Where to put $$$$ for just a year?

Improvolone

I was going to buy a house this year, but it didn't work out. I now have a bunch of money from assets I had liquidated just sitting in a basic checking account. I plan on using this money next year to buy a home, and since I don't need this much cash available to me to live on, I thought I would let it do a little work for me.

What are my options here? A 9 month CD? I've heard good things about ING... haven't I? I'm kind of in the void on this one and any input would be great.

adytum

Park it in a 9 or 12 month CD, depending on the rates. ING is fine, so is your local bank. Local bank might have better rates as they sometimes run promotions.

matt has a problem

I second a CD. ING isn't as great as they once were, but then again interest rates for everything have dropped everywhere.

Namrok

I just created a CD at Ally. They seemed to have the best rates from looking around. It's FDIC insured too. Not much more you need to worry about to the best of my knowldge. I used to do my CDs at HSBCDirect, but their rates have gone down the shitter lately. I think ING isn't much better.

Djeet

Check out bankrate.com to compare rates. Also check with local credit unions, they can often edge out larger bank rates.

Bennmann

Prosper.com or lendingclub.com

You can choose to only loan people $$ whose causes you like and make a decent %, grow the economy by keeping your money in circulation, etc.

adytum

Except your Lending Club (and Prosper, if it's the same setup) loans can default, and you have no recourse.

Namrok

You also can't get your money back out of prosper whenever you want.

I use propser, I love prosper, it's gotten me a great return thus far. But its just not suited for short term, low risk savings. The loans you lock into at prosper have a set 3 year duration. And the only way to get your money back is to sell the note on a second hand market.

Bennmann

Ah thanks for the clarification all. Wish peer to peer loans had variable terms as well as rates.

altmann

CDs are not so great. They aren't BAD, but they're a step up from a bullshit savings account, with the caveat that if you want your money NOW then you're fucked. I hate to step on what other people have said, but they are really not the greatest investment and I'd mainly recommend them to people who have problems taking money out (penalties help mitigate that).

Why not just sock it into a mutual fund? You get dividend reinvestment and there is usually no penalty for early withdrawal? Usually you get pretty good returns.

I use Franklin Templeton but you could talk to Charles Schwab or Merril Lynch. That's my recommendation.

If you talk to a rep, they'll ask you questions about your investment plans and threshholds so you don't get stuck in a high risk volatile (yet possible high return) fund vs a low risk lower return fund.

Deebaser

altmann wrote: »

Why not just sock it into a mutual fund? You get dividend reinvestment and there is usually no penalty for early withdrawal? Usually you get pretty good returns.

If he's planning on buying a house next year a 1.4% guaranteed return may be better than risking a -4% return.

adytum

The OP is asking about what to do with a significant chunk of money that he will need - in its entirety - in one year.

Investing in securities that can lose money is probably not what he's interested in.

Correct me if I'm wrong Improvolone.

altmann

He said he wanted his money to work for him.

My opinion, was mutual fund. In all my life, I've never seen my or my companies mutual fund lose money. Your returns are less, that's true, but I'm talking about a 2--6% return. It's a suggestion. He can talk to a financial advisor and they will give him the real deal. They have different classes of funds for different investment strategies, and some are for people who literally will not tolerate losses.

It's very sad the financial idea that most people look directly at the POSSIBILITY that you could lose money and ignore the very real and most likely alternative, that you will make money, as an afterthought.

But don't take it from me, call a banker. I'm just giving options that I think work well and have worked nicely for me.

SniperGuy

This may be the right place to ask! I'm a total noob at everything investment related, but I have a small chunk at the moment and was wondering what I could do to read up on my options, things I need to know, or a way to figure out the best way for me to invest it. Any suggestions for beginner stuff too?

Terrendos

If you're going to put money in any sort of stock market, you need to put it in something reliable. Something like a nuclear power company isn't going anywhere, because the fuel price isn't going to fluctuate like oil.

If this were something like a 2-5 year investment, I'd say a mutual fund or similar. But 1 year, if you're sure you're going to need all that money, you should probably go for the CD.

Then again, I'm no economics expert.

Deebaser

Terrendos wrote: »

If this were something like a 2-5 year investment, I'd say a mutual fund or similar. But 1 year, if you're sure you're going to need all that money, you should probably go for the CD.

My sentiments exactly. I just checked out my investment account and my large cap is down about 5% YTD. If I invested the downpayment on my house in January, I'd probably be shitting blood.


@Sniper check out investopedia and motley fool (if they're still around). Plenty of resources for noobs.

Kakodaimonos

Like other people are suggesting, look at Bankrate.com and find a CD that you're happy with. Couple of things to watch for:

1. Make sure you're not set for an auto-rollover on the CDs. Some of them will immediately roll you onto a new CD even if you didn't want to.
2. Money Market Accounts (MMAs) from securities firms ARE NOT FDIC insured. Only MMAs from banks are FDIC insured.
3. Mutual funds are not FDIC insured.
4. Interest compounded daily is better than simple or quarterly interest. You may not notice it if you're on a short investing period.

SpazHappy

MMAs are not insured because unlike banks they don't need to be. They do not "collapse" the way a bank does. They are much safer places to store your money.

A money market fund always has a dollar for every dollar you put in. A bank doesn't. Your savings account with a bank is basically a loan to the bank to let them loan out your money to other people, and in the event of a collapse, they can only guarantee to pay you back a certain amount... But it could take a LONG time for them to pay you back.

Money Market funds however don't really fail. There have only been about 6 cases in history where a money market fund has lost money, and in every case the finanicial company actually paid back the amount lost to the investors by infusing their own cash into the fund. And even then, we're only talking about maybe 5% percent loss in value, not a complete drain of cash. And all these cases were special circumstances.

Diogee

As a personal wealth advisor this thread greatly concerns me.

You can't just put your money in a "Mutual Fund". There are thousands upon thousands of different mutual funds out there ranging from fixed income funds such as Pimco's Total Return fund (PTTAX) to large cap equity funds like Fairholme Fund (FAIRX). While they are both technically mutual funds their investment objectives are massively different, as well as their volitility and expected returns. As for Altman, who says "His companies mutual fund has never lost money", let me know the ticker so I can put all my clients in that! Ha.

Maybe you guys are talking about money markets? You're better off going with a high-yield savings account then a money market fund at this point. Yields across the board are at historic lows. You could go with an asset-allocation mutual fund but at the end of the day, you are still taking market risk and if you don't want to lose money, you can't go down that route.

The lack of understanding of financial instruments in the world today is an incredibly scary thing. Hearing someone say "Oh yea I'm invested in the Franklin Templeton mutual fund" is like asking someone what car they drive and they say "I drive the one i bought from the automaker". It's meaningless.

Long story short - just go with a high-yield savings account and be happy with your 1-1.5%

Heir

Diogee wrote: »

As a personal wealth advisor this thread greatly concerns me.

You can't just put your money in a "Mutual Fund". There are thousands upon thousands of different mutual funds out there ranging from fixed income funds such as Pimco's Total Return fund (PTTAX) to large cap equity funds like Fairholme Fund (FAIRX). While they are both technically mutual funds their investment objectives are massively different, as well as their volitility and expected returns. As for Altman, who says "His companies mutual fund has never lost money", let me know the ticker so I can put all my clients in that! Ha.

Maybe you guys are talking about money markets? You're better off going with a high-yield savings account then a money market fund at this point. Yields across the board are at historic lows. You could go with an asset-allocation mutual fund but at the end of the day, you are still taking market risk and if you don't want to lose money, you can't go down that route.

The lack of understanding of financial instruments in the world today is an incredibly scary thing. Hearing someone say "Oh yea I'm invested in the Franklin Templeton mutual fund" is like asking someone what car they drive and they say "I drive the one i bought from the automaker". It's meaningless.

Long story short - just go with a high-yield savings account and be happy with your 1-1.5%

What about a CD?

Diogee

Heir wrote: »

Diogee wrote: »

As a personal wealth advisor this thread greatly concerns me.

You can't just put your money in a "Mutual Fund". There are thousands upon thousands of different mutual funds out there ranging from fixed income funds such as Pimco's Total Return fund (PTTAX) to large cap equity funds like Fairholme Fund (FAIRX). While they are both technically mutual funds their investment objectives are massively different, as well as their volitility and expected returns. As for Altman, who says "His companies mutual fund has never lost money", let me know the ticker so I can put all my clients in that! Ha.

Maybe you guys are talking about money markets? You're better off going with a high-yield savings account then a money market fund at this point. Yields across the board are at historic lows. You could go with an asset-allocation mutual fund but at the end of the day, you are still taking market risk and if you don't want to lose money, you can't go down that route.

The lack of understanding of financial instruments in the world today is an incredibly scary thing. Hearing someone say "Oh yea I'm invested in the Franklin Templeton mutual fund" is like asking someone what car they drive and they say "I drive the one i bought from the automaker". It's meaningless.

Long story short - just go with a high-yield savings account and be happy with your 1-1.5%

What about a CD?

A CD is fine, but at the end of the day the yield on a 12 month CD is going to be the same or an insignficant amount more then a high-yield savings account and you are locking your cash up for 12 months. Keep the easy access to liquidity incase you find yourself in need of the money in the mean time.

Diogee

altmann wrote: »

He said he wanted his money to work for him.

My opinion, was mutual fund. In all my life, I've never seen my or my companies mutual fund lose money. Your returns are less, that's true, but I'm talking about a 2--6% return. It's a suggestion. He can talk to a financial advisor and they will give him the real deal. They have different classes of funds for different investment strategies, and some are for people who literally will not tolerate losses.

It's very sad the financial idea that most people look directly at the POSSIBILITY that you could lose money and ignore the very real and most likely alternative, that you will make money, as an afterthought.

But don't take it from me, call a banker. I'm just giving options that I think work well and have worked nicely for me.

Oh and the last thing you should EVER do is call a banker. They will sell you whatever investment makes them the most money and somewhat fits the purpose you are requesting. Find a Registered Investment Advisor as they are independent, unbiased, and held to a fiduciary standard rather then a suitability standard.