Best short term safe investment?

[White.Beard.Doc]

I am hoping to invest short term cash reserves for the highest low risk return. I have placed some funds at online Ally Bank, which currently pays 1.5% for an 11 month CD, no penalty for early withdrawal.  I have some funds in tax free (free of both state and federal) municipal bonds, but this investment, while it has been earning around 3% tax free, carries some interest rate risk should I ever need to cash out.

My marginal tax rate is a hair above 50% between federal 39.6%, plus high state income tax, plus federal phaseouts.  So tax free bonds offer some benefit, although that comes with the interest rate risk.  I am curious to know how others invest cash reserves for the best return with minimum to no risk?

[meccos]

There are some tax exempt money markets.  I think currently paying out at about .8%.  Based on your taxes, this may actually be better than most online bank accounts.

[q-school]

Ally cd that you are in

[StarTrekDoc]

At that tax bracket -  you're lucky to stay ahead of inflation and costs -- but short term -  Ally is as good as anything -- watch FDIC limits too.

[White.Beard.Doc]

I had a lot of cash parked in my Chase Bank savings account, but they pay almost no interest.  It sounds like Ally Bank is being used by others to park cash.  Has anyone found any better tax free options?

 

 

[Donnie]

I use Ally as well for anything I might need within 1 year.

[Donnie]

Crixus wrote:

Ally has yuuuge exposure to subprime auto. FDIC will be meaningless in the next crisis.

Cut out the middle man.

https://www.treasurydirect.gov/RS/UN-AccountCreate.do

considering the risk Ally is taking with your deposits, why only 1.5%? When you can get that risk free. With no management fee.

Click to expand...

Interest rate risk tho

[G]

Crixus wrote:

Ally has yuuuge exposure to subprime auto. FDIC will be meaningless in the next crisis.

Cut out the middle man.

https://www.treasurydirect.gov/RS/UN-AccountCreate.do

considering the risk Ally is taking with your deposits, why only 1.5%? When you can get that risk free. With no management fee.

Click to expand...

As you may be aware, if we are in a situation in which FDIC is meaningless, your gold miner stock certificates will only have value as kindling....

[Donnie]

G wrote:

Crixus wrote:

Ally has yuuuge exposure to subprime auto. FDIC will be meaningless in the next crisis.

Cut out the middle man.

https://www.treasurydirect.gov/RS/UN-AccountCreate.do

considering the risk Ally is taking with your deposits, why only 1.5%? When you can get that risk free. With no management fee.

Click to expand…

As you may be aware, if we are in a situation in which FDIC is meaningless, your gold miner stock certificates will only have value as kindling….

Click to expand...

I think you are forgetting about Masse's reverse English liquidity pyramid :P

[Donnie]

Crixus wrote:

Donnie wrote:

Crixus wrote:

Ally has yuuuge exposure to subprime auto. FDIC will be meaningless in the next crisis.

Cut out the middle man.

https://www.treasurydirect.gov/RS/UN-AccountCreate.do

considering the risk Ally is taking with your deposits, why only 1.5%? When you can get that risk free. With no management fee.

Click to expand…

Interest rate risk tho

Click to expand…

The YC is flat. 6 mo is the sweet spot. The real risk is a Bretton Woods type get together in which sovereign debt is reconciled…currency devalued.

What worries me is what I’m going to do if the Fed goes into the negative zone. Do I go all in on gold then?

 

Click to expand...

I'm pretty sure I know what you mean, and I think i's safe to say that we've definitely entered the danger zone!

[Jaqen Haghar MD]

Buy tons of physical gold bars and doubloons.  Bury them all over the place in small parcels over a 30 mile area, and then make a detailed map.  Take a long hard look at the map, and then eat the map.  When the apocalypse comes, just remember your caches, dig them up and blammo! You'll be king of the new world!

An even better plan would be to buy a strategically located small farm and house, practice your animal husbandry (rabbits, goats, and chickens) and tend appropriate crops so you're ready for the big day.  Invest in freeze dried meals, canning jars, food prep and storage, blacksmithing, guns, ammo, knives and fishing equipment.  Remember to stay in peak physical shape for the ensuing battles with roving hordes.

Or....  just keep it in the Ally account for now.

 

 

 

[Hatton]

If the Crixus scenario happens and the world as we know it comes to an end I think our medical skills would be more valuable than gold.  The roving hordes will all need lacerations sewn up and babies delivered.

I am also interested in the best place for short term reserves.  I currently keep about 50% in a vanguard mmf and 50% in a short term bond fund.

[PhysicianOnFIRE]

White.Beard.Doc wrote:

I have placed some funds at online Ally Bank, which currently pays 1.5% for an 11 month CD, no penalty for early withdrawal.

Click to expand...

Thanks for the tip!

I just moved most of my Ally cash from savings to the No-Penalty CD. It took all of two minutes. Improved my interest rate from 1.2% to 1.5% (note: minimum of $25,000 to get the 1.5% APY)

[HumbleInvestor]

White.Beard.Doc wrote:

I am hoping to invest short term cash reserves for the highest low risk return. I have placed some funds at online Ally Bank, which currently pays 1.5% for an 11 month CD, no penalty for early withdrawal.  I have some funds in tax free (free of both state and federal) municipal bonds, but this investment, while it has been earning around 3% tax free, carries some interest rate risk should I ever need to cash out.

Click to expand...

Ally's FAQ says the CD interest is credited when the CD is matured or at the yearly anniversary. For the 11 month CD, there is no penalty for early withdrawl, but do you get the prorated interest in such case or do you forfeit any interest accrued? I am looking for a good place to park some short term reserves which I may need in the next 3-12 months. Where can you look up such tax free municipal bonds?

Thanks

HI

[White.Beard.Doc]

HumbleInvestor wrote:

White.Beard.Doc wrote:

I am hoping to invest short term cash reserves for the highest low risk return. I have placed some funds at online Ally Bank, which currently pays 1.5% for an 11 month CD, no penalty for early withdrawal.  I have some funds in tax free (free of both state and federal) municipal bonds, but this investment, while it has been earning around 3% tax free, carries some interest rate risk should I ever need to cash out.

Click to expand…

Ally’s FAQ says the CD interest is credited when the CD is matured or at the yearly anniversary. For the 11 month CD, there is no penalty for early withdrawl, but do you get the prorated interest in such case or do you forfeit any interest accrued? I am looking for a good place to park some short term reserves which I may need in the next 3-12 months. Where can you look up such tax free municipal bonds?

Thanks

HI

Click to expand...

Re: Ally 11 month no penalty CD at 1.5%

You can pull your funds out any time starting 7 days after you buy the CD.  If you allow the CD to mature, you get your interest credited at 11 months when it matures.  If you pull your funds out early, the process takes 2 business days for you to get your money, but you will get your interest credited for whatever time period you held the CD upon closing the CD.

An Ally Bank customer posted about having a positive experience closing the 11 month CD early:

https://www.depositaccounts.com/blog/2011/12/my-experience-with-ally-banks-no-penalty-cd.html

 

Re: tax free municipal bonds

I like shorter maturity bond funds currently.  Shorter bond maturities reduce the interest rate risk in the current environment where there is a good chance that interest rates will slowly be rising.  This is important if you cash out early, as the underlying share value for a long term bond fund will go down when interest rates rise.  The short duration bond fund shares do not fall significantly in value when rates rise, but depending on the duration of the bonds, they may fall a bit.

Vanguard has low fee bond funds of many types.  I have invested in an intermediate term bond fund

https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0071

and I also have some that are tax free.  You can choose a bond fund free of federal taxes if you live in a no tax state, or a state specific fund which is free of federal, state and local taxes.  Vanguard is conservative in their bond investments.  They have no exposure to Puerto Rico bonds, for example.  Here is an example of an intermediate duration bond fund free of federal taxes.

https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0042

Personally, I have invested in a fund that is specific to my state.