Spring, TX · Member since 2016 · 243 posts · 203 votes
Looking for some other ideas about where to put money to place short term ($1,000 for one year, the other $1,000 for 2 yrs), basically this is money on top of my emergency fund that I'm saving for big ticket costs for either car/house. So far what I've considered are the following:
Stock Market, but even with an ETF or index fund I could withdraw at a 10-20% loss
Considered bonds, but risk/reward isn't really worth it since they could as well drop 10% in the short term
CD for 12 months @ 1.5%
Currently, I have my Emergency fund + the extra money getting 1% interest. Currently, only about $2,000 to potentially move out, but I add about $250/mo to the account. I'm wondering if there are any other areas that others are using that I haven't considered, or a place to get better rates?
I think you are definitely overthinking this, if we are talking about maximizing the ROI on $2,000 in 2 years? If you found the great XYZ strategy and made 30% ROI, you would have $600 more in two years. That same strategy probably comes with the risk of losing 30% just as easy and you would have $600 less. Small beans (within the range of $1200) in most scenarios of buying a house or car as you stated in the OP.
@Ernest Chamblee I'm planning to keep $2k in a reserves account getting 1% interest. With my $250/mo (disposable), I will add a new sub account on my investment account specifically for this. Invest the $250/mo into ETF/Index Fund(s). Also, once I need to buy a new used vehicle, I can use these funds, plus the sale of my current car to pay cash. Seems like some people are more aggressive and others are more risk adverse. Just gotta do what I'm comfortable with otherwise I'll end up stressing over it haha.
Have you considered creating a brand new checking account from some banks? Some banks have this type of promotion where if you deposit a few thousands and let it sits for three month you get $150 or $250 cash bonus. And after three month you can move that money. If you put $2000 and get $250 in three month it's a good ROI in my opinion. And it's very safe!
I think it's great to have emergency funds for more than six months. I have more than three year's spending saved. Ppl says it's too much but I like to know that i will always be fine even if stock market crushes now and last three years. Haha
I never really considered doing that for the bonus, although it definitely sounds better than a few bucks a month. Looks like there's at least a few banks that I'd be able to get the bonus.
I've been using the Stash app on my iphone. $1/month to buy ETFs. Its a slick interface where you can invest based on your beliefs; ie "Clean & Green", or "Robots Rising", they even have a index for REITs.
@Bill Regan Is it $1/mo + fees for the ETF? Either way that's pretty cheap, although I don't own a smart phone so I can't download the app ($15/mo for my plan haha). There is a website similar to this called Motif, they have the same type of deal as what you described. I've never really gotten into those, normally I just go with the traditional ETFs (REIT included).
I've thought about this myself, but really for an "in between deals" stage. Ideally I'd be investing in real estate, but with down payments, the reality is there is a considerable amount of time to build up the next down payment and you want your capital to be doing something. Higher velocity of money means you're getting richer generally.
We did the "open a new bank account thing". Seemed like a lot of hassle to us, needed to have $15k in the bank for 6 months straight and 6 months of a direct deposit going into it plus X number of transactions coming out. All for $250 and it didn't seem worth it. Also, make sure YOU are receiving the offer. My wife's co-worker received another bank's Direct Mail piece, told my wife, she went to the bank and the teller said, "sure we can do that for you" but come to find out 2 weeks later, we weren't qualified for it and couldn't claim it.
Me personally, if this is really just play money, I'd explore Peer-to-Peer lending. Higher yields there and I've read it's fairly safe.
I think @Chingju Hu's idea is solid. The key is to not trust a teller and to actually speak with a banker and get things in writing. There are forums online that we can't mention here where you can find sweet deals on how to park temporary cash for big bonuses.
P2P lending is *not* a good place to park money as it lacks liquidity and it's actually scammy. Like Prosper has been hit with tons of lawsuits. I parked a couple thousand play money and tested it out over 3 years in the past and my returns were OK but not worth the time it took to perform additional screening as non-secured loans have a higher default rate than they advertise. There's a huge delta on what they advertise to borrowers versus lenders, and even those numbers are false.
I guess the recommendation would be
1) No work - online only high yield savings account
2) Willing to do a tiny bit of work - park it in bank accounts with sick sign on bonuses
I mean, either put it in a safe or put it all in a start up company. Go be an angel investor to some geeky high school kid who says he is going to create the next facebook :). Pretty much the only way your $1,000 will ever grow to anything significant over time.
UNLESS, you go back 20 years and buy Amazon's IPO :)
No seriously, short of selling crack there really isnt much you can do with $2000 that is going to earn you an appreciable amount of money in that short of a time period. It would take almost 7 years to double that money in a mediocre performing account earning between 5-10%. Set the money aside, cut your living expenses then save save save save. In due time you will have enough cash. Patience grasshopper.
@Chris Armstrong I'm not looking for a way to get rich quick. All I did was make a post asking for ideas to get a better return than 1% and I already have money elsewhere to purchase a property. In order to see what others are doing, I posted this and got some good ideas...I don't think you read the initial post and just said something to say it.
@Ray Lai Completely agree with you about P2P and that the bank idea is
Personally I would put it in a money market. The returns aren't great but they are better than a savings account and you would have relatively easy access to it. Just my .2