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Old 05-14-2009, 09:20 AM
 
101 posts, read 142,783 times
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Default 3-5 year investments

I am looking at saving up for a downpayment on a home. I am planning to buy in 3-5 years. Does anyone have any suggestions on what might yield the highest ROI during this timeframe? Let's assume that I am putting $1000 a month into this investment. CDs do not appear to be yielding a very attactive APY right now. What would you do?
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Old 05-14-2009, 10:00 AM
 
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CDs are riskless. That is a big deal. You WILL NOT lose A RED CENT with a CD.

There are other ways to increase your return a bit, and still have near zero downside risk, but they are NOT as simple as CDs and you MAY have to watch them a bit, especially to understand why the value may fluctuate. If you understand the fluctuation you SHOULD be OK in moving to a truly riskless account with enough time to settle your real estate.

The key is that you have a 3-5 year horizon. If you want something with EXACTLY 36 months you MUST stick to CDs.

OK, warnings over.

Vanguard Inflation-Protected Secs (VIPSX) - Google Finance

Vanguard GNMA (VFIIX) - Google Finance

Vanguard Long-Term U.S. Treasury (VUSTX) - Google Finance

If you don't understand WHY WHEN and HOW these fluctuate for GOODNESS SAKE, do NOT put your money in!!!
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Old 05-14-2009, 11:24 AM
 
Location: San Jose, CA
6,555 posts, read 15,652,148 times
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To get the safest tax-advantaged investment without paying fees to mutual funds, you could buy treasuries using Treasury Direct that will mature when you anticipate needing the money. The rates will be similar to CDs, but you don't have to pay federal income tax on your earnings.
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Old 05-18-2009, 10:50 AM
 
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Do not invest money in the stock market you'll need in 10 years or more!! So put it in a savings account like ING and/or CDs, it's your safest bet.
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Old 05-18-2009, 04:53 PM
 
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Quote:
Originally Posted by chet everett View Post
CDs are riskless. That is a big deal. You WILL NOT lose A RED CENT with a CD.
CD's still carry the risk of inflation outpacing your interest rate. If you're worried about a spike in inflation and missing the opportunity to get higher interest rates in the near future, it would be best to keep your savings in TIPS or a money market account account.
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Old 05-18-2009, 05:04 PM
 
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Default Did you see the other funds I linked to?

Quote:
Originally Posted by sterlinggirl View Post
CD's still carry the risk of inflation outpacing your interest rate. If you're worried about a spike in inflation and missing the opportunity to get higher interest rates in the near future, it would be best to keep your savings in TIPS or a money market account account.

Do you not understand what the difference is between the funds I listed and a CD?

There is no way a money market is going to have a better 3-5 year return than any of those funds, and right now TIPS are not prudent to purchase outright, as we are in a technically deflationary interest rate environment. Over 3-5 years that would require quite a lot of things to change, all of which you'd have to be on top, while the a fund will do this for you , as long s you understand the timing of distributions: https://personal.vanguard.com/us/fun...T#hist=tab%3A0
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Old 05-19-2009, 12:49 PM
 
Location: NY
8 posts, read 15,855 times
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Quote:
Originally Posted by la60336 View Post
I am looking at saving up for a downpayment on a home. I am planning to buy in 3-5 years. Does anyone have any suggestions on what might yield the highest ROI during this timeframe? Let's assume that I am putting $1000 a month into this investment. CDs do not appear to be yielding a very attactive APY right now. What would you do?
CASH is king during a deflationary environment. Just keep it in a Short term treasury money market fund for right now. You do not have the skill to deal with this market as it changes or you will lose your you know what.

Or tell me what you are investing in so I can short it....LOL!!!

"GREED IS GOOD"
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Old 05-21-2009, 03:45 PM
 
101 posts, read 142,783 times
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Thank you all for your replies. I gather that the safest way to save this money in that time frame is in a money market or a CD. My goal is to be able to "benefit" from the inflated rates that appear to be on the horizon. In 2005-2006 ING was paying about 4.5%-5% for their savings account, so that might be a good route to go. I do not want to get into something that is going to lock me in at today's pre-inflationary rates.
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Old 05-21-2009, 04:24 PM
 
20,734 posts, read 32,507,164 times
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Default You are right about not locking into anything, but I think there are better ways to do this for the time frame you have.

Quote:
Originally Posted by la60336 View Post
Thank you all for your replies. I gather that the safest way to save this money in that time frame is in a money market or a CD. My goal is to be able to "benefit" from the inflated rates that appear to be on the horizon. ... I do not want to get into something that is going to lock me in at today's pre-inflationary rates.
There are lots of services that you can get for free or for subscription that give you a fairly useful view of both current lending rates and rates of return on CDs.

Metropolitan Area Mortgage Statistics, from HSH Associates

Mortgage (ARM) Indexes: Certificates of Deposit (CD), CD ARMs, 6-Month CD Index

Forecast of 3 Month LIBOR Interest Rate

It is smart NOT to lock into the anything when these indicate a pathetic return for at least the next 3 months.

HOWEVER, given that you want FLEXIBILITY to be in a position to purchase with the wide time frame of 36 to 60 months I would strongly suggest that you consider NOT a MM account, which will similarly pay VERY LITTLE and instead consider the funds that I suggest or similar funds that are fully invested in inflation protected and / or US Government securities. DO NOT, however assume that you can "leave you money" in such a fund right up until you close. As these funds have REGULARLY scheduled dividend periods and strongly correlate with other scheduled events you NEED to plan to move out of these funds and into a 'plain' money market fund with time to lock in the value before closing.

That last paragraph would be something a "for fee" financial planner would charge for...
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Old 05-28-2009, 10:47 AM
 
Location: Houston, TX
15,124 posts, read 14,154,866 times
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If you want to add more risk, look into some MLPs, like KMP, CNQ, EEP etc...nice monthly payouts you can reinvest.
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