Hey guys, so I have some cash sitting around for a potential downpayment on a house / condo...I am not sure when I will need it, but I dont want it to sit in my checking earning no interest. Where is a safe place to put my money?
any very safe investments that I could throw 3/4 of it in to get 1-2% annual return? I havea Charles Schwab account now, but I dont think their money market account pays anywhere near that.
thanks
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http://www.ally.com/bank/savings/
or check out bankrate to see what the prevailing rates are
Also if you have Schwab, you might have access through their brokerage services to other fixed income investments (CDs) that you can buy in on. I would check that out too. I know Fidelity gives you the ability to do that.
Short term corp bonds with fortress balance sheets would be my pick but that might be a bit more risk than you're looking for. If you know approximately when you'll need the money you can set yourself up to hold them to maturity.
EDIT: You could also look for a nice preferred from one of these F50 companies with a cumulative dividend. Bit farther out on the risk curve though
dividends??
On the lower end of what you're looking for, Sallie Mae has a HY Savings account paying 1% right now https://www.salliemae.com/savings-and-cds/savings-accounts/
Buy an apartment, you can rent it out when you want to move around.
Look in the 2ndary market for strong credit rated munis, most probably will be selling at a premium but the coupon rates will be much higher than current prices of paper being issued. Most munis are callable and will be called over the next 2-3 yrs given where we are in the yield curve, so upon early redemption you're total return, triple tax free, should be better than simply buying a treasury and holding it for 1-2 yrs.
Can you quantify "very safe"? If you're willing to take some principal risk you can get a decent total return from some bond ETFs.
http://int.wholesale.bnymellonam.com/core/literature/datafile_datasheet…
American Express savings isn't bad... 0.90%.
Seconded. I've got one.
I am assuming you're thinking in terms of a year or so rather than the next few months.
If you think you won't need some of it until after 11 months, Series I Savings bonds are the best deal running on risk-free savings rates:
http://treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
3% yield for the next six months. Tracks inflation after that.
Beyond $10K/year, Ally.com's 5-year CDs with a 60 day early withdrawal penalty gets you about 1.8%.
If you need money in the short term, Alliant Credit Union (federally insured) offers a 1.00% APY on savings deposits. They have been in the top 5-10 banks for savings rates for the past few years. Ally.com comes close, but is about 10-15 basis points short.
Leave it to the thrifty guy to know where to stick your money
PS: if you're buying in a downtown area, it may be wise to pair some of your savings with an investment in a residential REIT. The idea here is that there's going to be some correlation between the size of your downpayment on a condo in a multifamily building and how the multifamily REITs are doing. You're making a few assumptions here, but the bottom line is that if you're committed to buying, you've got a bit of a comparative advantage against other investors at the same price for investing in residential REITs.
Safety of Principal is goal number one, and an adequate return is goal number two.
Ally bank has a 6-month CD offering 0.74% and a 1 year offering 0.99%. These are solid options. It would take extending to a 5yr treasury to find similar rates. Also if you have a longer holding period the US Savings Bond, Series I looks good. Current rate is 3.06% thru April, 2012 (rates reset every 6mo. Historical rate mean is 4.18%). Minimum holding period is 1yr, and you can redeem after one year with a 3months interest penalty. If you hold for 5 years there are no penalties. The only bad thing is 10k limit, 5k online and 5k paper.
You will sleep better at night knowing your funds are safe with zero risk and that you are earning halfway decent interest, and that you will be ready to buy when the opportunity presents itself. Yes it may be possible to get 50-100bps more but personally I wouldn't take any risk with a house on the line.
The amex savings rate just mentioned looks great too
Microsoft bonds
3 month treasuries
@tommygun check out the early withdrawal penalty on the Ally.com CDs. It's 60 days for a 5 year CD against a rate of 1.8%. The realized yield exceeds the six month rate for an early withdrawal.
I am actively looking - I've put in 5-6 offers in on places over the last 4 months, but nothing has panned out. I think many sellers that bought in 2004-2007 are still delusional about what they can get in this market.
Prices are a bitch here in Boston - not Manhattan prices, but in nice areas you're still looking at north of $600+/sf, and many without parking.
So I'm not in a rush, but I'm also looking to buy in the next few months if the right opportunity comes up. Most of the places I put offers on are still on the market...which tells me it's good I didn't reach.
Anyways, if it's June and I still haven't found a place, I will likely just go the rental route for a few more years. If I end up with my current girlfriend, she's said she wants to move back west coast (SF) when she is done wit her residency in 2.5years, so renting may be the smart move anyways. since I may be moving west coast in a few years, ideally i'd get a place in boston to live for 2-2.5yrs, with a good potential rent area (rents have been shooting up in boston while home prices mainly still flat, even with low ass rates)...
thoughts?
I agree with UFO, get an apt in a desireable area and then rent it out when you leave.
Also check out ING's orange savings account. Gives you about 1% also.
The smartest play you've made is dating a doctor =)
Jimbo
Ha, thanks Jimbo. By the way, great to have you back / active on the boards again. All the chimps will be better off because of it.
I don't really want to open yet another account since I have BoA for personal and business, Fidelity for investments and now charles Schwab (international travel, no ATM fees - made sense for my trip down to S. america, plus their customer service is truly awesome).
I think I'll call the Schwab guys and see what they can get me...I'm not so risk averse so putting some in corporate bonds may be a good move.
^^ Patrick, if that's the case, why not stick 10% of your down payment savings into residential REITs? There's going to be a strong correlation between the down payment you'll have to make and the value of your REIT stock. Some of them are paying 3% and the preferreds are implying an additional 2-3%/year market risk premium. Why not correlate your risk with your down payment going down?
I assume you mean 50% of the downpayment, 10% of total purchase?...the theory being if the residential REIT drops in value, I won't need as much a downpayment because home values will have also dropped? that is true, I just am looking at such a wide range of properties that I'd prefer to have the option to reach if need be - I think putting 1/2 of the downpayment in a residential REIT to increase correlation and maybe 50% in a fixed income ETF to try and reduce volatility may be the way to go.
Any idea where I can find a good REIT? never invested in one...
I like BPO. They're a subsidiary of Brookfield Asset Management and are pretty reasonably priced at this level, although not the screaming buy it was 3 months ago.
There's still a couple risks with this:
1.) You might change your mind on whether or where you want to buy. 2.) Your REIT will probably own buildings in other cities that may decline in value. 3.) The rental market might weaken relative to the property market and your REIT is unable to go condo on its properties. Nothing's to say these assumptions about arbitrage-free markets will hold and management won't exploit them.
As for which REITs to own, check out which residential apartment buildings are renting in the area you want to live, find out who owns them, and most importantly, what else they own.
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