short term investment instead of money market...

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riptide
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short term investment instead of money market...

Post by riptide » Thu Sep 07, 2017 2:08 pm

I am waiting for my home to be built, it is now delayed until the end of December 2017. $60,000 sitting in money market gaining nothing. I almost invested it all in VTSAX and then would need it again the end of December. I hate just letting it sit there gaining nothing in interest.

Now, the house was supposed to be ready in October/November. I will need to add to the $60,000 for a payment with an additional $10,000 or so. I don't know if this delay changes where I should take the money. I have the options to take the $10,000 from the Brokerage account (stocks and bonds) or U.S. EE Series Treasury bonds , which mature in 2022. The value of the Brokerage Account is $188,500 and the Treasury Bonds total $50,000 currently. There are six Treasury bonds that are worth around $7,500 each currently.
Brokerage account 70/30 | VG total Market 40% | VG total Intl 12% | VG small cap value 12% | VG Reit index 6% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

Grt2bOutdoors
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Re: short term investment instead of money market...

Post by Grt2bOutdoors » Thu Sep 07, 2017 2:35 pm

riptide wrote:
Thu Sep 07, 2017 2:08 pm
I am waiting for my home to be built, it is now delayed until the end of December 2017. $60,000 sitting in money market gaining nothing. I almost invested it all in VTSAX and then would need it again the end of December. I hate just letting it sit there gaining nothing in interest.

Now, the house was supposed to be ready in October/November. I will need to add to the $60,000 for a payment with an additional $10,000 or so. I don't know if this delay changes where I should take the money. I have the options to take the $10,000 from the Brokerage account (stocks and bonds) or U.S. EE Series Treasury bonds , which mature in 2022. The value of the Brokerage Account is $188,500 and the Treasury Bonds total $50,000 currently. There are six Treasury bonds that are worth around $7,500 each currently.
I would take it from the brokerage account. While the EE's are currently worth $7,500, in 2022, exactly 5 years from now (assuming it matures in September 2022) the bond will each be worth $15,000. That is a 15% yield to maturity. No way, would I cash those bonds in, that is a guaranteed return, the brokerage account's return is not guaranteed.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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riptide
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Re: short term investment instead of money market...

Post by riptide » Thu Sep 07, 2017 2:45 pm

Thanks man will do,
What about a place to put the $60,000 for 3 months?!
Brokerage account 70/30 | VG total Market 40% | VG total Intl 12% | VG small cap value 12% | VG Reit index 6% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

trav867
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Re: short term investment instead of money market...

Post by trav867 » Thu Sep 07, 2017 2:49 pm

There are a few online banks that offer no penalty CDs at around 1.5%. Ally, CIT etc..

omgbirdman
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Re: short term investment instead of money market...

Post by omgbirdman » Thu Sep 07, 2017 3:41 pm

Grt2bOutdoors wrote:
Thu Sep 07, 2017 2:35 pm
I would take it from the brokerage account. While the EE's are currently worth $7,500, in 2022, exactly 5 years from now (assuming it matures in September 2022) the bond will each be worth $15,000. That is a 15% yield to maturity. No way, would I cash those bonds in, that is a guaranteed return, the brokerage account's return is not guaranteed.
How can the yield be this high though? Since 2005 when EE bonds went to fixed rates, the highest rate has been 3.7%.

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riptide
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Re: short term investment instead of money market...

Post by riptide » Fri Sep 08, 2017 8:00 am

omgbirdman wrote:
Thu Sep 07, 2017 3:41 pm
Grt2bOutdoors wrote:
Thu Sep 07, 2017 2:35 pm
I would take it from the brokerage account. While the EE's are currently worth $7,500, in 2022, exactly 5 years from now (assuming it matures in September 2022) the bond will each be worth $15,000. That is a 15% yield to maturity. No way, would I cash those bonds in, that is a guaranteed return, the brokerage account's return is not guaranteed.
How can the yield be this high though? Since 2005 when EE bonds went to fixed rates, the highest rate has been 3.7%.
The yield is not that high, but they still are a guaranteed gain over the next five years, where the brokerage account can lose or gain.
Brokerage account 70/30 | VG total Market 40% | VG total Intl 12% | VG small cap value 12% | VG Reit index 6% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

omgbirdman
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Re: short term investment instead of money market...

Post by omgbirdman » Fri Sep 08, 2017 8:07 am

riptide wrote:
Fri Sep 08, 2017 8:00 am
The yield is not that high, but they still are a guaranteed gain over the next five years, where the brokerage account can lose or gain.
So what is the yield? If it's less than 1% or so, it's probably worth the hassle to cash it out and switch it to a savings account.

Grt2bOutdoors
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Re: short term investment instead of money market...

Post by Grt2bOutdoors » Fri Sep 08, 2017 10:37 am

riptide wrote:
Fri Sep 08, 2017 8:00 am
omgbirdman wrote:
Thu Sep 07, 2017 3:41 pm
Grt2bOutdoors wrote:
Thu Sep 07, 2017 2:35 pm
I would take it from the brokerage account. While the EE's are currently worth $7,500, in 2022, exactly 5 years from now (assuming it matures in September 2022) the bond will each be worth $15,000. That is a 15% yield to maturity. No way, would I cash those bonds in, that is a guaranteed return, the brokerage account's return is not guaranteed.
How can the yield be this high though? Since 2005 when EE bonds went to fixed rates, the highest rate has been 3.7%.
The yield is not that high, but they still are a guaranteed gain over the next five years, where the brokerage account can lose or gain.
What was the month and year that each EE bond was issued in? Was it in 2005?
Here are the rules on EE bonds that were issued during that time period. Yes, the EE bond earns a variable rate, but the bond also reaches original maturity in 17 years. That means a bond issued in 2005 will mature in 2022, the value is guaranteed to double. Even if you bond is earning a current low yield of 1.68% today, the difference between what it is worth today and what the ending value is at maturity is the true yield to maturity. I would not cash in that EE bond, you'll be leaving guaranteed money on the table.

https://www.treasurydirect.gov/indiv/re ... 042005.htm
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

alampatel
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Re: short term investment instead of money market...

Post by alampatel » Fri Sep 08, 2017 11:59 am

Why not just lend doing hard money and using collateral for security? You can charge up to 20 percent for the risk...

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riptide
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Re: short term investment instead of money market...

Post by riptide » Thu Sep 14, 2017 11:11 am

Grt2bOutdoors wrote:
Fri Sep 08, 2017 10:37 am
riptide wrote:
Fri Sep 08, 2017 8:00 am
omgbirdman wrote:
Thu Sep 07, 2017 3:41 pm
Grt2bOutdoors wrote:
Thu Sep 07, 2017 2:35 pm
I would take it from the brokerage account. While the EE's are currently worth $7,500, in 2022, exactly 5 years from now (assuming it matures in September 2022) the bond will each be worth $15,000. That is a 15% yield to maturity. No way, would I cash those bonds in, that is a guaranteed return, the brokerage account's return is not guaranteed.
How can the yield be this high though? Since 2005 when EE bonds went to fixed rates, the highest rate has been 3.7%.
The yield is not that high, but they still are a guaranteed gain over the next five years, where the brokerage account can lose or gain.
What was the month and year that each EE bond was issued in? Was it in 2005?
Here are the rules on EE bonds that were issued during that time period. Yes, the EE bond earns a variable rate, but the bond also reaches original maturity in 17 years. That means a bond issued in 2005 will mature in 2022, the value is guaranteed to double. Even if you bond is earning a current low yield of 1.68% today, the difference between what it is worth today and what the ending value is at maturity is the true yield to maturity. I would not cash in that EE bond, you'll be leaving guaranteed money on the table.

https://www.treasurydirect.gov/indiv/re ... 042005.htm
They were issued in 1992 , 30 year EE series treasury bonds, mature in 2022. Started earning 4% , I am not sure what they gain now, I always believed it was locked in at 4%, but told differently...
Brokerage account 70/30 | VG total Market 40% | VG total Intl 12% | VG small cap value 12% | VG Reit index 6% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

Grt2bOutdoors
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Location: New York

Re: short term investment instead of money market...

Post by Grt2bOutdoors » Thu Sep 14, 2017 11:22 am

riptide wrote:
Thu Sep 14, 2017 11:11 am
Grt2bOutdoors wrote:
Fri Sep 08, 2017 10:37 am
riptide wrote:
Fri Sep 08, 2017 8:00 am
omgbirdman wrote:
Thu Sep 07, 2017 3:41 pm
Grt2bOutdoors wrote:
Thu Sep 07, 2017 2:35 pm
I would take it from the brokerage account. While the EE's are currently worth $7,500, in 2022, exactly 5 years from now (assuming it matures in September 2022) the bond will each be worth $15,000. That is a 15% yield to maturity. No way, would I cash those bonds in, that is a guaranteed return, the brokerage account's return is not guaranteed.
How can the yield be this high though? Since 2005 when EE bonds went to fixed rates, the highest rate has been 3.7%.
The yield is not that high, but they still are a guaranteed gain over the next five years, where the brokerage account can lose or gain.
What was the month and year that each EE bond was issued in? Was it in 2005?
Here are the rules on EE bonds that were issued during that time period. Yes, the EE bond earns a variable rate, but the bond also reaches original maturity in 17 years. That means a bond issued in 2005 will mature in 2022, the value is guaranteed to double. Even if you bond is earning a current low yield of 1.68% today, the difference between what it is worth today and what the ending value is at maturity is the true yield to maturity. I would not cash in that EE bond, you'll be leaving guaranteed money on the table.

https://www.treasurydirect.gov/indiv/re ... 042005.htm
They were issued in 1992 , 30 year EE series treasury bonds, mature in 2022. Started earning 4% , I am not sure what they gain now, I always believed it was locked in at 4%, but told differently...
Original maturity was 12 years, the initial rate was 6%, after 2004, the rate became a fixed 4% for remainder of term. So you will give up a guaranteed 4% fixed rate from now until full maturity in 2022. I would not cash it in because the rate is known and guaranteed, you can not get a AAA rated 4% bond with a 5 year maturity anywhere today, but you can if you continue to hold those bonds.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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riptide
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Re: short term investment instead of money market...

Post by riptide » Thu Sep 14, 2017 11:55 am

Thanks, I will hold them until maturity, unless I need them for an emergency.
I hate to take from the Brokerage account, but I have no other options...
Brokerage account 70/30 | VG total Market 40% | VG total Intl 12% | VG small cap value 12% | VG Reit index 6% | VG Total Bond 30% | TSP Account 75/25 | C Fund 45%, S 15%, I 15%, G 25% | EE Bonds=Emergency Fund

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