Early Retirement Extreme Forums

I have a little over $30k that I’d like to park somewhere and keep fairly liquid for the moment. I have pretty much everything else invested in index funds—I’m a VERY lazy investor—and I don’t think I want to put this cash in an index fund at the moment. Unless you talk me out of it!

This is money that I may use for some home repairs in the near future, or to pay off the house in about a year or so.

I was thinking about doing a CD ladder or just putting into a Vanguard money market. Rates look like they are about 2.3 or so for both.

Any other thoughts? Would like relative safety and relative liquidity, but I can be a little risky with some of it. But I’m still lazy!

If you have all your other money in big banks/vanguard, I'd put the money in a local bank or credit union (some in savings/CDs, some in a safe deposit box). Use it to spread your institutional risk around.

Advise to pay off your house now if you have funds to do it. One less debt to think about. One good thing about index funds, it's ok to be lazy. Just invest regularly and your monies will work harder than you do.

In general the duration of the asset should be matched to the duration of the liability, so technically that translates into a CD that matures "in about a year or so" (but why not just pay it off now?) and a second CD that matures "in the near future". No reason to bother with a ladder. Ladders are intended to create limited liquidity at a higher rate than rolling 1-month CDs or using a money market account.

I’ve been away from the USA for a while, but a lot of my friends are using Goldman Sachs online savings account which is supposedly yielding somewhere in the neighborhood of 2%.
Not a bad place to park some cash short term

Sorry, I guess I should have included more details. Current amount is not quite enough to pay off the house at the moment. I’m going to probably sell my rental hose when the current lease is up, then use some of that money and some of this money to pay off the house. I’m going to do some house repairs/work, probably in the fall—anew patio roof, a light renovation of the master bath, and some window repairs. Too hot and too busy to get all that done right now.

Ally has 2.5% on 12 month CD

All America Bank has a Mega Money Market account at 2.4%. I've had my FU money there for a while. The account comes with a Debit card w/ a limit of 6 transactions per month.

I use Vanguard Prime Money Market for that purpose (the "in a while" stuff). For money I know I'll be spending in say the next year, I just keep it in a savings account at my bank. That might not be the razor's edge as far getting a yield on it, but I tend to value convenience along with liquidity for such funds.

Wealthfront is offering 2.57% in their savings accounts (FDIC insured).

$40 in wallet

$500 worth of twenties in house

$4500 deposited in checking once a quarter that I live on.

(12)1 year CDs at $5,000 each. Each one matures on the 15th of each month. If I don't need it for an emergency, I renew it for another year. If I need it, I use it, and replace it in the rotation the next year.

All other cash from paychecks, dividends, interest, disbersment from my 12 CDs, side gigs, etc goes to a money market until I have enough there to do what I want with it - investment purchases, planned home improvements, major planned purchases, the $4500 quarterly deposit to checking, etc.

My small business has it's own checking account that I use to pay myself, cover operating costs, and to reinvest in the business.

EdithKeeler wrote: ↑

Sat Jul 20, 2019 10:28 am

I have a little over $30k that I’d like to park somewhere and keep fairly liquid for the moment. I have pretty much everything else invested in index funds—I’m a VERY lazy investor—and I don’t think I want to put this cash in an index fund at the moment. Unless you talk me out of it!

Ok, I'll be the one to recommend an index fund.

For this type of thing I personally like SHY or SHV.

@Tyler9000 - I've thought about those as a vehicle to park my cash while waiting for more buying opportunities. However, the yield is about what you'd get in a CD + you're now taking on a perhaps unappreciated interest rate risk (if yields go up, the ETF price goes down) and you also need to pay commission to get in or out(*).

(*) Broker might offer free trades for certain ETFs, but it often comes with certain constraints such as mandatory holding periods.

As a result of those concerns and because of my particular investment strategy, I use 3-5 month CD ladder. (The time period is chosen to release funds slowly so I don't buy too early on a crash---this is basically an emotional constraint based on knowing myself. 3-5 months is about the time duration I'd expect from a major slide, so I expect to be buying on the way down while not having information about "how far down". A 1 month long correction thus only spends 20% of my ladder. See how that works...) Noting that my goals are thus somewhat different from EK's.

Since the Feds came out with their talk about dropping interest rates again (afterall, the economy is supposedly doing splendid and unemployment rate is at a historic low, so why the hell not ), all "safe yield" instruments are yielding almost the same (about 2% flat plus minus a quarter). Thus is comes down to mostly friction costs. For example, I'm way too lazy to open new bank accounts to score an extra 0.1% but many like to play that game.

I'm with a major bank, getting money market and cd rates slightly lower than the best listed here. I also have a savings account with them that gives relatively poor returns, for liquid funds. It's all connected and makes life easy though.

Wealthfront sounded a little too good to be true - better rates than a year CD but totally liquid. I did a little checking and found:

• Cash Account is offered by Wealthfront Brokerage. Neither Wealthfront Brokerage nor its affiliates is a bank. Wealthfront Brokerage conveys Cash Account funds to depository institutions that accept and maintain such deposits. The cash balance in the Cash Account is swept to one or more banks (the “Program Banks”) where it earns a variable rate of interest and is eligible for FDIC insurance. FDIC insurance is not provided until the funds arrive at the Program Banks. FDIC insurance coverage is limited to $250,000 per qualified customer account per banking institution. Wealthfront Brokerage uses more than one Program Bank to ensure FDIC coverage of up to $1 million for your cash deposits. For more information on FDIC insurance coverage, please visit www.FDIC.gov. Customers are responsible for monitoring their total assets at each of the Program Banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits at Program Banks are not covered by SIPC. This is not an offer, or solicitation of any offer to buy or sell any security, investment or other product.

Probably ok, but I decided not to chase the extra $57 per $10k switching would offer. Personal capital is offering something similar, but only a 2.3% return. The intent must be to up-sell planning services.

If you have debt, get out of debt now. Pay it off with the cash.

I think you could do both.
Put the 30k into an account that pays interest and also set up a direct debit/standing order to put it into an investment account and buy a particular fund. e.g. 3k a month for 10 months.
The reason for doing it this way is to reduce the risk of a market correct just after you pop in the 30k and buy your fund.