Mother wants to buy house - where to park cash in meantime

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BogleInvestorLondon
Posts: 140
Joined: Mon Nov 25, 2013 10:16 am

Mother wants to buy house - where to park cash in meantime

Post by BogleInvestorLondon » Thu Oct 12, 2017 5:39 pm

Hi all

My mother has around 500k in cash and owns her house.

She is going to sell her house and use the cash to purchase a house, probably for around 900k.

She intends to do this in around a year but wants somewhere to park the cash. She is in the UK and I know some might say not to speculate, but she is worried about Brexit and the pound. Anyway, she asked me what fund I thought is good for her at Vanguard. I suggested an all in one fund like LifeStrategy but I am not sure. If she goes for this would a 60/40 aa be reasonable? I know stocks can fall but there is risk in everything.

Thanks

protagonist
Posts: 4841
Joined: Sun Dec 26, 2010 12:47 pm

Re: Mother wants to buy house - where to park cash in meantime

Post by protagonist » Thu Oct 12, 2017 7:03 pm

BogleInvestorLondon wrote:
Thu Oct 12, 2017 5:39 pm
Hi all

My mother has around 500k in cash and owns her house.

She is going to sell her house and use the cash to purchase a house, probably for around 900k.

She intends to do this in around a year but wants somewhere to park the cash. She is in the UK and I know some might say not to speculate, but she is worried about Brexit and the pound. Anyway, she asked me what fund I thought is good for her at Vanguard. I suggested an all in one fund like LifeStrategy but I am not sure. If she goes for this would a 60/40 aa be reasonable? I know stocks can fall but there is risk in everything.

Thanks
If she needs the cash within a year, I would not invest it in stocks and would be at least a bit wary of bonds beyond short-term. What if the market crashes?

She needs to put it in something ultra-safe and liquid (at least at the time she will need it). In the US that would mean perhaps a CD (if she knows she will not need it prior to maturity, given the short time period) or a bank account offering a "high" (by today's standards) interest rate.

As for Brexit and the pound, I cannot advise. I also don't know British law regarding the tax implications of selling property and purchasing a new home at a later date. Perhaps some of the British folks here can help you with these issues. But you are speaking in US dollars and Vanguard, so I am confused as to her situation. Bottom line- something very secure and liquid, even at the expense of keeping up with inflation if necessary.

And another factor....in the US, bank accounts in the same name at the same institution are only insured up to $250K....there are ways around that. I am only familiar with the US.

BogleInvestorLondon
Posts: 140
Joined: Mon Nov 25, 2013 10:16 am

Re: Mother wants to buy house - where to park cash in meantime

Post by BogleInvestorLondon » Thu Oct 12, 2017 7:40 pm

Thanks for the reply protagonist.

I will think of your points.

As for Vanguard, we have Vanguard here in the UK with very similar funds.

itstoomuch
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Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: Mother wants to buy house - where to park cash in meantime

Post by itstoomuch » Thu Oct 12, 2017 8:32 pm

I started to wind down our Discretionary Accts in Jan 2016 on the basis of high valuations, election year, and the desire of spouse to buy a home near to DS in Seattle. By late fall I was mostly cash (+20% for fiscal year 2016) and remain so to Spring 2017 where upon I essential gave up on equity Market and resumed active buy and sells. Then spouse started active home search in June and again I started to wind down the Roths and NQ accounts to cash.
Condo purchased closed on August 30. The Discretionary will probably total yield 3-5%, fiscal year ending Nov. My risk was fairly high for this amount of return. Worked out fine for us but I was ready to move very quickly. Spouse located a condo on thursday night, viewed it on Saturday, Bid on Monday am, Won the bid over 15 others by 5pm @22% over asking :| We also had to pay 40% down because of the senior penalty :x .

If you are buy & hold type, then holding cash is good. Your risk is missing any profit opportunities.
If you are a trader and can move quickly then holding stock/bonds is OK. Your risk is not moving quick enough to get out.

You need to manage your expectations and be aware of the risks involved.
YMom's$$$MV
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

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