Suggestion to park 250k for 12-18 months

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nj121
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Suggestion to park 250k for 12-18 months

Post by nj121 »

I need suggestions for parking 250k for next 12-18 months. I am saving this money for future investments.

Can you guys please suggest which one is better for this timeframe? (I never invested in T-bill (only invested in the I bonds) or brokered CDs before)

1. T-bill
2. Brokered CD at fidelity (current rate is 4.75%)

Edit: I am planning to start investing in real estate or buy a business. I have to be at my current job for next 1.5 years. I am not at all at retirement age but I will have enough years invested by then that i can start new chapter in my life.

Thank you
Last edited by nj121 on Wed Nov 23, 2022 10:42 am, edited 1 time in total.
tibbitts
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Re: Suggestion to park 250k for 12-18 months

Post by tibbitts »

nj121 wrote: Wed Nov 23, 2022 9:55 am I need suggestions for parking 250k for next 12-18 months. I am saving this money for future investments.

Can you guys please suggest which one is better for this timeframe? (I never invested in T-bill (only invested in the I bonds) or brokered CDs before)

1. T-bill
2. Brokered CD at fidelity (current rate is 4.75%)

Thank you
Everyone is going to ask why you are saving for future investments (vs. a purchase like a home for example), since that's not a typical approach here.
dbr
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Re: Suggestion to park 250k for 12-18 months

Post by dbr »

nj121 wrote: Wed Nov 23, 2022 9:55 am I need suggestions for parking 250k for next 12-18 months. I am saving this money for future investments.

Can you guys please suggest which one is better for this timeframe? (I never invested in T-bill (only invested in the I bonds) or brokered CDs before)

1. T-bill
2. Brokered CD at fidelity (current rate is 4.75%)

Thank you
This kind of thing is really six of one, half dozen of another. You can look at what is involved in either case and decide if you have a preference one way or the other. You can also give up a little yield for what might or might not be more convenient transactions to make such as a bank CD or some money market funds. Money market funds would be maximally flexible and easy to transact.
Last edited by dbr on Wed Nov 23, 2022 10:23 am, edited 1 time in total.
john0608
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Re: Suggestion to park 250k for 12-18 months

Post by john0608 »

probably should ladder t-bills or cds (i prefer t-bills) divide into 1/3's and purchase 6, 12, 18 months T-bills - gives you flexibility in case rates rise or you need the money -
Topic Author
nj121
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Re: Suggestion to park 250k for 12-18 months

Post by nj121 »

tibbitts wrote: Wed Nov 23, 2022 9:57 am
nj121 wrote: Wed Nov 23, 2022 9:55 am I need suggestions for parking 250k for next 12-18 months. I am saving this money for future investments.

Can you guys please suggest which one is better for this timeframe? (I never invested in T-bill (only invested in the I bonds) or brokered CDs before)

1. T-bill
2. Brokered CD at fidelity (current rate is 4.75%)

Thank you
Everyone is going to ask why you are saving for future investments (vs. a purchase like a home for example), since that's not a typical approach here.
I am planning to start investing in real estate or buy a business. I have to be at my current job for next 1.5 years. I am not at all at retirement age but I will have enough years invested by then that i can start new chapter in my life.
Topic Author
nj121
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Re: Suggestion to park 250k for 12-18 months

Post by nj121 »

john0608 wrote: Wed Nov 23, 2022 10:15 am probably should ladder t-bills or cds (i prefer t-bills) divide into 1/3's and purchase 6, 12, 18 months T-bills - gives you flexibility in case rates rise or you need the money -
Thats a great suggestion to divide in multiple terms. I never invested in t-bills before so I may need to go through the learning curve here. I may call fidelity to understand this better
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retired@50
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Re: Suggestion to park 250k for 12-18 months

Post by retired@50 »

nj121 wrote: Wed Nov 23, 2022 10:35 am
john0608 wrote: Wed Nov 23, 2022 10:15 am probably should ladder t-bills or cds (i prefer t-bills) divide into 1/3's and purchase 6, 12, 18 months T-bills - gives you flexibility in case rates rise or you need the money -
Thats a great suggestion to divide in multiple terms. I never invested in t-bills before so I may need to go through the learning curve here. I may call fidelity to understand this better
The article about buying treasury products by Harry Sit, The Finance Buff, is often helpful.

See link: https://thefinancebuff.com/treasury-bil ... arket.html

Regards,
This is one person's opinion. Nothing more.
john0608
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Re: Suggestion to park 250k for 12-18 months

Post by john0608 »

fairly easy using vanguard with no fees so i am sure fidelity is the same once they walk you thru it
i would suggest you keep a spreadsheet of purchase date, maturity date, i rate, value of mature bill, cost of t-bill - t-bills are purchased for less than face value so you get the face value at end of term - keep for full term to ensure you get full value.

i am a bit overly detailed so i have 2 monthly ladders (IRA and non-IRA) going out 12 months but thats just how i like to keep on top of things but it works to my advantage as rates continue to rise - when they begin to fall i will try to go longer term realizing you can't time the market perfectly.

with t-bills you have the option of setting up various ladder intervals (30, 60, 90, 120, 180, etc)
dbr
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Re: Suggestion to park 250k for 12-18 months

Post by dbr »

Another option is a TIPS maturing in a year or so bought at a broker on the secondary market.
Kookaburra
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Re: Suggestion to park 250k for 12-18 months

Post by Kookaburra »

Are brokered CDs in the 12-18 month range really paying 4.75%?
Topic Author
nj121
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Re: Suggestion to park 250k for 12-18 months

Post by nj121 »

Kookaburra wrote: Wed Nov 23, 2022 10:58 am Are brokered CDs in the 12-18 month range really paying 4.75%?
Vanguard 12 months rate: 4.85%
Fiedlity 12 months rate: 4.75
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papermario
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Re: Suggestion to park 250k for 12-18 months

Post by papermario »

Depending on your state, gov bonds have tax advantages.
JonFund
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Re: Suggestion to park 250k for 12-18 months

Post by JonFund »

I would l suggest doing a ladder of either CDs or Treasuries. I recently put $400,000 into a 4-rung Treasury ladder with maturities at 6, 12, 18, and 24 months. If rates continue to rise, I'll roll the first maturity into a new bond. If they fall, I'll consider my options at that point.
Topic Author
nj121
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Re: Suggestion to park 250k for 12-18 months

Post by nj121 »

papermario wrote: Wed Nov 23, 2022 11:44 am Depending on your state, gov bonds have tax advantages.
Good point: I live in NJ so 6.6% state tax
lakpr
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Re: Suggestion to park 250k for 12-18 months

Post by lakpr »

nj121 wrote: Wed Nov 23, 2022 11:52 am
papermario wrote: Wed Nov 23, 2022 11:44 am Depending on your state, gov bonds have tax advantages.
Good point: I live in NJ so 6.6% state tax
To compare the brokered CD yield to treasury-bills and treasury-notes, you will need to multiply the brokered CD yield by 0.936 (= 1 - 6.6%). So a 4.85% brokered CD = 4.54% Treasury bill/note yield for the same duration. If you are able to get more than 4.54% on the T-bill, prefer that; otherwise go with the CD.

I haven't looked for a couple of weeks, but I think the treasury bills are yielding "only" 4.36%, so there is a minor advantage going with the brokered CD. However, make sure that the brokered CD is *NOT* callable. If rates fall in the future, the CD might get called away; with the T-bills/T-notes, you are guaranteed to get the stated yield if you can hold until maturity.
secondopinion
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Re: Suggestion to park 250k for 12-18 months

Post by secondopinion »

Given a 12-month suggestion, you can probably secure around 4.7% for a 12-month treasury bill. But I cannot speak about the investment in a new business other than you might need to favor some liquidity over yield.
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hulburt1
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Re: Suggestion to park 250k for 12-18 months

Post by hulburt1 »

Love all the information. I won the game at 69 I'm looking at cd. thanks
hulburt1
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Re: Suggestion to park 250k for 12-18 months

Post by hulburt1 »

Love all the information. I won the game at 69 I'm looking at cd. thanks
FellsGuy
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Re: Suggestion to park 250k for 12-18 months

Post by FellsGuy »

lakpr wrote: Wed Nov 23, 2022 5:18 pm
nj121 wrote: Wed Nov 23, 2022 11:52 am
papermario wrote: Wed Nov 23, 2022 11:44 am Depending on your state, gov bonds have tax advantages.
Good point: I live in NJ so 6.6% state tax
To compare the brokered CD yield to treasury-bills and treasury-notes, you will need to multiply the brokered CD yield by 0.936 (= 1 - 6.6%). So a 4.85% brokered CD = 4.54% Treasury bill/note yield for the same duration. If you are able to get more than 4.54% on the T-bill, prefer that; otherwise go with the CD.

I haven't looked for a couple of weeks, but I think the treasury bills are yielding "only" 4.36%, so there is a minor advantage going with the brokered CD. However, make sure that the brokered CD is *NOT* callable. If rates fall in the future, the CD might get called away; with the T-bills/T-notes, you are guaranteed to get the stated yield if you can hold until maturity.
Excellent post thank you and to make sure I'm understanding T-bills yield are state tax free so they have that advantage over CD's?
To OP good luck with the next chapter!
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. | Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”
MikeG62
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Re: Suggestion to park 250k for 12-18 months

Post by MikeG62 »

nj121 wrote: Wed Nov 23, 2022 9:55 am I need suggestions for parking 250k for next 12-18 months. I am saving this money for future investments.

Can you guys please suggest which one is better for this timeframe? (I never invested in T-bill (only invested in the I bonds) or brokered CDs before)

1. T-bill
2. Brokered CD at fidelity (current rate is 4.75%)

Edit: I am planning to start investing in real estate or buy a business. I have to be at my current job for next 1.5 years. I am not at all at retirement age but I will have enough years invested by then that i can start new chapter in my life.

Thank you
For 12-18 months, either would probably yield similar results (at the present time) - once you build in the state tax benefit. In that case, I'd go with treasuries over brokered CD's for liquidity.

I've bought a large amount of Treasuries over the last several months. A few weeks ago I began buying some 5-year non-callable brokered CD's (yield of 4.90%). This week I bought another brokered CD (3-year non-callable also at 4.90%). Those yields exceed what I could get on comparable term Treasuries. The bottom line is, it depends on yields on each instrument at the time you are looking to make the purchase.
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anon_investor
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Re: Suggestion to park 250k for 12-18 months

Post by anon_investor »

FellsGuy wrote: Thu Nov 24, 2022 7:19 am
lakpr wrote: Wed Nov 23, 2022 5:18 pm
nj121 wrote: Wed Nov 23, 2022 11:52 am
papermario wrote: Wed Nov 23, 2022 11:44 am Depending on your state, gov bonds have tax advantages.
Good point: I live in NJ so 6.6% state tax
To compare the brokered CD yield to treasury-bills and treasury-notes, you will need to multiply the brokered CD yield by 0.936 (= 1 - 6.6%). So a 4.85% brokered CD = 4.54% Treasury bill/note yield for the same duration. If you are able to get more than 4.54% on the T-bill, prefer that; otherwise go with the CD.

I haven't looked for a couple of weeks, but I think the treasury bills are yielding "only" 4.36%, so there is a minor advantage going with the brokered CD. However, make sure that the brokered CD is *NOT* callable. If rates fall in the future, the CD might get called away; with the T-bills/T-notes, you are guaranteed to get the stated yield if you can hold until maturity.
Excellent post thank you and to make sure I'm understanding T-bills yield are state tax free so they have that advantage over CD's?
To OP good luck with the next chapter!
Yes, T-Bills are exempt from state/local taxes, so you need to factor that in when comparing to CDs.
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