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Short term investment

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  • Short term investment

    I have 150k cash, that I need in 2 to 5 years for buy-in. What would you do with money? I was thinking (20k stocks, 40k intermed munies, 90k high interest savings). In highest tax bracket.


    If market tanks will likely not have to sell stock portion by saving over the next few years.  Thanks!


  • #2
    Muni funds are probably a better rate than any high savings accounts. There are always cds if you can find them at above inflation rates. I might dip into indexes a little more if your horizon was more towards 5 years, munis if closer to 2.


    • #3
      Looks like you're on the right track.  I'll assume you have no debt at more than the 1% you'll get on high interest savings.  If you did, you're probably better off paying that down as much as you think you can save back up in the next two years to get you back to your $150K.

      Since you'll for sure need the money in the near term, you'll need a system to guarantee your final liquid savings amount.  High interest savings is the simple go-to, but you can probably make more on a CD (or laddered CDs, likely between 1.5 and 2%) since you have a rough timeline.  I would plan to invest for the long term whatever is over the amount that you need to have $150K liquid at 2 years.  For example, if you think you can save $30K per year (over and above your tax advantaged savings), then put $90K into something boring and guaranteed, invest the other $60K up front for the long term, and plan to continue to add to your boring investment with your extra savings over the next two years.

      I'd be tempted to put a chunk in tax exempt bonds as you suggested, but even though its low risk I'm not sure if its worth the possible extra 2% return.  I'm no expert, but that's what I'd do since I have no confidence to predict the market (bond or stock) in the short term.


      • #4
        WCICON24 EarlyBird
        There is no such thing as short-term investing. You would be speculating. For money you need in the next 2 - 5 years, buy high-quality corporate bonds timed to mature at date of need. However, the I see no problem investing the part you can invest beyond 5 years in a well-balanced equity mutual fund/ETF portfolio, rebalanced annually and continue to save to replenish if necessary. Muni funds are too risky, imo.
        My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
        Johanna Fox, CPA, CFP is affiliated with Wrenne Financial for financial planning clients