]

Margin at this point? To buy bonds? Sounds like a really terrible idea.

My investing guru, Warren Buffett, will not let himself use margin because he doesn't see the point of taking on the risk. Why do you want to put yourself in that position?

I can't predict stock prices and bonds prices are even trickier.

[Clever_Username]

Why do you think you'll know when things settle? How will you tell?

If you have a mortgage with a fixed rate of 4%, paying it down is a low risk 4% return, at least for some period of time.

[ssvincent]

That was my thought as well
....

Buy a rental property and get it paid down but obviously the getting in and out of real estate costs you about 20k on each transaction.. Even if it's easy to find a buyer

[stimulacra]

If you wait for the stock market to settle you will probably miss most of the recovery.

I would pick an asset allocation that would let you sleep at night and use that as a starting point to target 4%.

[wootwoot]

If you have a mortgage then paying down principle could have a 4% return depending on the rate of your loan.

[fire4fun]

That was my thought as well
....

Buy a rental property and get it paid down but obviously the getting in and out of real estate costs you about 20k on each transaction.. Even if it's easy to find a buyer

As a buyer transaction fees can be $0. Just put into your contract that seller pays your closing costs. I call it "your price, my terms" if you are their only full price offer, often then will take it.

[ssvincent]

so that could potentially work ....

when i buy , have the seller pay the closing costs and i get my real estate license in the meantime and when its time to sell in a few years i would sell it myself and list it myself on zillow...

[sambb]

interesting. i would buy stock.

[KyleAAA]

Margin at this point? To buy bonds? Sounds like a really terrible idea.

My investing guru, Warren Buffett, will not let himself use margin because he doesn't see the point of taking on the risk. Why do you want to put yourself in that position?

I can't predict stock prices and bonds prices are even trickier.

Buffett does use leverage. He just has a better way to get it than portfolio margin.

To answer OP's question, no. But you can get close with CDs.

[asset_chaos]

How low a risk do you require? Bonds, even with duration and credit risk, are less risky than stocks. Going to Vanguard's list of mutual funds by asset class and showing bond attributes says that several bond funds have yields to maturity of 4% or more, but none of them are short term or treasury only. Possibly the least risky that meets your required threshold is intermediate term investment grade at 4%. How did you arrive at 4% as the threshold? Intermediate term investment grade is certainly riskier than treasury bills, but it's much less risky than the stock market. If you have determined that your investment plan succeeds from today going forward with a 4% return, then your rational objective is to get that expected return at the least risk. Perhaps some moderate risk bonds is your answer.

[Arby]

5 year CD at 3.5% you could call low risk, though there is still inflation risk and interest rate risk.

[jeffyscott]

Actually, I see there is one 4% CD, CUSIP 40434YT64, matures 04/25/2031, though. Long term bond funds have yields above 4%, I would not call them low risk but lower risk than stocks, I'd not consider them appropriate for a short-term investment, nor would I count on getting 4% with a short term investment in them. But then, neither would I consider selling and waiting for things to "settle" to be a sensible plan.

Also in the not low risk category, Vanguard shows >4% available in 1 year investment grade corporate bonds. I assume that's in the lowest category of "investment grade".
https://personal.vanguard.com/us/FixedIncomeHome

In another, not low risk category, floating rate funds have SEC yields above 4% as do several other types of risky bond funds.

Of course, there are no low risk, short term, investments with returns of 4%+, and REITS or GLD are certainly not low risk.

[rich126]

There are preferred shares of stocks that pay a solid dividend. Depends on your risk level but they do pay over 4%.

[munemaker]

i thought about using 2x margin and buying ultra short bonds etfs...even with the interest charge i'd be around 4

This sounds like a great idea. I can't think of anything that could go wrong.

[TomatoTomahto]

i thought about using 2x margin and buying ultra short bonds etfs...even with the interest charge i'd be around 4

This sounds like a great idea. I can't think of anything that could go wrong.

Thank you for the (literal) laugh out loud.

[quantAndHold]

That was my thought as well
....

Buy a rental property and get it paid down but obviously the getting in and out of real estate costs you about 20k on each transaction.. Even if it's easy to find a buyer

As a buyer transaction fees can be $0. Just put into your contract that seller pays your closing costs. I call it "your price, my terms" if you are their only full price offer, often then will take it.

You know that sellers can do basic math just as well as you can, right? The only thing having the seller pay closing costs does is roll the closing costs into the sale price. If you can get the seller to pay $10k in closing costs, you could have got the seller to take $10k less on the sale price instead. Seller paid closing costs is usually a way for people who don’t have enough down payment money to finance what would normally be part of the down payment.

[fire4fun]

That was my thought as well
....

Buy a rental property and get it paid down but obviously the getting in and out of real estate costs you about 20k on each transaction.. Even if it's easy to find a buyer

As a buyer transaction fees can be $0. Just put into your contract that seller pays your closing costs. I call it "your price, my terms" if you are their only full price offer, often then will take it.

You know that sellers can do basic math just as well as you can, right? The only thing having the seller pay closing costs does is roll the closing costs into the sale price. If you can get the seller to pay $10k in closing costs, you could have got the seller to take $10k less on the sale price instead. Seller paid closing costs is usually a way for people who don’t have enough down payment money to finance what would normally be part of the down payment.

Sometimes it is just a mental thing and if the seller needs to get rid of the property, he or she will and a nice round offer that is full price but still they have to pay closing costs is just fine with them. You'd be surprised how much psychology plays into it even if mathematically I know what you are saying.

[delamer]

If you’ve pulled out of the US stock market “until things settle,” then you are treating stocks as a short-term investment.

And they aren’t.

You should only be in stocks if you are prepared to hold them for the long run.

That’s the core problem, not where you can get 4% on a safe investment.

[Spinola]

TIAA Traditional is earning me 4.18%. At 44% of my portfolio and growing, a nice counterbalance to my stocks. Of course the money has been in Traditional for decades to earn 4.18%. New money would earn you much less to start.

Trying to time the market is a fools errand, as any good Boglehead knows. Get back in at whatever AA you are comfortable with. 50/50 to 25 /75 ( if you are very risk adverse) is a good range, pick one and hold.

[ssvincent]

Is tiaa traditional an annuiity

[Spinola]

Is tiaa traditional an annuiity

Yes, that is what it is, with an accumulation phase, in my case 25 years and counting.

https://www.tiaa.org/public/how-do-trad ... ities-work

"TIAA Traditional Annuity* is designed to help you create your "paycheck" in retirement - no matter what happens in the markets. Take advantage of guaranteed growth, dependable lifetime income and exclusive benefits that our fixed annuity provides.

[Nummerkins]

As of my posting time, the S&P 500 closed up over 5%. There's your 4% return in one day and you missed out on it because you panicked. Instead of jumping around from one bad idea to another, check out the stickied threads and craft a sold strategy going forward. Follow the posting format and put up your numbers for the forum to dissect and help you out.

[stimulacra]

If you’ve pulled out of the US stock market “until things settle,” then you are treating stocks as a short-term investment.

And they aren’t.

You should only be in stocks if you are prepared to hold them for the long run.

That’s the core problem, not where you can get 4% on a safe investment.

+1

VTI is up 4.8% today. Helps ease some of the pain from last week (where I rebalanced mid-week).

[Jack FFR1846]

i thought about using 2x margin and buying ultra short bonds etfs...even with the interest charge i'd be around 4

This sounds like a great idea. I can't think of anything that could go wrong.

You really need to first insert the <Jeremy Clarkson Voice>

then: "This sounds like a great idea. What could possibly go wrong?"

Then end the voice: </voice>

[sergeant]

I'm getting 4.125% in my stable value fund in my 457b.

[bhsince87]

I'm getting about 3.3% tax free in the Vanguard PA long term municipal fund.

That's about 4.5% equiv for a high tax bracket.

I'd call it medium risk, though.

But it's simple.

[retiredflyboy]

You can never avoid risk, only the type of risk.

[patrick]

I get 6.17% with very low risk on my Digital Credit Union savings account.

Unfortunately it has a $1,000 maximum for that return.

[Mike Scott]

CDs are the obvious answer but... if you are willing to do the work monitoring and moving money around new accounts, you can get bank bonuses on bank accounts. Look up doctorofcredit.com and read the bank bonus info. For rentals, do you want to take on the "job" of running/managing rental properties?

[JoMoney]

Corportate bonds of an intermediate term or longer are yielding over 4%, but that's not exactly "low risk" or "short term".

[ssvincent]

heres a really newbie question ;

if you buy a corporate bond / or long term bonds , but only end up keeping them for a short term

do you still retain the 4 % of interest of coupon payments during the time you owned it for ?

[AtlasShrugged?]

ssvincent....Do you have a mortgage at 4%? Then every extra dollar you put toward principle is an investment with a guaranteed 4% rate of return.

[Tamarind]

Sorry, I'm still blinking bemusedly at OP requesting investments with safe return but citing REITs, GLD, and margin as possibilities.

Long CDs, stable value funds, or debt prepayment are the only safe things I can think of that would approach that return for large sums. A Mango account will still get you that rate but only on $2500 or less.

[acegolfer]

ssvincent....Do you have a mortgage at 4%? Then every extra dollar you put toward principle is an investment with a guaranteed 4% rate of return.

I was going to suggest this, until I saw OP mentioned "short term".

OP, if you are going to retire mortgage short term (by refinance, selling house, etc), then making extra payment will be a short term risk-free return.

[galeno]

NO.

To get a REAL 4% REAL CAGR you'll have to hold 100% NON-USA equities.

I assume a REAL 3% CAGR for USA equities and a REAL 6% for non-USA equities.

[DR]

Here's another way to look at it using Portfolio Visualizer's "portfolio optimization." I targeted 4% asking to optimize for minimum volatility. I used these two tickers: AGG (total bond index) and VTSMX (vanguard's total market index). It is using the dates 1985-2018. It calculates that the ratio of those two funds with the lowest standard deviation targeting 4% CAGR is 93.82% AGG and 6.18% VTSMX. The StdDev is 3.56%. The best year was 7.35% and the worst year -1.43%

This doesn't mean this is the lowest standard deviation of any two funds, but it's a reasonable way to think about and you could compare different funds or three funds, etc.

Dan

[dbr]

Here's another way to look at it using Portfolio Visualizer's "portfolio optimization." I targeted 4% asking to optimize for minimum volatility. I used these two tickers: AGG (total bond index) and VTSMX (vanguard's total market index). It is using the dates 1985-2018. It calculates that the ratio of those two funds with the lowest standard deviation targeting 4% CAGR is 93.82% AGG and 6.18% VTSMX. The StdDev is 3.56%. The best year was 7.35% and the worst year -1.43%

This doesn't mean this is the lowest standard deviation of any two funds, but it's a reasonable way to think about and you could compare different funds or three funds, etc.

Dan

Good example to illustrate what is involved. Some people would buy this on the understanding that 3.56% is a low standard deviation compared, for example, to a stock fund that might run 19% standard deviation. Other people would blanch at the possibility that there was a year with a 1.43% loss. It really is a question of paying your money and taking your choice, but thank you for showing what the choices might look like.

[Blake7]

I'm getting 4.125% in my stable value fund in my 457b.

Could you share the fund name? That’s way better than my 457’s stable value fund. Maybe time to call my fund’s rep.

[GrowthSeeker]

There are preferred shares of stocks that pay a solid dividend. Depends on your risk level but they do pay over 4%.

Ah, but a dividend of 4% tells you nothing about what the total return is for that stock. If, during a given year, the share price drops 10% and you get a 4% dividend, then you have a 6% loss.
It's all about the total return, or it should be.

[nisiprius]

To paraphrase "Anna Karenina," low risk investments are all alike; every high risk investment is risky in its own way.

Since all low risk investments are alike, low risk investments that trade freely in an open market can't have huge differences in their return. If they did, only one with the highest return would sell--and all the others would soon adjust in some way to match return.

If you think you have spotted a low risk investment with a much higher return than others, it is almost certain that there is hidden risk there and you have failed to spot it.

In other words, you are in great danger. If you go around telling the world that you are looking for one, there's a danger that you will find one--or, rather, that an actual scammer will find you.

Circa 2006-2007, there were various examples of things that people thought had higher return with virtually no risk: auction rate securities, the GE "Enhanced Cash" mutual fund, the Schwab "YieldPlus" mutual fund, and the Fidelity Ultrashort Bond Fund. In every case, they were expecting to get only a small amount of extra return, less than a percent, and instead they got into significant trouble.

Schwab said of YieldPlus:
"The fund’s investment strategy is designed to offer higher yields than a money market fund while seeking minimal changes in share price."
This is what happened:


(Now, I put in the "trade freely in an open market" for a reason. Bank accounts and series I savings bonds sometimes have earned a little more than a money market mutual fund, or than Treasury bills. This is only possible because these are not useful to big institutional investors, and represent cases where the small saver gets a small break as a matter of public policy, to encourage thrift. Even so, it's only a small break).

[michaeljc70]

Interesting that gold and 2x margin are considered low risk.

Let us know when the market settles down.

[delamer]

heres a really newbie question ;

if you buy a corporate bond / or long term bonds , but only end up keeping them for a short term

do you still retain the 4 % of interest of coupon payments during the time you owned it for ?

The interest is paid based in a schedule.

The danger is that you sell at a time when interest rates are higher than when you bought, which means your principal value will have declined.

If you paid $1,000 for a bond yielding 3% and the yield on similar bonds is now 4%, you won’t get your $1,000 back if you sell.

[garlandwhizzer]

Is there any low risk 4% return? Depends on how low is "low risk?" If you mean risk-less, something that you never have to worry about no matter what happens, the answer is an unequivocal no except in highly inflationary times when you can get 30 year Treasuries yielding more than that nominally but likely zero or less in real terms. Real return is the only kind that matters long term. Nominal return of 4% is discounted by cumulative inflation going forward which means that its return in the future is unknown. There has never been a place in the bond market where a guaranteed real return of 4% was offered. Likewise the stock market, commodities market, alternatives market, hedge funds, private equity etc.. This animal does not exist. No one can guarantee such performance in the face of unknown future inflation and yet preserve the principal value of your investment. A promise of high nominal yields is often the hook the investment industry uses to lure inexperienced customers into the riskier segments of the fixed income market. If you read the fine print in their offerings, you'll always find it isn't as safe as it sounds. The search for a 4% nominal yield is much more likely to get you into trouble than a balanced portfolio of safe lower yielding bonds plus equity IMO.

Garland Whizzer

[Dialectical Investor]

There has never been a place in the bond market where a guaranteed real return of 4% was offered.

I think TIPS very briefly touched 4% in late 2008. Definitely an outlier though. And by that time, stock losses were substantial.

[galeno]

When I studied finance in the mid 1990s the "risk free rate of return" was always defined as the 10 year US treasury note yield. Right now it's 2.74% NOMNINAL.

[The Wizard]

Is tiaa traditional an annuiity

Yes, that is what it is, with an accumulation phase, in my case 25 years and counting.

https://www.tiaa.org/public/how-do-trad ... ities-work

"TIAA Traditional Annuity* is designed to help you create your "paycheck" in retirement - no matter what happens in the markets. Take advantage of guaranteed growth, dependable lifetime income and exclusive benefits that our fixed annuity provides.

I have a bunch of Trad in tax deferred as well.
New contribs to restricted Trad are credited at 4% annually.
A Trad accumulation can be "annuitized" or not.
If not, then you can withdraw ~10% of it per year in retirement or just wait till age 70 and withdraw the RMD amount...