Investing Alternative to CDs
January 23, 2012 12:56 PM Subscribe
What alternatives to CDs are there for short-to-medium term investing?
I have a chunk of money that my family wants to set aside for vacations over the next 12+ years. The plan is to take a more expensive vacation every other year, with the off years' vacations being more frugal and staying close to home. Besides CDs, what other investment opportunities are there where I can get to the money in a few years? My risk threshold is up to medium; no rolling the dice in Vegas investment plans for me, please.
I have a chunk of money that my family wants to set aside for vacations over the next 12+ years. The plan is to take a more expensive vacation every other year, with the off years' vacations being more frugal and staying close to home. Besides CDs, what other investment opportunities are there where I can get to the money in a few years? My risk threshold is up to medium; no rolling the dice in Vegas investment plans for me, please.
I disagree that CDs are high risk, certainly not higher risk than a stock fund like SPY.
In the current economic environment you aren't going to find any investments that have significant returns above inflation and are low risk. For something slightly riskier but with higher returns than a CD, I would suggest a low cost broad bond fund, like Vanguard's Total Bond Index ETF.
posted by justkevin at 1:35 PM on January 23, 2012 [1 favorite]
In the current economic environment you aren't going to find any investments that have significant returns above inflation and are low risk. For something slightly riskier but with higher returns than a CD, I would suggest a low cost broad bond fund, like Vanguard's Total Bond Index ETF.
posted by justkevin at 1:35 PM on January 23, 2012 [1 favorite]
Um, dfriedman, I don't think this level of volatility is appropriate for money you plan on spending within a year or two. Investing in a stock index is great for the long term; not so much for money that you'll need to access soon.
posted by alms at 1:52 PM on January 23, 2012
posted by alms at 1:52 PM on January 23, 2012
12 years is definitely medium-to-long term. One option for considering how to invest is looking at what age based mutual funds do. For instance, the Utah 529 age based plan has a model portfolio for a kid who's 13-15 years. Ie, someone who will be spending their money 3-9 years from now. Not an exact match for what you're doing but close.
Their aggressive fund is currently 40% stocks, 45% bonds, and 15% cash. Their conservative fund is 10% stocks, 55% bonds, 35% cash.
Obviously you can't invest your money in the UESP fund. But you could easily buy something similar via a low cost index fund provider like Vanguard. In no way is this risk free, but I think UESP's policies represent reasonable managed risks.
posted by Nelson at 2:28 PM on January 23, 2012
Their aggressive fund is currently 40% stocks, 45% bonds, and 15% cash. Their conservative fund is 10% stocks, 55% bonds, 35% cash.
Obviously you can't invest your money in the UESP fund. But you could easily buy something similar via a low cost index fund provider like Vanguard. In no way is this risk free, but I think UESP's policies represent reasonable managed risks.
posted by Nelson at 2:28 PM on January 23, 2012
Best answer: CDs aren't high risk. In fact the only return more certain is inflation protected treasuries / savings bonds. It's pretty much a fact that you'll be getting a shitty return on CDs.
I'm not entirely clear on why this money needs to be earmarked for vacation. Why not push as much as you can into retirement plans now, and just reduce contributions later as the vacation money is needed? Then you're free to invest it in whatever long term high reward strategy you use for retirement.
posted by pwnguin at 3:06 PM on January 23, 2012 [2 favorites]
I'm not entirely clear on why this money needs to be earmarked for vacation. Why not push as much as you can into retirement plans now, and just reduce contributions later as the vacation money is needed? Then you're free to invest it in whatever long term high reward strategy you use for retirement.
posted by pwnguin at 3:06 PM on January 23, 2012 [2 favorites]
Response by poster: I'm going to go the route pwnguin suggests. I had thought of that, but I guess I feared that we'd never get around to actually saving for vacations as something always came up to spend money on. It just takes some financial prioritizing and discipline, but it should be better for our retirement in the long run.
posted by medarby at 12:52 PM on January 30, 2012
posted by medarby at 12:52 PM on January 30, 2012
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Invest the money in an index fund like SPY or something.
posted by dfriedman at 12:58 PM on January 23, 2012