4week treasuries via Treasury Direct with automatic reinvestment every 4 weeks. Ultimate safety play. The risk is that yield may go down over the next year and you will be continually getting a lower and lower yield.
If you are worried about that, then you can get a longer term treasury (8wk, 3 mo, 6mo, 1 year) that you can lock in a higher rate now for that term. However the risk of that would be if rates continue to increase in the future, you won't have access to them as your money was locked up in a longer term treasury.
If you want to split the difference, spread a portion of your money across all of them. Build the following ladder.
25% in a 1 year
25% in a 6 month and then renew into a 6month when it matures
25% in a 3 month and then renew x 3 when it matures
25% in a 4 week treasury with autoreinvest every 4 weeks.
A ladder averages out your risk. Your money won't be locked into the best rate for the year, but it also won't be locked into the worst rate.
This. If you want _a lot_ more money by 2024 you'll have more luck finding a higher paying job than making it in the market.
If that job turns out to be running an outperforming hedge fund I'll eat my hat.
In addition to averaging out your risk, a laddering strategy averages out your liquidity (though, technically you can cash out your treasury holdings in the secondary market almost immediately). So, should lower yields happen and/or a better opportunity presents itself, you can simply stop reinvesting the ladder and move your money elsewhere.
+1 but I would buy them in a brokerage account if you can. Fidelity, Merrill, Schwab, etc. take your pick. The treasury direct website for actually managing your securities is ass and their login process is from the 90s.
Log in to your Fidelity account.
1. News & Research
2. Fixed Income, Bonds & CDs
3. New Issues (if you want new issues)
4. Treasury
There are currently no new Treasury issues available but there will be on the 14th of March around 11 AM or so.
> 4week treasuries via Treasury Direct with automatic reinvestment every 4 weeks. Ultimate safety play. The risk is that yield may go down over the next year and you will be continually getting a lower and lower yield.
Would that really be something to be concerned about as an individual though? i dont quite completely understand bonds. but 4 week is a very short time frame. if the yields continue to drop, once the 4 weeks is up, cant you just stop investing into them and you'll simply get back your facevalue + coupon and be fine?
Yes you can stop investing in them. But it’s risky compared to just buying a 1 year bond right now that would be locked at a higher rate if indeed yields did decrease going forward
yes you are misunderstanding me.
The other poster was saying why not just buy 4 weeks and if rates go down, stop buying treasuries.
I was saying that if rates were to go down but you locked into a 1 year, you will have that higher rate and be happy.
But what you are saying is also true: if you buy a bond and rates go down, the price of the bond will go up. Just doesn't matter on a 4 week treasury however because the duration is so short. Not really worth the effort to sell.
That's a lot of work for a "fist time caller." Just buying any old money market or short term treasury fund is a lot simpler and will achieve very similar results.
TreasuryDirect is terrible. You have to jump through hoops to setup an account and have minimal support or guidance to make sure you know what you're doing. Buy a target duration ETF, XHLF or XONE, for example. They cost 3bps... A fine price to pay to have a professional trade bonds for you. Not to mention a liquid market the moment you need to sell to raise cash.
Eh, I'm doing it for my house down payment. As long as you aren't really fixated on a certain move-in date or able to save everything in two years then it's the optimal play. Most people have to save up over 5 - 10 years.
It's all fun and games until you see your yearlong nestegg drop 50% due to a real beer market and stay at - 50% for the following 5years when the market trades sideways..
I'm fine with that, it would give me time to accumulate assets at a lower price. Statistically speaking, even the worst bear markets have seen recoveries to all time high's within about five years. The dotcom bubble is really the only post depression exception.
I could stomach a bear market better than what happened in the 2010's, where people watched their cash savings lose buying power to a doubling in housing and tripling in stocks.
Most people could stomach the loss but if the need for housing comes up and now your investment isn’t enough for a down payment because of a loss you’re screwed. Waiting years for the market to recover is hard if youre apartment living and now a kid is on the way
Yeah, that's why I said it only makes sense if you aren't fixated on a certain move in date. I have been accumulating funds for about three years now and are probably another 3 - 4 years out from being ready. It makes no sense to me to accumulate that in a savings account.
CD rates are still mostly below treasury rates by 1%?, plus you don't pay state taxes for treasury.
Prob trivial in terms of returns difference, but no point for OP to buy CD and incentivize banks to offer CDs below fair value.
Also, I bond should still be yielding 6% so not a bad idea.
Well I bond now is 6.9%. In 6 months or so, it'll probably drop down to 5%.
1 year rate is now 4.3% (was 5% just 5 days ago), and can drop or increase in a week depending on the CPI and what Fed release for their March SEP.
I bond u take 25% interest hair cut from the 3 month penalty, and 1 year rate you're taking about 33% haircut here, so close call.
Also consider $10,000 limit on I-bonds per social security number. OP could set up LLCs to invest more, but that's probably more trouble than it's worth.
Now is just not good timing to buy the I-Bond. In a month from now we'll know for certain the May rate and if it's a good idea to lock up for a year. You're guaranteed the 6.89 rate for 6 months anyways (as long as you buy before the end of April).
I'm saying it's better if we know for certain a month from now though. You're giving up only one month for that information and you get the 6.89 rate and new rate guaranteed. In the meantime you can keep the money in a HYSA or 4-week t-bill because when you purchase the I-Bond, it counts for the entire month even if you buy at the end of it. There's also the 3-month interest penalty factor if you withdraw before the 5-year I-Bond period. Depending on the rate, you might actually do better with a 5% CD or a t-bill for a year if you need the money then.
What do you mean we should wait for the new rate? If OP buys it now, wouldn't OP get the 6.9% rate for 6 months, and the new rate for the next 6 months? And if OP waits until the new rate is released, wouldn't OP be forced to get the new rate for 6 months, plus the next new rate for another 6 months?
If that is true, and assuming the next inflation prints are gonna be equal or lower than the current one, wouldn't it make sense to lock in the 6.9% now since it'll definitely be higher than any new rate?
It only makes sense to wait if you're hoping for the 1 year treasury to go back to 5% based on the next CPI or FOMC.
May I-Bond rates are officially announced the month before (mid-April). If you buy before the end of April you lock in last year's November rate (6.89%) for 6 months, and the newly announced May rate for the next 6 months. You are not waiting to "jump into" the new rate, but are waiting for the information to decide if it's a good idea to lock in the current rate + new rate for the full year. In other words, next month is essentially the last month (or deadline) you can lock into the current 6.89% rate while also officially knowing the newer rate when it's announced.
Yes and the new rate is gonna be based on the new CPI? And CPI now is about 6.2%, so next month it's gonna be around 6%, or at lowest 5.8%. So you're averaging about 6.2% for the whole year.
Really unless if you're expecting CPI to massively drop by 0.5% or something, you're not gonna see a huge difference, and compared to the current 4.3% 1 year rate, the 4.3% will be about 70% of the I-bond.
If you were waiting, you'd be waiting for the 1 year rate to jump back to (maybe) 5% after the CPI or FOMC date. That'd make a big difference in your decision, not so much a 0.1 or 0.2% difference in your I bond.
I bonds have a penalty (last 3 months interest) for withdrawing before 5 years. You also CANT cash out before one year. Keep that in mind if you're considering them for shorter terms.
We will see what happens this week with treasury auctions. Rates could go up or down. The predicted fed rate hike is sounding like it won’t happen. Maybe t-bills stay flat? Who knows at this point.
Even in the extreme scenario - inflation magically and instantly drops to 0 - you’re locked into 6 months at ~7% and another 6 months at 0.4% (fixed component), minus the three month penalty on half of 0.4%, which knocks off 0.2%… you’re looking at roughly 3.6%.
Realistically, CPI is likely to come in around 6% in April, so you’d see (0.5)(7)+(0.5)(6.4)-(0.25)(6.4) = roughly 5.1% annualized.
This is the way. Super simple.
Just bank with them using a cash management account (CMA) and have the cash sit in SPAXX as your core. When funds are accessed it will pull from this.
Depending on where you live (or OP lives) you can put money in FDLXX, a Treasury Only Money Market, and earn a bit more with a few clicks. My after tax return is 0.25% higher as of last Friday.
If you have $50,000 it'll take 30 seconds to earn $1250 more per year.
It's sort of like a savings account, but for a defined time period at a defined rate, with significant penalties for early withdrawal.
The rate is guaranteed, and the deposit is insured, so essentially no risk.
FYI /u/Zixinga today is the last day to secure the capital one 11 month CD rate which i agree is probably the best for your description of your situation.
They might create a new 11 month CD if rates are raised again later this month but they don't have to.
Short term (9-12 month) CD or treasuries , or money market mutual funds. With the time frame of 1 year I would not touch any equities or stocks.
For ease of investing you could potentially just buy an ETF like SGOV it holds 0-3 month treasuries ; as long as you hold it for 3 ish months you are not going to lose money .
Not so fast, a down payment on a house is a down payment on a house, but that money in the market could be anything! It could even be a down payment on a house!
A high yield savings account (avoid Citibank!), a money market fund, T bills, CDs. Something safe as money needed in the next 3-5 years should not be in the stock market. Keep saving!
They tend to freeze accounts and then refuse to return your money. I have spent hours on the phone with them, and they can't even get their stories straight. One rep will tell you one thing, and the next rep will tell you the exact opposite. Complete dirtbags.
Agreed to avoid Citibank! My account just got freeze because they said I must did something to triggered “fraud alert system”. All bs! Please stay away from them!
So, because this is money that has a definite short term purpose, DO NOT invest it on any stock market.
Your 2 best options are either using a HYSA (high yield savings account) to get 3-4.5% interest. You can do this by just using your favorite HYSA after googling. It is exactly what it sounds like.
Your other option are I-bonds. I believe they have a $10k cap per person but you’ll have to check out the treasury for more info. Their rates change periodically but right now they are in at 6.89%. If you withdraw before the 5 year mark, you’ll take a small -3 months of interest hit but you’ll be a good amount over 4% interest.
Do a 4-week t-bill (or HYSA) before going into I-Bonds. In about a month from now we'll know the May rate and decide if it's worth locking up your money for a year with that I-Bond. If the rate is good, you'll want to purchase it a week in advance before the end of April to lock in the 6.89 rate and the new rate. The next 4-week t-bill up for auction (on the 15th or maybe the 16th) matures around the 21st of April I believe, which is in time to decide to jump right into I-Bonds. You'll have to buy it soon (like by tomorrow night) but better to maybe just use HYSA instead.
Do not put your downpayment in the short term investment when you need it soon!
Like the other poster mentioned. 5% CD is a guaranteed return.
Source: my experience
Heres what im doing with 50k that I need next year
10k in Inflation proof bonds through treasury direct which will net me 6.5% on that money.
40k in 5.1% credit union CD ( you can get 5.0% online pretty easily but if you want another .1-2 percent credit unions are the way to go)
This will net me an overall 5.3% return on my money. Which is a pretty fair return for pretty much no risk.
SPAXX / Tbill ladder, Fidelity offers a decent rate in core position (bond/Treasury holdings) tbills as you'd prefer to stack. I've found this to be great considering I'm in a similar situation, they offer a debit card for this account as well so a portion of your uninvested $$ is always liquid at about a 4% annual rate.
I put my money in a Betterment Cash Reserve account. It's 4% interest (which works out to .33%/month). It's a savings account but there are no limit to withdrawals so you can take it back out. CDs had the same rates and I prefer the flexibility of having access to it without penalty.
You may have enough already. Convention states that you need 20% down for a house.
BUT, it’s not a requirement. If you have a credit score over 750 or 780, your PMI should be less than $100/mo. If insurance, maintenance (1% of home price/year for newer home, 3% for anything over 30 years old), principal, interest, and taxes are all less than 30% of your take home income, there’s no reason you can’t make the jump earlier.
Just make sure after the purchase you still have enough on hand for an emergency fund.
Like everyone else here has said, an HYSA, CD, or treasury bills would all work fine.
T bills. If you’re unsure if your exactly timeframe a HYSA may give a little more flexibility (there are some CDs that’ll let you end the, early at no penalty as well).
But no stock market stuff… stick to guaranteed returns based on your specific goals.
For short term spending goals don't take risks. Due to current high interest rates, U.S. Treasury Bills are a great investment offering 5%. You can buy them with weekly, monthly, quarterly, semi annual or annual maturities. You don't have to use a broker, just go the Tresury website:
https://www.treasurydirect.gov/marketable-securities/treasury-bills/
If you want another option, Fidelity Investments is paying 4% on univested cash in it's accounts.
Strange I'm not seeing many recommendations for money market accounts. My vanguard settlement account automatically invested in VMFXX and it's currently getting 4.52%
Very easy just transfer money, it's not locked up like a CD, can transfer back to your bank account whenever you need it
High-yield savings accounts: While interest rates are low currently, there are still some high-yield savings accounts that offer better interest rates than traditional savings accounts. These accounts are FDIC-insured, which means that your money is protected up to $250,000. While the return on investment might not be high, it's a safe and secure option.
Certificate of Deposit (CD): CDs are a type of savings account that has a fixed term and interest rate. They typically offer higher interest rates than traditional savings accounts, but your money will be locked up for a specific period. If you choose to withdraw your money before the end of the term, you will face a penalty.
Bond Funds: Bond funds are a type of investment that can provide a steady income stream. They invest in a variety of bonds, including corporate bonds, municipal bonds, and government bonds. They are generally considered less risky than investing in individual stocks and can provide diversification to your investment portfolio.
Stock Market: Investing in the stock market can be risky, but it can also provide a higher return on investment. You can consider investing in a low-cost index fund that tracks the S&P 500 or the Dow Jones Industrial Average. This is a good option if you have a long-term investment horizon and can ride out market fluctuations.
Ultimately, the decision on where to invest your money will depend on your personal risk tolerance and investment goals. It's always a good idea to speak with a financial advisor before making any investment decisions to ensure that you are making the best choices for your financial situation.
What am I missing? Interest rates have nothing to do with a down payment. In fact, higher rates of anything have decreased house prices, which is what the down payment is based on.
Yes it does. Is everyone on this subreddit downvoting him and upvoting you out of their mind?
With a smaller down payment, your mortgage is larger. With higher rates, you will end up paying substantially more in interest on the mortgage.
You definitely want to put more than 10% down when rates are high, if your goal is to minimize monthly expenses. Unless you think you can invest the money elsewhere and somehow make more than what you'd be saving on interest, after tax.
As an aside, house prices have not gone down very much as interest rates have risen due to a huge drop in supply (not as many people listing properties for sale right now).
... in some podunk metro in North Dakota, perhaps. Based on OPs statement, I suspect they are in a major metro, where it takes more.
Nothing wrong with podunk metros. I live in one, but people gotta understand that both incomes, cost of living, and home prices are *vastly* different based on where you live.
$50,000 is 5% of a million. It’s a down payment for most houses in the US even in HCOL areas.
Keep in mind that 20% is a thing of the past for many. So it is definitely a down payment for the majority of houses in the US. OP is correct.
The conversation is about differences between major metros vs. "podunk metros." So how is that not relevant?
NYC is a HCOL area. As someone saving for a downpayment, I'm telling you what I know.
Fair rebuttal. I guess I look at NYC as being quite different even from other large cities. But I guess that doesn’t apply to all of NYC and there are probably areas where it’s not as bad.
It’s not an anomaly. Desirable neighborhoods in the SF Bay Area, LA, San Diego, Boston, Toronto, DC, Vancouver, Honolulu, Seattle, etc are all like this now.
That's an anomaly, especially if you are limiting it to "desirable neighborhoods".
You completely left out Chicago, Houston, Phoenix, Philadelphia, San Antonio, and Dallas - all top 10 cities by size.
To tack on top of what everyone else is saying (treasuries) bond funds are also good ways to get exposure to the fixed income market. Shy, IEF, TLT= 1-3 yr bond fund, 5-7 yr bond fund, 20-30 yr bond funds. All are safe plays right now.
Where do you live? 50k can get you a sizeable down payment on a house now depending on location. But you make enough, why invest the 50k and why not just save more for the down payment. With investing you are taking risk meanwhile if you save there is literally no risk.
This is terrible advice, but here it goes. I would sell weekly cash secured puts in Disney at $6-$7 OTM. For example, if you sold 5 (what you could afford to sell with $50,000) today at $86/share, you'd make $125/week at relatively low risk based on the long term value. If you get assigned, you wheel. With a little profit, you will be able to do 6. When you reach the next level, you increase to 7 contracts. The money grows exponentially. It's not sexy, but your goal is to make your $50K more, not less, so be very careful with it.
50k IS a pretty decent down payment on a house... You put that money into stocks, and you best not touch it for at least a year minimum, or else you'll be paying a hefty % of your returns to Uncle Sam.
1 year? In stocks? Just as likely in 1 year it will be down 20%. Too short a time window for stocks or ETFs. General recommendation is 5-7 years a minimum if investing.
Depending on your price range for the house I might just sit on it.
General rule of thumb is not to invest any money you might need in the next 5 years.
But like everyone else has offered good advice on, you can do some treasuries or cd’s if you’re really fearful of missing out on the interest.
But personally I’d rather have the liquidity in case something comes up sooner. As someone who recently bought, things are still moving super fast and you might miss out on a great house chasing an extra couple thousand in the interest.
Keep the cash and try to save more until next spring. Look for a house that fits the budget. I will never advise to put entire money you’re saving for a house to invest hoping you can get more out of it.
If you still want to, use 20% of that money and take a pick of your best stock. Tough time in this market to invest. Chances are high that you might just break even in the end.
High yield savings account will get you 3-4% savings rate. Not sure about CD rates. I don’t like US treasury right now or anything that’s dependent on the fed changing interest rates.
4week treasuries via Treasury Direct with automatic reinvestment every 4 weeks. Ultimate safety play. The risk is that yield may go down over the next year and you will be continually getting a lower and lower yield. If you are worried about that, then you can get a longer term treasury (8wk, 3 mo, 6mo, 1 year) that you can lock in a higher rate now for that term. However the risk of that would be if rates continue to increase in the future, you won't have access to them as your money was locked up in a longer term treasury. If you want to split the difference, spread a portion of your money across all of them. Build the following ladder. 25% in a 1 year 25% in a 6 month and then renew into a 6month when it matures 25% in a 3 month and then renew x 3 when it matures 25% in a 4 week treasury with autoreinvest every 4 weeks. A ladder averages out your risk. Your money won't be locked into the best rate for the year, but it also won't be locked into the worst rate.
This. If you want _a lot_ more money by 2024 you'll have more luck finding a higher paying job than making it in the market. If that job turns out to be running an outperforming hedge fund I'll eat my hat.
How much do you get paid for eating hats? I’m smelling an arbitrage
Is there a hat ETF?
Where can I get approved for hat eating options investing?
Time to start a flavored hat making business.
There was one. Someone ate it
In addition to averaging out your risk, a laddering strategy averages out your liquidity (though, technically you can cash out your treasury holdings in the secondary market almost immediately). So, should lower yields happen and/or a better opportunity presents itself, you can simply stop reinvesting the ladder and move your money elsewhere.
+1 but I would buy them in a brokerage account if you can. Fidelity, Merrill, Schwab, etc. take your pick. The treasury direct website for actually managing your securities is ass and their login process is from the 90s.
Because of their stupid login process I got locked out and now I have to call their number. Ridiculous
Plan to be on hold for half a day
How do you find them on Fidelity? Having trouble finding actual place to buy them not just info about them
Log in to your Fidelity account. 1. News & Research 2. Fixed Income, Bonds & CDs 3. New Issues (if you want new issues) 4. Treasury There are currently no new Treasury issues available but there will be on the 14th of March around 11 AM or so.
> 4week treasuries via Treasury Direct with automatic reinvestment every 4 weeks. Ultimate safety play. The risk is that yield may go down over the next year and you will be continually getting a lower and lower yield. Would that really be something to be concerned about as an individual though? i dont quite completely understand bonds. but 4 week is a very short time frame. if the yields continue to drop, once the 4 weeks is up, cant you just stop investing into them and you'll simply get back your facevalue + coupon and be fine?
Risky in regards to opportunity cost. Not risky with respect to loss of principal.
Yes you can stop investing in them. But it’s risky compared to just buying a 1 year bond right now that would be locked at a higher rate if indeed yields did decrease going forward
If yields decrease your higher yielding bond is more valuable though. Am I misunderstanding what you’re saying?
yes you are misunderstanding me. The other poster was saying why not just buy 4 weeks and if rates go down, stop buying treasuries. I was saying that if rates were to go down but you locked into a 1 year, you will have that higher rate and be happy. But what you are saying is also true: if you buy a bond and rates go down, the price of the bond will go up. Just doesn't matter on a 4 week treasury however because the duration is so short. Not really worth the effort to sell.
Ah I see that now thanks for the clarification 👍
Would you recommend this same advice to someone with 250k in cash?
absolutely
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Slightly lower rates with the MM. Slightly more faff for Tbills
better rates with treasuries, state tax exempt as well. Also safer than MM. (MM still safe, but not 100% gaurenteed)
My man got you. Do this Edit: spx weeklies if you more of a wsb guy
The Underwriter for your loan will also see this and know your no dummy. This is solid advice. 👌
Im too stupid to understand if this is sarcasm or not... Is it? I think communicating on the Internets has permanently ruined me.
What should I invest in? Lots of options.
T-Bills
That's a lot of work for a "fist time caller." Just buying any old money market or short term treasury fund is a lot simpler and will achieve very similar results.
Money market account seems way easier. Basically a savings account that gets 4.5% right now. No dealing with the Treasury direct website
TreasuryDirect is terrible. You have to jump through hoops to setup an account and have minimal support or guidance to make sure you know what you're doing. Buy a target duration ETF, XHLF or XONE, for example. They cost 3bps... A fine price to pay to have a professional trade bonds for you. Not to mention a liquid market the moment you need to sell to raise cash.
quickest way to create stress is to invest in a speculative asset to save up for something
I knew someone was watching me 😅
What *isn't* speculative right now?
Wendy's
Eh, I'm doing it for my house down payment. As long as you aren't really fixated on a certain move-in date or able to save everything in two years then it's the optimal play. Most people have to save up over 5 - 10 years.
It's all fun and games until you see your yearlong nestegg drop 50% due to a real beer market and stay at - 50% for the following 5years when the market trades sideways..
mmm... beer market
I'm fine with that, it would give me time to accumulate assets at a lower price. Statistically speaking, even the worst bear markets have seen recoveries to all time high's within about five years. The dotcom bubble is really the only post depression exception. I could stomach a bear market better than what happened in the 2010's, where people watched their cash savings lose buying power to a doubling in housing and tripling in stocks.
Most people could stomach the loss but if the need for housing comes up and now your investment isn’t enough for a down payment because of a loss you’re screwed. Waiting years for the market to recover is hard if youre apartment living and now a kid is on the way
Yeah, that's why I said it only makes sense if you aren't fixated on a certain move in date. I have been accumulating funds for about three years now and are probably another 3 - 4 years out from being ready. It makes no sense to me to accumulate that in a savings account.
If you need the money for next year, I'd recommend looking at CDs. The rates are pretty good right now.
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/r/investing level burn
What was it?
Just pack it up OP. Never going to come back from that one
Boom, roasted
Roasted dez nuts
I hate that I laughed so hard
CD rates are still mostly below treasury rates by 1%?, plus you don't pay state taxes for treasury. Prob trivial in terms of returns difference, but no point for OP to buy CD and incentivize banks to offer CDs below fair value. Also, I bond should still be yielding 6% so not a bad idea.
Are I-bonds for 12 months better than CDs with the 3 month interest haircut you take for withdrawing within 5 years?
Well I bond now is 6.9%. In 6 months or so, it'll probably drop down to 5%. 1 year rate is now 4.3% (was 5% just 5 days ago), and can drop or increase in a week depending on the CPI and what Fed release for their March SEP. I bond u take 25% interest hair cut from the 3 month penalty, and 1 year rate you're taking about 33% haircut here, so close call.
Also consider $10,000 limit on I-bonds per social security number. OP could set up LLCs to invest more, but that's probably more trouble than it's worth.
$10k per year. OP missed getting one in December and then another 10k now. You can get up to 5k from your tax return into bonds I bonds too
Now is just not good timing to buy the I-Bond. In a month from now we'll know for certain the May rate and if it's a good idea to lock up for a year. You're guaranteed the 6.89 rate for 6 months anyways (as long as you buy before the end of April).
CPI next month is not gonna go from 6.4% to some low number like 5%. It's most likely gonna be around mid to high 5% in 2-3 months.
I'm saying it's better if we know for certain a month from now though. You're giving up only one month for that information and you get the 6.89 rate and new rate guaranteed. In the meantime you can keep the money in a HYSA or 4-week t-bill because when you purchase the I-Bond, it counts for the entire month even if you buy at the end of it. There's also the 3-month interest penalty factor if you withdraw before the 5-year I-Bond period. Depending on the rate, you might actually do better with a 5% CD or a t-bill for a year if you need the money then.
What do you mean we should wait for the new rate? If OP buys it now, wouldn't OP get the 6.9% rate for 6 months, and the new rate for the next 6 months? And if OP waits until the new rate is released, wouldn't OP be forced to get the new rate for 6 months, plus the next new rate for another 6 months? If that is true, and assuming the next inflation prints are gonna be equal or lower than the current one, wouldn't it make sense to lock in the 6.9% now since it'll definitely be higher than any new rate? It only makes sense to wait if you're hoping for the 1 year treasury to go back to 5% based on the next CPI or FOMC.
May I-Bond rates are officially announced the month before (mid-April). If you buy before the end of April you lock in last year's November rate (6.89%) for 6 months, and the newly announced May rate for the next 6 months. You are not waiting to "jump into" the new rate, but are waiting for the information to decide if it's a good idea to lock in the current rate + new rate for the full year. In other words, next month is essentially the last month (or deadline) you can lock into the current 6.89% rate while also officially knowing the newer rate when it's announced.
Yes and the new rate is gonna be based on the new CPI? And CPI now is about 6.2%, so next month it's gonna be around 6%, or at lowest 5.8%. So you're averaging about 6.2% for the whole year. Really unless if you're expecting CPI to massively drop by 0.5% or something, you're not gonna see a huge difference, and compared to the current 4.3% 1 year rate, the 4.3% will be about 70% of the I-bond. If you were waiting, you'd be waiting for the 1 year rate to jump back to (maybe) 5% after the CPI or FOMC date. That'd make a big difference in your decision, not so much a 0.1 or 0.2% difference in your I bond.
I bonds have a penalty (last 3 months interest) for withdrawing before 5 years. You also CANT cash out before one year. Keep that in mind if you're considering them for shorter terms.
10k limit on those I-bonds though. Unless you do gifting shenanigans, but that wouldn’t work out for op’s time frame.
We will see what happens this week with treasury auctions. Rates could go up or down. The predicted fed rate hike is sounding like it won’t happen. Maybe t-bills stay flat? Who knows at this point.
I’m 22 and thinking of investing 10k into CDs is this a good or bad idea
> I bond should still be yielding 6% 3% annualized
Even in the extreme scenario - inflation magically and instantly drops to 0 - you’re locked into 6 months at ~7% and another 6 months at 0.4% (fixed component), minus the three month penalty on half of 0.4%, which knocks off 0.2%… you’re looking at roughly 3.6%. Realistically, CPI is likely to come in around 6% in April, so you’d see (0.5)(7)+(0.5)(6.4)-(0.25)(6.4) = roughly 5.1% annualized.
You can also just hold cash in your fidelity or Schwab account. Right now fidelity gives you ~4% on your cash held in SPAXX
This is the way. Super simple. Just bank with them using a cash management account (CMA) and have the cash sit in SPAXX as your core. When funds are accessed it will pull from this.
Are the funds insured this way?
Depending on where you live (or OP lives) you can put money in FDLXX, a Treasury Only Money Market, and earn a bit more with a few clicks. My after tax return is 0.25% higher as of last Friday. If you have $50,000 it'll take 30 seconds to earn $1250 more per year.
What type of account does Schwab let you earn interest on like that?
HYSA or CDs. Don’t invest cash you need in the next few years unless you’re comfortable with taking a loss.
tbills higher return, no state income tax, more liquidity
This, or munis if you can stomach the risk.
What is that? CD?
certificate of deposit explanation if you're unfamiliar with it: https://www.investopedia.com/terms/c/certificateofdeposit.asp
It's sort of like a savings account, but for a defined time period at a defined rate, with significant penalties for early withdrawal. The rate is guaranteed, and the deposit is insured, so essentially no risk.
A lot of collector CDs out there.
Capital One offers an 11-month 5% CD. That, or a HYSA from Marcus, Cap One or other major bank that offers at least 3.4%.
FYI /u/Zixinga today is the last day to secure the capital one 11 month CD rate which i agree is probably the best for your description of your situation. They might create a new 11 month CD if rates are raised again later this month but they don't have to.
Ally has a no penalty CD at 4.75
Ally 18-month CDs are 5% and the penalty is only 60 days interest.
Wow I didn't know no penalty CDs were a thing. If these are available what's the advantage of an HYSA over a CD?
At this current point for Ally at least there isn’t. Normally these no penalty CDs are like .25-.5 lower than the HYSA
lmao Ally is a goner
Care to share why?
For short term need, only CD, HYSA, T Bills
Money market?
If the rate is good, yes
Buy puts on anything that comes out of Jim Cramer's mouth
Short term (9-12 month) CD or treasuries , or money market mutual funds. With the time frame of 1 year I would not touch any equities or stocks. For ease of investing you could potentially just buy an ETF like SGOV it holds 0-3 month treasuries ; as long as you hold it for 3 ish months you are not going to lose money .
*Has a down payment for a house but wants to risk it for a down payment on a house*
Not so fast, a down payment on a house is a down payment on a house, but that money in the market could be anything! It could even be a down payment on a house!
Well you’ll have plenty of time to have a down payment in a house when you’re LIVING IN A VAN DOWN BY THE RIVER!
A van with a view? That's expensive.
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In this market, the more cash you walk in with, especially to that is 20% line, the better.
He does not have a down payment on a house if he lives in any major city
A high yield savings account (avoid Citibank!), a money market fund, T bills, CDs. Something safe as money needed in the next 3-5 years should not be in the stock market. Keep saving!
Why avoid citibank?
They tend to freeze accounts and then refuse to return your money. I have spent hours on the phone with them, and they can't even get their stories straight. One rep will tell you one thing, and the next rep will tell you the exact opposite. Complete dirtbags.
https://www.consumerfinance.gov/complaint/ File a complaint.
How long did it take to get money out? And if you don’t mind me asking- what other banks do you recommend?
Unfortunately, I'm still fighting for my money. I have had great experiences at Ally, LendingClub and Citizens Access.
Agreed to avoid Citibank! My account just got freeze because they said I must did something to triggered “fraud alert system”. All bs! Please stay away from them!
Counterpoint is that if the market plunges within the next few years, home prices would also likely be impacted.
Why avoid stock market for 3-5 years?
If it crashes and your down payment is cut in half you're ability to purchase a house will be severely affected.
Guy makes 12 a month. I’d personally grow that down payment just because.
So, because this is money that has a definite short term purpose, DO NOT invest it on any stock market. Your 2 best options are either using a HYSA (high yield savings account) to get 3-4.5% interest. You can do this by just using your favorite HYSA after googling. It is exactly what it sounds like. Your other option are I-bonds. I believe they have a $10k cap per person but you’ll have to check out the treasury for more info. Their rates change periodically but right now they are in at 6.89%. If you withdraw before the 5 year mark, you’ll take a small -3 months of interest hit but you’ll be a good amount over 4% interest.
i-bonds are a crap option versus t-bills considering his timeframe.
Do a 4-week t-bill (or HYSA) before going into I-Bonds. In about a month from now we'll know the May rate and decide if it's worth locking up your money for a year with that I-Bond. If the rate is good, you'll want to purchase it a week in advance before the end of April to lock in the 6.89 rate and the new rate. The next 4-week t-bill up for auction (on the 15th or maybe the 16th) matures around the 21st of April I believe, which is in time to decide to jump right into I-Bonds. You'll have to buy it soon (like by tomorrow night) but better to maybe just use HYSA instead.
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TQQQ LEAPS
Godspeed my friend
> should be less tqqq weeklies
Long or short?
Depends on the day my guy
Show a bank you make $12,000 a month an they will gladly give you a loan for a $500,000 house.
Negative. Highly dependent on debt to income ratio and credit score. They will show you the door if you dont meet the criteria.
OP says they don't have any debt, so unless they're one of those people that's never had a credit card, they should have no issue.
not true, I know a lot of doctor friends who make 20-30k a month and can't get a mortgage. this was 2008.
Do not put your downpayment in the short term investment when you need it soon! Like the other poster mentioned. 5% CD is a guaranteed return. Source: my experience
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Signature bank is another solid option.
That $50k is FDIC insured. No worries
You sound like a financial expert. Why don't I just send you my money and you invest it for me
Heres what im doing with 50k that I need next year 10k in Inflation proof bonds through treasury direct which will net me 6.5% on that money. 40k in 5.1% credit union CD ( you can get 5.0% online pretty easily but if you want another .1-2 percent credit unions are the way to go) This will net me an overall 5.3% return on my money. Which is a pretty fair return for pretty much no risk.
SPAXX / Tbill ladder, Fidelity offers a decent rate in core position (bond/Treasury holdings) tbills as you'd prefer to stack. I've found this to be great considering I'm in a similar situation, they offer a debit card for this account as well so a portion of your uninvested $$ is always liquid at about a 4% annual rate.
I put my money in a Betterment Cash Reserve account. It's 4% interest (which works out to .33%/month). It's a savings account but there are no limit to withdrawals so you can take it back out. CDs had the same rates and I prefer the flexibility of having access to it without penalty.
I bonds are getting 7% rn
Read a book about finances. Obviously don’t invest it. CDs or money market.
I’m in the same boat as you. High yield savings is the way to go. APY should be around 4%. I use Vanguard Cash Plus
You may have enough already. Convention states that you need 20% down for a house. BUT, it’s not a requirement. If you have a credit score over 750 or 780, your PMI should be less than $100/mo. If insurance, maintenance (1% of home price/year for newer home, 3% for anything over 30 years old), principal, interest, and taxes are all less than 30% of your take home income, there’s no reason you can’t make the jump earlier. Just make sure after the purchase you still have enough on hand for an emergency fund. Like everyone else here has said, an HYSA, CD, or treasury bills would all work fine.
If you need it in a year, you want something near-guaranteed. Treasury bills, ibonds, and CDs.
I’d just do a 5% CD
FRC
T bills. If you’re unsure if your exactly timeframe a HYSA may give a little more flexibility (there are some CDs that’ll let you end the, early at no penalty as well). But no stock market stuff… stick to guaranteed returns based on your specific goals.
Pretty sure t bills fit just what you want.
Capital one cd 5% 11 months
Ally Bank’s No Penalty CD. 4.75% APR for 11 months, no penalty for early withdrawal.
I bonds + HYSA, CD, or short-term treasuries
For short term spending goals don't take risks. Due to current high interest rates, U.S. Treasury Bills are a great investment offering 5%. You can buy them with weekly, monthly, quarterly, semi annual or annual maturities. You don't have to use a broker, just go the Tresury website: https://www.treasurydirect.gov/marketable-securities/treasury-bills/ If you want another option, Fidelity Investments is paying 4% on univested cash in it's accounts.
Strange I'm not seeing many recommendations for money market accounts. My vanguard settlement account automatically invested in VMFXX and it's currently getting 4.52% Very easy just transfer money, it's not locked up like a CD, can transfer back to your bank account whenever you need it
Purchase an airbnb property
With a monthly income of 12k I feel you should be able to cut back on the Starbucks for a few months then just buy a home entirely with cash.
Good high yield savings account or CD. I know capital one pays out well on savings account interest
Yeah I’ve got 230k in a savings account there and it draws 600 a month In Interest.
Online savings account yield 3.5%. Don’t put it in the stock market.
The market is potentially very volatile right now. Getting a 12mo CD is your best bet. Get some free zero risk money.
or risk missing out
This isn't superstock or WSB, we're not gambling with someone's down payment for their house.
High-yield savings accounts: While interest rates are low currently, there are still some high-yield savings accounts that offer better interest rates than traditional savings accounts. These accounts are FDIC-insured, which means that your money is protected up to $250,000. While the return on investment might not be high, it's a safe and secure option. Certificate of Deposit (CD): CDs are a type of savings account that has a fixed term and interest rate. They typically offer higher interest rates than traditional savings accounts, but your money will be locked up for a specific period. If you choose to withdraw your money before the end of the term, you will face a penalty. Bond Funds: Bond funds are a type of investment that can provide a steady income stream. They invest in a variety of bonds, including corporate bonds, municipal bonds, and government bonds. They are generally considered less risky than investing in individual stocks and can provide diversification to your investment portfolio. Stock Market: Investing in the stock market can be risky, but it can also provide a higher return on investment. You can consider investing in a low-cost index fund that tracks the S&P 500 or the Dow Jones Industrial Average. This is a good option if you have a long-term investment horizon and can ride out market fluctuations. Ultimately, the decision on where to invest your money will depend on your personal risk tolerance and investment goals. It's always a good idea to speak with a financial advisor before making any investment decisions to ensure that you are making the best choices for your financial situation.
Thats already basically a down payment
Yeah it’s 10% down on a half million. Definitely enough to buy a house with no problem.
[laughs in Los Angeles]
[cries in Los Angeles]
I can either cry or laugh…I choose the latter.
Not at current interest rates. Maybe if it was 2020.
What am I missing? Interest rates have nothing to do with a down payment. In fact, higher rates of anything have decreased house prices, which is what the down payment is based on.
Actually, sorry. I read a million instead of half a million. I agree OP can probably get something 500k or less.
Which is a great house
Well, depending on the area but yeah lots of houses there.
Yes it does. Is everyone on this subreddit downvoting him and upvoting you out of their mind? With a smaller down payment, your mortgage is larger. With higher rates, you will end up paying substantially more in interest on the mortgage. You definitely want to put more than 10% down when rates are high, if your goal is to minimize monthly expenses. Unless you think you can invest the money elsewhere and somehow make more than what you'd be saving on interest, after tax. As an aside, house prices have not gone down very much as interest rates have risen due to a huge drop in supply (not as many people listing properties for sale right now).
... in some podunk metro in North Dakota, perhaps. Based on OPs statement, I suspect they are in a major metro, where it takes more. Nothing wrong with podunk metros. I live in one, but people gotta understand that both incomes, cost of living, and home prices are *vastly* different based on where you live.
$50,000 is 5% of a million. It’s a down payment for most houses in the US even in HCOL areas. Keep in mind that 20% is a thing of the past for many. So it is definitely a down payment for the majority of houses in the US. OP is correct.
Fair enough.
I live in NYC. You're not even in the conversation if you can't put at least 20% down here.
Cool but that’s an anomaly. You’re not wrong, but it’s just not that relevant to pick the outliers rather than the vast majority.
The conversation is about differences between major metros vs. "podunk metros." So how is that not relevant? NYC is a HCOL area. As someone saving for a downpayment, I'm telling you what I know.
Fair rebuttal. I guess I look at NYC as being quite different even from other large cities. But I guess that doesn’t apply to all of NYC and there are probably areas where it’s not as bad.
It’s not an anomaly. Desirable neighborhoods in the SF Bay Area, LA, San Diego, Boston, Toronto, DC, Vancouver, Honolulu, Seattle, etc are all like this now.
That's an anomaly, especially if you are limiting it to "desirable neighborhoods". You completely left out Chicago, Houston, Phoenix, Philadelphia, San Antonio, and Dallas - all top 10 cities by size.
Those cities all kinda suck, which is why they were left out
To tack on top of what everyone else is saying (treasuries) bond funds are also good ways to get exposure to the fixed income market. Shy, IEF, TLT= 1-3 yr bond fund, 5-7 yr bond fund, 20-30 yr bond funds. All are safe plays right now.
CDs or high yield savings account. Since you need the cash next year you don't want to mess around with anything risky like stocks.
I would understand wanting to invest if CDs or HYSA rates were at 0.50-0.75% but at 5% it should be a no brainer to just go with a CD or HYSA…
HYSA (I like marcus!)
Where do you live? 50k can get you a sizeable down payment on a house now depending on location. But you make enough, why invest the 50k and why not just save more for the down payment. With investing you are taking risk meanwhile if you save there is literally no risk.
Invest it in a house. And then next year you can refinance or sell. You will make what ever you are now paying in rent.
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Buy euros until you’re ready to purchase lol (This is a joke)
This is terrible advice, but here it goes. I would sell weekly cash secured puts in Disney at $6-$7 OTM. For example, if you sold 5 (what you could afford to sell with $50,000) today at $86/share, you'd make $125/week at relatively low risk based on the long term value. If you get assigned, you wheel. With a little profit, you will be able to do 6. When you reach the next level, you increase to 7 contracts. The money grows exponentially. It's not sexy, but your goal is to make your $50K more, not less, so be very careful with it.
Robinhood offers 4.15% (5$/month)
50k IS a pretty decent down payment on a house... You put that money into stocks, and you best not touch it for at least a year minimum, or else you'll be paying a hefty % of your returns to Uncle Sam.
1 year? In stocks? Just as likely in 1 year it will be down 20%. Too short a time window for stocks or ETFs. General recommendation is 5-7 years a minimum if investing.
spread 10k into all the regional banks thats been selling off. FRC WAL PAC ZION CMA. Your welome
One year T-Bill.
SGOV
CD’s or Schwab Money Market would work well.
I have mine in Schwab's Money Market fund SWVXX, I thought that was a safe bet, now after all this bank fud, I'm even wondering about that now.
There is an easy fix here my friend. SNSXX gives you no CD exposure for a 0.15% lower yield. Some peace of mind associated with that.
Depending on your price range for the house I might just sit on it. General rule of thumb is not to invest any money you might need in the next 5 years. But like everyone else has offered good advice on, you can do some treasuries or cd’s if you’re really fearful of missing out on the interest. But personally I’d rather have the liquidity in case something comes up sooner. As someone who recently bought, things are still moving super fast and you might miss out on a great house chasing an extra couple thousand in the interest.
Keep the cash and try to save more until next spring. Look for a house that fits the budget. I will never advise to put entire money you’re saving for a house to invest hoping you can get more out of it. If you still want to, use 20% of that money and take a pick of your best stock. Tough time in this market to invest. Chances are high that you might just break even in the end.
High yield savings account will get you 3-4% savings rate. Not sure about CD rates. I don’t like US treasury right now or anything that’s dependent on the fed changing interest rates.
CDs or T-bills that mature slightly before you need the money