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The days of short term, high yield CDs are gone and not likely to return for a while. I am not sure about the current rates, but I believe you need about a 5 year CD to get a yield of much over 4%. Short term rates are really bad. You can do just about as well keeping your money under the mattress.
I do agree - never trust the financial advisors, or stock brokers, or investment counselors or whatever other names these individuals use. If they make commissions off of your transactions, run the other way.
Jrkliny (directly above) is absolutely correct. I think it's a mistake to obsess about interest rates if the main goal is safety. Better to accept a low rate of interest and have all of your principal there when you need it. After all, look what happened to so many people's retirement funds' value over the past two years. The nation's second largest public pension fund, the California State Teachers' Retirement System, lost 25% of its value between June 30, 2008 and June 30, 2009. And that was managed by pro's. Some systems did worse.
Escort Rider, apparently you did not read this thread in detail. I switched a lot of my investments towards equities beginning last summer. I am not planning on moving towards "safer" investments for a number of months. I do agree that the most "pros" are idiots. The majority of pros did not move out of stocks at the right time. However, it is not always fair to blame the pros. Most of the investment funds are restricted. If the fund that a pro manages is supposed to be a large stock fund then they have little choice. It is up to the individual investor to move their money between investments.
Jrkliny (directly above) is absolutely correct. I think it's a mistake to obsess about interest rates if the main goal is safety. Better to accept a low rate of interest and have all of your principal there when you need it. After all, look what happened to so many people's retirement funds' value over the past two years. The nation's second largest public pension fund, the California State Teachers' Retirement System, lost 25% of its value between June 30, 2008 and June 30, 2009. And that was managed by pro's. Some systems did worse.
Unless people did something silly like pulling their money out of the market at or near bottom and not having it in during the run up. They have recovered much of their money since October 2007. If major indexes are at their 18 month highs you should not have lost a ton still.
September 2007 the DJI was about 14k and had been increasing for many years. This is clearly not the same trend. The current market still has a long way to go to even return to the 2007 levels and I expect to rebalance well before that happens. I am very conservative about losses but even I decided last June that we had well passed the point of risk for a double dip recession. If there was any time to invest in equities it was during 2009 and probably for up to another year, maybe even 2 years. When you and the majority of investors start to feel more comfortable, then I will worry and look for the alternatives. I have spent too many years ignoring my investments. Now I watch them.
If your comments were directed at me you are missing my point. I was in and have 85-90% of my money back from the October 7, 2007 highs. My point is that now is a bit late to jump into the dance with money you are counting on for the short term. The OP has a three basket investment strategy and I believ this is money from his short term basket he is talking about and not baskets 2 and 3.
I also believe you are underestimating Mr Mathjak. I believe he has a substantial amount invested and is not going to put himself into a tight corner. We all roll the dice when we invest in equities - or any other investment. Now seems to be one of the best times to be heavily into equities. My mutuals funds all have minimal fees and no penalties for cashing out. Personally I have no plans to cash out. If the market does do a double dip, then I will be buying on the way down.
I think you may not be as aware of Mathjk and his investment strategy. You are making a point but the context you are making it in is not the same as your suggestion would be best for.
I also believe you are underestimating Mr Mathjak. I believe he has a substantial amount invested and is not going to put himself into a tight corner. We all roll the dice when we invest in equities - or any other investment. Now seems to be one of the best times to be heavily into equities. My mutuals funds all have minimal fees and no penalties for cashing out. Personally I have no plans to cash out. If the market does do a double dip, then I will be buying on the way down.
If you are close to retirement and need those funds then playing the market is not the best play. At this point you want safety with income..that seems to be what mathjak is looking for.
5 years or less doesn't give you time to recoup. If you're younger and have 10 years or more..you can probably recover from a steep stock market drop.
If you need steady, reliable income for the next 5 years..equities is not the place to be.
I am close to retirement, but even so I plan on living for many more years. If I am lucky that could be 30 or more years. Leaving funds in some "safe" place is not sufficient. I need to be able to invest with a balanced strategy so that my nest egg continues to grow. Without growth I will never be able to survive the ravages of years of inflation. Sure I need to keep a cushion to handle short term needs, but I need to have most of my money invested.
I am close to retirement, but even so I plan on living for many more years. If I am lucky that could be 30 or more years. Leaving funds in some "safe" place is not sufficient. I need to be able to invest with a balanced strategy so that my nest egg continues to grow. Without growth I will never be able to survive the ravages of years of inflation. Sure I need to keep a cushion to handle short term needs, but I need to have most of my money invested.
That cushion is his basket one and that is what he is talking about. To make it quick and simple Basket investing is a strategy of having three distinct baskets of investments. Short, medium and long term. Each basket is weighted per your situation and each has a different time horizon with increase risk per year. He has a need for money from retirement to SS kicking in. He is talking about a bridge basket and has long term investments with greater risk independent of this basket. I was in a comparable situation. Retired in December 2007 which could have been the worse possible time. We had two years plus until eligible for SS. We had good pensions and were transplants. I had plus years worth of investments in good old safe money market funds. And the rest in medium and long term baskets. Our budget worked out as planned (good pensions) and we used a little of the money for furniture etc as part of our relocation. We lived comfortably/good and didn't need the money in the money market funds. Had my funds been co-mingled and I needed money I would have been taking it from depreciated assets. Instead the asset pool they came from remained intact. In April with our budget well in hand I moved the remainder of the money out of money market funds and into bonds. My wife gets her first SS check this month and I will at 70. My portfolio now has more risk as my entire time horizon has shifted. My baskets 2 and 3 are more heavily weighted and 3 especially so. I really don't need the investment money for the near term. The OP is talking about his bridge money.
We have balanced strategies just structured differently. Balanced mutual funds are potentially killers if you are drawing money from them. When you have to draw from them during a correction you are pulling money from bonds which may be holding value and stocks which are losing value in the same proportion your funds invest in them. If you have separate equity and bond fund for example you can with draw from the one holding value the best.
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Thanks, I guess I need to give this some more thought. I will be facing a similar situation. I am downsizing and will be living for a couple of years off my wife's SSDI and the net after selling our house and relocating. My current plan is to keep the bulk of my funds in TIAA-CREF retirement and mutual funds. I will open a small money market basically as a bank account. And yes I would pull out of individual funds based on the market conditions. Annuities and CDs, even short term, just don't seem to make sense for now.
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