Where to safely park $200k

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Topic Author
viajero
Posts: 14
Joined: Fri Nov 20, 2020 2:42 pm

Where to safely park $200k

Post by viajero »

I sold my condo and have $200k that I need to preserve and hopefully grow short term - I will be buying a new place sometime between 1 and 4 years from now.
Some ideas I have:

1. The simplest/safest way is to put it in a HYSA (citi has 0.6%) and forget about it. I'll be losing on inflation but zero risk.
2. Invest in Vanguard state bonds which will be both federal and state tax free - current yield is ~ 2.4% - a bit more risky but beats 0.6% savings account
3. Some combination of index and bond - higher risk but possibly higher reward

Any ideas/comments/suggestions?
DesertDiva
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Location: In the desert

Re: Where to safely park $200k

Post by DesertDiva »

A HYSA or CDs are appropriate for your goals. I would focus on safety ahead of yield for short-term needs.
lessismore22
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Location: USA

Re: Where to safely park $200k

Post by lessismore22 »

Credit unions will often times offer a bit higher than average CD rates for new money accounts. Some do put a cap on the amount though, so might not be able to put the entire 200k in one spot if you go that route.
tashnewbie
Posts: 934
Joined: Thu Apr 23, 2020 12:44 pm

Re: Where to safely park $200k

Post by tashnewbie »

If you think you could need the money in 1 year, I would stick with savings vehicles that guarantee return of principal.

If you're more flexible, and it could be 4+ years when you need it, then you could get a bit more complicated with your options.
bradinsky
Posts: 265
Joined: Sat Jul 21, 2018 6:32 am

Re: Where to safely park $200k

Post by bradinsky »

OP,
I’d go with #1. If you might need all of your money in a year, I don’t see the wisdom in taking any risk. Cap One is at .5%, and that’s higher than all of the financial institutions in my area, so the .6% seems like a good rate for these times. Good luck!

Brad
User avatar
anon_investor
Posts: 3720
Joined: Mon Jun 03, 2019 1:43 pm

Re: Where to safely park $200k

Post by anon_investor »

viajero wrote: Fri Nov 20, 2020 2:49 pm I sold my condo and have $200k that I need to preserve and hopefully grow short term - I will be buying a new place sometime between 1 and 4 years from now.
Some ideas I have:

1. The simplest/safest way is to put it in a HYSA (citi has 0.6%) and forget about it. I'll be losing on inflation but zero risk.
2. Invest in Vanguard state bonds which will be both federal and state tax free - current yield is ~ 2.4% - a bit more risky but beats 0.6% savings account
3. Some combination of index and bond - higher risk but possibly higher reward

Any ideas/comments/suggestions?
You might go with an FDIC insured 11 month no penalty CD at Ally Bank, currently paying 0.60% APY:
https://www.ally.com/bank/no-penalty-cd/

The benefit is you are guaranteed that 0.60% interest (HYSA can drop rate at any time), and there is $0 penalty to break the CD, so you can do so if you need the money (to spend or if you find a better safe investment).
ericcohen
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Joined: Wed Dec 26, 2018 9:34 pm

Re: Where to safely park $200k

Post by ericcohen »

I think you need to decide whether you will need the money closer to 1 year from now or 4. There’s a big difference in the amount of risk you can take for those timeframes. If 4 years I would take a lot more risk. Possibly a safer mix of stocks and muni bond fund. 60-40; 50-50. If 1 year then yes hysa sounds good. If 2 years, munis.that’s just what I would do. Figure out exactly how long you want to hold.
Gill
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Re: Where to safely park $200k

Post by Gill »

ericcohen wrote: Fri Nov 20, 2020 6:33 pm I think you need to decide whether you will need the money closer to 1 year from now or 4. There’s a big difference in the amount of risk you can take for those timeframes. If 4 years I would take a lot more risk. Possibly a safer mix of stocks and muni bond fund. 60-40; 50-50. If 1 year then yes hysa sounds good. If 2 years, munis.that’s just what I would do. Figure out exactly how long you want to hold.
60-40 allocation for four years? Way too much risk IMO.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
PennyWise7
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Re: Where to safely park $200k

Post by PennyWise7 »

Check out BSV Vanguard Short term Bond Fund.
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anon_investor
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Re: Where to safely park $200k

Post by anon_investor »

Gill wrote: Fri Nov 20, 2020 7:43 pm
ericcohen wrote: Fri Nov 20, 2020 6:33 pm I think you need to decide whether you will need the money closer to 1 year from now or 4. There’s a big difference in the amount of risk you can take for those timeframes. If 4 years I would take a lot more risk. Possibly a safer mix of stocks and muni bond fund. 60-40; 50-50. If 1 year then yes hysa sounds good. If 2 years, munis.that’s just what I would do. Figure out exactly how long you want to hold.
60-40 allocation for four years? Way too much risk IMO.
Gill
How about 40/60?
ivgrivchuck
Posts: 279
Joined: Sun Sep 27, 2020 6:20 pm

Re: Where to safely park $200k

Post by ivgrivchuck »

anon_investor wrote: Fri Nov 20, 2020 4:39 pm
You might go with an FDIC insured 11 month no penalty CD at Ally Bank, currently paying 0.60% APY:
https://www.ally.com/bank/no-penalty-cd/
+1

Seriously a savings account or a no-penalty-cd are the only reasonable options in your situations.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
eldplanko
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Joined: Fri Nov 20, 2020 8:15 pm

Re: Where to safely park $200k

Post by eldplanko »

My 2 cents, for no risk:

10k I-Bonds @1.68% now
10k Ally HYSA @0.6% now
180k Ally 11-mo no-penalty CD @0.6% now

On Jan 1, move 10k Ally HYSA to I-Bonds @1.68%

Re-evaluate in 11 months; if at any point you can lock in higher than 0.6% from the CDs, upgrade, some for I-bonds after 12-mo, even with the 3-mo penalty, it’s better than any other no risk rate right now

rinse, repeat
Gill
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Location: Florida

Re: Where to safely park $200k

Post by Gill »

anon_investor wrote: Fri Nov 20, 2020 8:18 pm
Gill wrote: Fri Nov 20, 2020 7:43 pm
ericcohen wrote: Fri Nov 20, 2020 6:33 pm I think you need to decide whether you will need the money closer to 1 year from now or 4. There’s a big difference in the amount of risk you can take for those timeframes. If 4 years I would take a lot more risk. Possibly a safer mix of stocks and muni bond fund. 60-40; 50-50. If 1 year then yes hysa sounds good. If 2 years, munis.that’s just what I would do. Figure out exactly how long you want to hold.
60-40 allocation for four years? Way too much risk IMO.
Gill
How about 40/60?
No. I don’t feel equities are at all appropriate.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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anon_investor
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Re: Where to safely park $200k

Post by anon_investor »

Gill wrote: Fri Nov 20, 2020 8:28 pm
anon_investor wrote: Fri Nov 20, 2020 8:18 pm
Gill wrote: Fri Nov 20, 2020 7:43 pm
ericcohen wrote: Fri Nov 20, 2020 6:33 pm I think you need to decide whether you will need the money closer to 1 year from now or 4. There’s a big difference in the amount of risk you can take for those timeframes. If 4 years I would take a lot more risk. Possibly a safer mix of stocks and muni bond fund. 60-40; 50-50. If 1 year then yes hysa sounds good. If 2 years, munis.that’s just what I would do. Figure out exactly how long you want to hold.
60-40 allocation for four years? Way too much risk IMO.
Gill
How about 40/60?
No. I don’t feel equities are at all appropriate.
Gill
I agree, which is why I suggested a FDIC insured no penalty CD. But if someone had a 4 year time frame and high risk tolerance, a small amount of equities might make sense, like 20% VTSAX / 80% FDIC insured cash, rebalanced annually.
tibbitts
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Re: Where to safely park $200k

Post by tibbitts »

viajero wrote: Fri Nov 20, 2020 2:49 pm Any ideas/comments/suggestions?
Buy the new place now.
Topic Author
viajero
Posts: 14
Joined: Fri Nov 20, 2020 2:42 pm

Re: Where to safely park $200k

Post by viajero »

Gill wrote: Fri Nov 20, 2020 8:28 pm
anon_investor wrote: Fri Nov 20, 2020 8:18 pm
Gill wrote: Fri Nov 20, 2020 7:43 pm
ericcohen wrote: Fri Nov 20, 2020 6:33 pm I think you need to decide whether you will need the money closer to 1 year from now or 4. There’s a big difference in the amount of risk you can take for those timeframes. If 4 years I would take a lot more risk. Possibly a safer mix of stocks and muni bond fund. 60-40; 50-50. If 1 year then yes hysa sounds good. If 2 years, munis.that’s just what I would do. Figure out exactly how long you want to hold.
60-40 allocation for four years? Way too much risk IMO.
Gill
How about 40/60?
No. I don’t feel equities are at all appropriate.
Gill
What about muni bonds? The one I'm looking at will have no taxes on gains and is currently at over 2% - do you think it's still too risky?
ivgrivchuck
Posts: 279
Joined: Sun Sep 27, 2020 6:20 pm

Re: Where to safely park $200k

Post by ivgrivchuck »

viajero wrote: Fri Nov 20, 2020 11:05 pm
Gill wrote: Fri Nov 20, 2020 8:28 pm
anon_investor wrote: Fri Nov 20, 2020 8:18 pm
Gill wrote: Fri Nov 20, 2020 7:43 pm
ericcohen wrote: Fri Nov 20, 2020 6:33 pm I think you need to decide whether you will need the money closer to 1 year from now or 4. There’s a big difference in the amount of risk you can take for those timeframes. If 4 years I would take a lot more risk. Possibly a safer mix of stocks and muni bond fund. 60-40; 50-50. If 1 year then yes hysa sounds good. If 2 years, munis.that’s just what I would do. Figure out exactly how long you want to hold.
60-40 allocation for four years? Way too much risk IMO.
Gill
How about 40/60?
No. I don’t feel equities are at all appropriate.
Gill
What about muni bonds? The one I'm looking at will have no taxes on gains and is currently at over 2% - do you think it's still too risky?
Compared to savings account you have very little to win and much to lose. I wouldn't recommend it.

If you are looking for extra yield at some risk, put 20% into stocks.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Topic Author
viajero
Posts: 14
Joined: Fri Nov 20, 2020 2:42 pm

Re: Where to safely park $200k

Post by viajero »

ivgrivchuck wrote: Sat Nov 21, 2020 12:25 am Compared to savings account you have very little to win and much to lose. I wouldn't recommend it.

If you are looking for extra yield at some risk, put 20% into stocks.
By stock you mean an index fund like 500 or total market?
ivgrivchuck
Posts: 279
Joined: Sun Sep 27, 2020 6:20 pm

Re: Where to safely park $200k

Post by ivgrivchuck »

viajero wrote: Sat Nov 21, 2020 1:03 am
By stock you mean an index fund like 500 or total market?
Yes. Either would work.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
Gill
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Location: Florida

Re: Where to safely park $200k

Post by Gill »

ivgrivchuck wrote: Sat Nov 21, 2020 1:09 am
viajero wrote: Sat Nov 21, 2020 1:03 am
By stock you mean an index fund like 500 or total market?
Yes. Either would work.
...and either might not work. :happy
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
invest4
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Joined: Wed Apr 24, 2019 2:19 am

Re: Where to safely park $200k

Post by invest4 »

If you don't mind a little effort, you could also give yourself an additional safe boost via bank promotions. For example Citibank - 50K for 90 days = $700. If you have a spouse, you can double it.
MikeG62
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Location: New Jersey

Re: Where to safely park $200k

Post by MikeG62 »

viajero wrote: Fri Nov 20, 2020 2:49 pm I sold my condo and have $200k that I need to preserve and hopefully grow short term - I will be buying a new place sometime between 1 and 4 years from now.
Some ideas I have:

1. The simplest/safest way is to put it in a HYSA (citi has 0.6%) and forget about it. I'll be losing on inflation but zero risk.
2. Invest in Vanguard state bonds which will be both federal and state tax free - current yield is ~ 2.4% - a bit more risky but beats 0.6% savings account
3. Some combination of index and bond - higher risk but possibly higher reward

Any ideas/comments/suggestions?
Safely park = FDIC/NCUA insured deposits or Treasuries.

What muni bond fund were you considering?
Real Knowledge Comes Only From Experience
ivgrivchuck
Posts: 279
Joined: Sun Sep 27, 2020 6:20 pm

Re: Where to safely park $200k

Post by ivgrivchuck »

Gill wrote: Sat Nov 21, 2020 7:00 am
ivgrivchuck wrote: Sat Nov 21, 2020 1:09 am
viajero wrote: Sat Nov 21, 2020 1:03 am
By stock you mean an index fund like 500 or total market?
Yes. Either would work.
...and either might not work. :happy
Gill
To be clear:
- If you want to have absolute safety (and I think this is the most sensible choice): 100% into savings account/no-penalty cd
- If you want to take some risk to have some protection against inflation: 20% into total stock marked; 80% into savings account/no-penalty cd is the most reasonable choice.

Bonds have low yields and they carry credit risk and duration risk. I can't see them as a proper solution in this situation.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
HMSVictory
Posts: 37
Joined: Sun Nov 01, 2020 7:02 am

Re: Where to safely park $200k

Post by HMSVictory »

There is no free lunch. If you want return you must take risk. If you want safety you will give up return.

Safety in the market comes over very long time horizons and the ability to not withdraw funds at the exact wrong times.

With a 1-4 year investment horizon I would not invest in the stock market. Keep the money in an FDIC insured bank account at 0.5%.
Stay the course!
Topic Author
viajero
Posts: 14
Joined: Fri Nov 20, 2020 2:42 pm

Re: Where to safely park $200k

Post by viajero »

invest4 wrote: Sat Nov 21, 2020 7:45 am If you don't mind a little effort, you could also give yourself an additional safe boost via bank promotions. For example Citibank - 50K for 90 days = $700. If you have a spouse, you can double it.
I'm currently doing exactly that :) But I don't want to go for smaller promos as it will quickly get out of hand
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