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I agree with Don. Sort of like Grandpa hiding his cash in the wall, burying it in the back yard, or hiding it under his mattress after recovering from the Great Depression. There's logic in them thar hills.
You didn't indicate whether this was deferred or post-tax dollars. The difference is whether your goal is to maintain today's value after paying taxes or simply to sit on the money and watch it grow 2-4-percent per year. Another factor is inflation - which will probably average 2-4-percent -- Therefore, you must gain 2-4-percent simply to break even without losing money.
How much involvement do you want? -- In my case, I don't want to spend retirement following the stock and bond market, so I put a large sum into relatively conservative, self-directed/broker managed funds and also Vanguard Wellsley. In the case of the former, I've probably averaged 5+-percent over 8+ years. (Since the latter is bond-focused, I've recently taken a 'hit' in the rising stock market -- but, that has still given me a balance in up/down markets. I've also put a large sum in an income-producing annuity - which I will activate next year when my RMD's come due. This will accommodate my RMD's, give me a lifetime income, plus pay the taxes on RMD's.
(My situation is similar to yours: I've got the money, but don't really need to use it, yet don't want to lose it in a volatile stock market ... and also don't want to engage in constantly tracking the markets. I realize this strategy is pretty conservative and may not earn what I might otherwise earn, but, it's secure and gives me peace of mind that I can cover inflation and taxes and not lose money. (Note: I have sufficient income from other sources, thus flexible access is not a big issue).
As Dave said, knowing your time line is key. If you will not need this money for anything in some specific amount of time I personally would put it in the stock market as it will do the best over the long run. But you have to have the stomach for that as stocks go up and down, but they always recover. You never "lose" money despite what people say.
Bonds or CD's can be OK but again, they are better if you know the time frame. If you don't want to own stocks then the next best thing is bonds (not bond funds) or CD's. Get like 5-year maturity of either and sit on them. You are guaranteed to not lose money but you have to wait the full 5 years. You can get shorter maturity of either but you get better interest on longer maturity CD or bonds.
US Treasury bonds are easy to buy on-line. Shop around for CDs. Good rates on CDs appear but quickly sell out.
I would stay away from bond funds unless you are investing for the long run, like more than 5 or 7 years.
Some CD offers never make it to the general public. Last year my credit union offered 2.5% certificates with a 4 year maturity, but they were only available to current credit union members and were not advertised. The only way to find out about them was to go to a branch and talk to a teller or bank officer. They also came with a 1x option to bump the interest rate if the Fed ever gets off their duff. I don't keep that much money in cash, but bought 5x$10,000 certificates as a good place to keep an emergency fund.
There are short term bonds that are relatively immune to interest rate fluctuations, but they are higher risk. It's best to put your money in high yield bond funds, which spreads the risk and hires somebody to keep an eye on company credit lines.
A nice conservative stock market investment is to spread money between a few value stocks that allow reinvestment of dividends and small annual purchases of stock. That avoids the broker fees that put you in the hole as soon as you buy most stocks. A value stock is one that keeps issuing a dividend no matter what the economy does. When stock prices drop, the dividend buys more shares. Google DRIP for info and a list of potential companies.
Real Estate is another investment, of you are a canny buyer.
The bottom line is diversify. Stocks, bonds, real estate and cash, then split each sector so you have lots of socks.
Where would you guys recommend putting a fairly large sum of money where it will draw interest and still be fairly safe? Someone I know said they put theirs into a Horace Mann fund of some type and it draws....oh, I think they said 3 or 4%.
In my credit union account. I'll PM you the routing and account numbers.
The bottom line is diversify. Stocks, bonds, real estate and cash, then split each sector so you have lots of socks.
Did you mean stocks? Don't anyone laugh, I have no idea if there is some kind of investment term called "socks".
Thanks for all the suggestions. Some of it is over my head. As in: "You didn't indicate whether this was deferred or post-tax dollars." I don't know....I guess deferred because it is called a "deferred retirement option" or something like that. And: "which I will activate next year when my RMD's come due." I don't know what RMD's are, but I will google it. Ok, got it.
"In my case, I don't want to spend retirement following the stock and bond market." This is me.
I've never had any money, so I don't know what to do with it! My mom had about 200,000 (life insurance) after my dad died and she had it in the stock market (at one point it grew to about 300,000, I think) but got it out when the market started plunging. Now, about 20 years later, it's all gone and she doesn't have much to live on. I've thought a many a time over the years, when she would fret about it, that I was glad to not have any money to worry about losing. lol
There are no good investments right now. Cash is losing value because of inflation, bonds are bad because interest rates have nowhere to go but up, and sock valuations are back in the stratosphere.
Where would you guys recommend putting a fairly large sum of money where it will draw interest and still be fairly safe? Someone I know said they put theirs into a Horace Mann fund of some type and it draws....oh, I think they said 3 or 4%.
how much is the "fairly large sum of money"? I would say CDs.
It's best to put your money in high yield bond funds, which spreads the risk and hires somebody to keep an eye on company credit lines.
High Yield bond funds can be a good investment under the right conditions and if you know what you are doing. But remember that High-Yield bonds are also called Junk bonds, and for good reason. They have huge risk (most HY bond funds lost 60% of their value during the 2008 crash). There is a constant and irreversible erosion of NAV for the fund because there are always defaults that happen. The default rate when the economy is good is about 2% per year. When the economy is suffering that can go up to 5%. It is not an investment for people who are looking for something safe.
If the OP wants hassle-free and very low risk, the best thing is CD's.
Otherwise I would say open a Schwab account and put the money into VWINX. It is a well managed mutual fund with an emphasis on safety but is 40% stocks to get better returns. Easy-peezy.
Lowest risk are bonds and CDs, but obviously rates are low.
Another option might be peer to peer lending, like lendingclub.com, A-grade/risk are typically 5-7% but minimum 36 mos term.
Another option might be dividend stocks, these are usually low volatility and consistent dividend returns, NYSE:ECC might be one example.
Another option might be mutual funds, but these are long term looking, healthcare/biotech still have good fundamentals such as VGHCX or FBIOX.
Do your own research, diversify (don't put all your eggs in one basket), and as others have said, timing is key... “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” - Warren Buffet.
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