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You are going to move but are unsure of the timing. The money you received will buy you a house in your new location or you could just bank it and rent for a substantial number of years.
What do you do with or where do you put the money while you're thinking this all through? 3-mo CD, savings account, MM Fund or other?
- When I have any type of windfall I simply roll it into my existing retirement savings - in same proportion as the existing allocation. Than it grows right along with my regular investments. But I’m pretty spread out and have every confidence the whole ball of wax isn’t just going to crash to the bottom next week (or next year) - regardless of markets.
- If I knew for certain I’d spend the money inside 2 or 3 years, I suppose I’d park it in short or intermediate term munis (possibly a bit of HY) and try to grind out a few percent.
- If you simply want to buy some (unspecified) “thinking time” than any of the 3 options you listed would do. (I use TRBUX, Price’s ultra-short, for cash holdings.) -
@Mark - Here’s one of the best (and funniest) threads ever to appear here on the question of where to invest short term money. It was posted by @Puddenhead in April, 2017. He intended to invest the funds only until the end of the year - fewer than 8 months away. You’ll probably have to scroll back to page 1 of the 3-page discussion.
gah, it all depends, on horizon, needs, confident returns, all that variable stuff
if rents are reasonable and a long timeframe, sure, invest it prudently w allocation
if expensive housing, don't count on housing valuations to rise; my house, in an expensive suburb bought at pricy time, is worthy only slightly more than a decade ago, and the sellers to us lost significantly
Thanks for that archived link @hank. Funny indeed. FWIW I had suggested PIMIX to the original questioner but told them I would post here to see what others thought.
Not quite the identical situation, but here's what I did when I sold my home intending to rent until I learned the new area and found a new place to buy at the right price point and location.
I put this money, which was for a short but uncertain term, into multiple internet banks (for insurance purposes). As the months dragged on, rates dropped, and different banks became rate leaders, I shuffled banks. Not frequently, but with that much money involved it was worth my while to keep an eye on rates.
FWIW, a bank I'd be looking at now, for $50K (or $100K for a couple), is Marcus. 2.15% rate plus a 1% bonus on new money. I might look at 3 month zeros - currently the sweet spot for Treasuries, state tax exempt, and short enough term that one can cash out before closing on a new home.
With respect to rent vs. buy, IMHO that's more a personal preference than an investment decision. Financially, it depends on the region of the country, and perhaps as suggested above, the type of neighborhood.
For example, I made about 18%/year on a nice suburban home. But over the many years since selling, it has appreciated about 3%/year, based on county sales records. My subsequent home, in a single family urban neighborhood, appreciated about 7%/year. (Haven't checked since I sold, but I'm sure it has gone up much faster since.) Current home, expensive housing in high density neighborhood, up about 7%/year. Dumb luck.
But, you may have difficulty finding rental places in those upscale suburbs. If that's where you want to live, buy there and enjoy it. If what matters to you is best use of money regardless of where you wind up living, the odds favor renting.
Two years ago, we were faced with a similar dilemma. We had inherited a sizable (for us) sum of money, but couldn’t invest it in IRAs. Although we already own our home and have no plans to move or buy a second home, we could use the money to live on at any time. I couldn’t see the value in investing in cash at that time, with money markets yielding less than 1% at the time.
We ended up investing it about 20% cash, 20% in a tax advantaged balanced fund (TAIFX), 30% in municipal bond funds, 30% in a total market index stock fund. The cash portion was invested in a CD ladder when rates rose last year, with individual issues maturing every 3 months, and the shortest portion in a money market fund. The total portfolio has very low volatility and increased in value in 2018, a tough year for stocks and bonds.
You noted: "The money you received will buy you a house in your new location or you could just bank it and rent for a substantial number of years."
To the "buy" thought, at least for our house and ages; I would have to rent in a new location to get a very good overview; with the exception, if I was fully aware of the overall location and trends.
Knowing the math for many years of what it costs to own a home; I/we are able to justify a rental home, if not a condo or similar in a new location. A paid for home still requires at least the following, yes? :
--- full insurance, real estate tax, perhaps a separate water/sewer fee, utilities (electric and propane or nat. gas), maintenance/replacement....roof, furnace, a/c, plumbing. If one lives far enough away from central services, then a water well and septic become other items. Probably more I have not considered. Our mortgage is long ago gone; but of recent: Nov. 2018, the 20 year old high efficiency furnace suffered a cracked heat exchanger....new furance = $3,900 installed; and last weeks storms broke forth $1,600 of tree damage to the property. No structure was damaged, so we paid the full amount. Roof shingles are good for about 20 years here, and we're 2 years away from that time frame. Well, you and other home owners know all this stuff. Lastly, as each year passes I've been less willing to maintain the lawn and equipment and starting the snow blower when nose moisture freezes to facial hair. These chores will become extra expenses not yet in the budget. Yes, a rental would have some of these costs perhaps as part of the monthly rent; and one would likely be responsible for electric/gas; and the cost to purchase rental insurance to protect your own personal items.
The money side: For the rental in this link, many boomers could pay the rent with net SS income for one person. Other sources of money are assumed to be available; and for this portion of the money we would not change our conservative investments at this time. So, no special short term bond funds or similar. We always maintain an emergency cash source via a credit union account; and if things got real nasty or demanding for cash, a transfer from Fidelity to the credit union account clears in 2 business days. >>> You noted this separate: " What do you do with or where do you put the money while you're thinking this all through? 3-mo CD, savings account, MM Fund or other?" Money waiting....I suppose I would have to park this for a short period (no more than 1 year) in CD's or a credit union savings acct.
I picked a rental in an area I only know from stories from friends and family over the years. Definitely out of the tundra/hard frost zone. Although I/we are not likely to move to Florida. A quick glance of other properties in this area show about a $1.25/ sq. ft. for many rental locations.
An add relative to the housing markets. There are numerous articles over the past several years regarding real estate, relative to buy and rent for the younger group. This write has a fair amount of data, that I will assume is accurate. As is historical with real estate...location, location, location; as affected by jobs and other factors.
Thanks for all the input catch. These folks are dealing with the things that likely all of us will have to deal with eventually - downsizing, giving up a home you've owned for what may seem like forever, inability to keep up with general upkeep and maintenance, physical deterioration and so on and so forth. I believe they've firmly decided that it's in their best interest to move and they are fairly familiar with the area they'd like to go but there are still all those uncertainties. After you've owned your own for some time it's hard to give up your accustomed to level of privacy and independence in exchange for association fees, possibly noisy neighbors and a new normal in terms of neighborhood comfort and safety. Who knows.
You are going to move but are unsure of the timing. The money you received will buy you a house in your new location or you could just bank it and rent for a substantial number of years.
What do you do with or where do you put the money while you're thinking this all through? 3-mo CD, savings account, MM Fund or other?
We are going into Rental Apt. and can't use IRA's but only taxable account. Considering 4 or 5 places like high yield corp Bullet and PHYZX, a dividend growth like SCHD, Real Estate like SCHH or VNQ.
Well ron a high yield corporate bond fund would not be my first choice but that doesn't mean it can't be yours. SCHD, SPHD and VNQ appeal to me but at todays richly valued prices I'd be more inclined to build a position slowly rather than investing it all in a lump sum. That's just me and you should do what you're most comfortable with.
I read some investors are using Wellesley, VWINX / VWIAX for short term holdings. Interesting plan. The worst year it ever had was around 9 % in its 45 year history, or something.
Comments
Split in 3 ways 32%each
And
Buy rest 3% in att short term bonds
http://cbonds.com/emissions/issue/222751
https://www.nerdwallet.com/rates/cds/best-cd-rates/e=bank&bank_type=credit_union&bank_type=internet_bank&deposit_minimum=25000&display_page=TOOLS&length_of_term=720&min_ratings=3&page=1&sort_key=apy&sort_order=desc&sub_product_type=CD&zip_code=02115
- If I knew for certain I’d spend the money inside 2 or 3 years, I suppose I’d park it in short or intermediate term munis (possibly a bit of HY) and try to grind out a few percent.
- If you simply want to buy some (unspecified) “thinking time” than any of the 3 options you listed would do. (I use TRBUX, Price’s ultra-short, for cash holdings.)
-
@Mark - Here’s one of the best (and funniest) threads ever to appear here on the question of where to invest short term money. It was posted by @Puddenhead in April, 2017. He intended to invest the funds only until the end of the year - fewer than 8 months away. You’ll probably have to scroll back to page 1 of the 3-page discussion.
https://www.mutualfundobserver.com/discuss/discussion/33673/what-would-you-do
if rents are reasonable and a long timeframe, sure, invest it prudently w allocation
if expensive housing, don't count on housing valuations to rise; my house, in an expensive suburb bought at pricy time, is worthy only slightly more than a decade ago, and the sellers to us lost significantly
it all depends
I put this money, which was for a short but uncertain term, into multiple internet banks (for insurance purposes). As the months dragged on, rates dropped, and different banks became rate leaders, I shuffled banks. Not frequently, but with that much money involved it was worth my while to keep an eye on rates.
FWIW, a bank I'd be looking at now, for $50K (or $100K for a couple), is Marcus. 2.15% rate plus a 1% bonus on new money. I might look at 3 month zeros - currently the sweet spot for Treasuries, state tax exempt, and short enough term that one can cash out before closing on a new home.
With respect to rent vs. buy, IMHO that's more a personal preference than an investment decision. Financially, it depends on the region of the country, and perhaps as suggested above, the type of neighborhood.
For example, I made about 18%/year on a nice suburban home. But over the many years since selling, it has appreciated about 3%/year, based on county sales records. My subsequent home, in a single family urban neighborhood, appreciated about 7%/year. (Haven't checked since I sold, but I'm sure it has gone up much faster since.) Current home, expensive housing in high density neighborhood, up about 7%/year. Dumb luck.
But, you may have difficulty finding rental places in those upscale suburbs. If that's where you want to live, buy there and enjoy it. If what matters to you is best use of money regardless of where you wind up living, the odds favor renting.
"From 1900 to 2000, the national average of the real rate of appreciation on home values was only 0.2%."
https://www.realestate.com/articles/finance/houses-appreciate-value
We ended up investing it about 20% cash, 20% in a tax advantaged balanced fund (TAIFX), 30% in municipal bond funds, 30% in a total market index stock fund. The cash portion was invested in a CD ladder when rates rose last year, with individual issues maturing every 3 months, and the shortest portion in a money market fund. The total portfolio has very low volatility and increased in value in 2018, a tough year for stocks and bonds.
@Mark- Wow, that's great! When can I expect it?
You noted: "The money you received will buy you a house in your new location or you could just bank it and rent for a substantial number of years."
To the "buy" thought, at least for our house and ages; I would have to rent in a new location to get a very good overview; with the exception, if I was fully aware of the overall location and trends.
Knowing the math for many years of what it costs to own a home; I/we are able to justify a rental home, if not a condo or similar in a new location.
A paid for home still requires at least the following, yes? :
--- full insurance, real estate tax, perhaps a separate water/sewer fee, utilities (electric and propane or nat. gas), maintenance/replacement....roof, furnace, a/c, plumbing.
If one lives far enough away from central services, then a water well and septic become other items. Probably more I have not considered.
Our mortgage is long ago gone; but of recent: Nov. 2018, the 20 year old high efficiency furnace suffered a cracked heat exchanger....new furance = $3,900 installed; and last weeks storms broke forth $1,600 of tree damage to the property. No structure was damaged, so we paid the full amount. Roof shingles are good for about 20 years here, and we're 2 years away from that time frame. Well, you and other home owners know all this stuff. Lastly, as each year passes I've been less willing to maintain the lawn and equipment and starting the snow blower when nose moisture freezes to facial hair. These chores will become extra expenses not yet in the budget.
Yes, a rental would have some of these costs perhaps as part of the monthly rent; and one would likely be responsible for electric/gas; and the cost to purchase rental insurance to protect your own personal items.
The money side: For the rental in this link, many boomers could pay the rent with net SS income for one person. Other sources of money are assumed to be available; and for this portion of the money we would not change our conservative investments at this time. So, no special short term bond funds or similar. We always maintain an emergency cash source via a credit union account; and if things got real nasty or demanding for cash, a transfer from Fidelity to the credit union account clears in 2 business days.
>>> You noted this separate: " What do you do with or where do you put the money while you're thinking this all through? 3-mo CD, savings account, MM Fund or other?"
Money waiting....I suppose I would have to park this for a short period (no more than 1 year) in CD's or a credit union savings acct.
I picked a rental in an area I only know from stories from friends and family over the years. Definitely out of the tundra/hard frost zone. Although I/we are not likely to move to Florida. A quick glance of other properties in this area show about a $1.25/ sq. ft. for many rental locations.
https://www.zillow.com/homedetails/3190-Regatta-Cir-Sarasota-FL-34231/47515785_zpid/?
My brief 2 cents worth.
Take care,
Catch
An add relative to the housing markets. There are numerous articles over the past several years regarding real estate, relative to buy and rent for the younger group. This write has a fair amount of data, that I will assume is accurate. As is historical with real estate...location, location, location; as affected by jobs and other factors.
Millennials and real estate