Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I am trying to decide on a good vehicle to grow savings beyond the typical low yield bank products out there (savings account, CD, etc) so the savings generate some better returns. However, how I go about that is very much up in the air.
The simple background is that I am growing my retirement savings nicely, and outside of that I have a very healthy "emergency" fund savings which has grown beyond what would be reasonable to hold in a bank account. Future dollars I put into the savings are not going to be immediately needed for anything, so a longer term investment makes sense.
I am looking for a vehicle that basically allows me to continue to efficiently add to it (monthly, by monthly, or something like that) and will yield far better than 0.X% of a bank account.
I have been drawn mostly to a more traditional no load indexed mutual fund. Although it will have stock market volatility, it will also have long term growth following the stock market. I will be able to routinely transfer money in, and should I need the money down the road I can get some back out. I am thinking an index fund will be a little more tax efficient than other types of funds too, as I should be able to avoid the fund capital gains taxes, and that combined with no loads and very low expense rations, I think it would be a good way to maximize the real money I see on the returns. I also was thinking this may be a cheaper/easier way than going with buying ETF shares, as doing so routinely may end up costing a lot in "trade" fees, without much of a benefit on the back end.
I just do not know for certain... as it is somewhat new territory for me.
You can avoid trade commissions entirely. Both Schwab and Vanguard allow you to trade their own ETFs with no commissions. Other brokers probably do as well.
I posted a similar question a few days ago and I keep checking on it... Although I want more on hand of what you call an emergency saving before I go to stock style investments. But what you are asking about now will be where I am in about six months.
Most people when they answered my thread said to do a plan similar to what you are proposing. Total stock market funds were advised. I am not there yet however, but like I said it sounds like you are. There was also some suggestions for CD ladders but again I want my emergency money to be more like cash in case it's needed. But with interest rates going up CDs might be worth a second look. I might look into other investments tied to interest rates too. For you maybe it's worth looking at splitting future savings into several vehicles like your index fund and other things such as CDs or treasury bills. Although I wonder if a quarter of a percent is really going to make a difference.
For CD's, that quarter of a percent is not going to make enough of a difference. Even if banks passed the whole quarter percent along to their offered CD rates, they will still be far under-performing compared to inflation.
I am in a similar position as you. I have a sizable EF fully funded 401k's and IRA's for the past 2 years. I recently opened a taxable account with Vanguard after doing a ton of reading on bogleheads the last few months.
I plan on purchasing VTSMX once dividends are paid later this month with my 5k opening balance and auto transferring $100 each week until I get to the 10 minimum for the Admiral shares.
Then I will build my 3 fund portfolio by adding in Total International (VGTSX) and Total Bond (VBMFX) the same way.
Shop around on CDs. MACU keeps running a 5 year CD at 2.3% with a 1 time bump up available if rates increase. If you have to pull your money out earlier than the 5 years, you lose only a few months worth of interest, which is minimal. See if someone in your area is doing anything similar to that. I find it to be a pretty good return for basically no risk.
I would consider ETF's as they can be purchased and sold during the day on limit orders.
I am thinking long term investing but when you want to get out it is nice to be able to try and sell at your price and not the days closing price.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
