$15k to invest but need to keep "liquid" ?????
Family friend was asking about this yesterday. They have 15k they saved. Their CU has a 7year @ 2.80% CD and he was thinking of putting in that. Sadly CD rates have been going down lately. Anyways. I said the CD was a good option and that I didnt know what else would be "liquid". And by that, I mean, readily available to withdraw. I know with a CD, you lose the interest if you withdraw it, but you keep your principal. If you leave it for the 7years, you get it all.
I did mention Gold and Silver, but they werent interested in that and there isnt any guarantees with those either.
Anyways, they arent into the "market" and up on all that stuff. So, I wasnt sure what other options might be available to them.
Have him check his retirement plan some let you pay additional in to buy time that you spent employed other places. Investing in your retirement plan may be the best option in todays market. Other than that a tanker full of gasoline would be handy to own.
T-Bills...choose your maturity/ies (4-52 weeks).
Treasurydirect.gov gives you commissionless trading at the day's auction so you get "big boy" pricing.
Mutual funds or a diverse stock portfolio might be a good option. You can generally sell and withdraw the funds fairly quickly through most online brokers, within 1-2 business days. If you diversify well, you have a better chance of being able to liquidate profitable stocks and not sell anything for a loss if you need the cash.
The down side with this is the potential for loss, so if the need to withdraw all of your money arises at a bad time for your portfolio, you may have no choice but to accept a loss. They need to think about how long term they want to invest, the amount of risk they're willing to accept, and the odds that they will need to liquidate on short notice.
You could always put a portion of it in the 7 year CD and see where rates go. That is actually a pretty decent rate in todays market. My only consideration would be the penalty for withdrawing the money if you need it. Usually it is a 3 month (one full quarter) penalty of accrued interest, but with a 7 year CD it could be greater than that. I dont know where you are at in FL, but Vystar Credit union has a "step up" CD that allows you to increase the rate one time in an 18 month period. May be worth looking into. I know they have stepup up CDs for 18 month durations. Clark Howard recently recomended 5 year CDs instead of a CD ladder and just taking the penalty if needed. Atleast that way you get some interest....
Another option would be 5,000 per year in I bonds. They are crushing CDs right now, but the money is not liquid for a year. They are paying over 4 percent right now and are likely going to pay over 3 percent for the next 6 month cycle. The strategy I am implementing for my emergency fund/fixed investment fund will be:
1. small percentage of cash in a share account
2. CD with 5 year duration paying approximately 2 percent interest
3. I bonds
Obviously I am not all the way there, but tha tis the direction I headed. Its not very sexy but it will give me peace.
Also, I know your friends are not into the market, and I think (from your posts) you are also fairly conservative as well. I am not very trusting of the market either for the last decade, but Vanguard has a great conservative mutual fund called "Wellesley" that is approximately 60 percent fixed and approximately 35 - 40 percent blue chip dividend paying stocks. Your friends could put 3,000 in the fund, which is the minimum, and probably be very safe with some growth and some better returns than just CDs. I am currently getting ready to move my ROTH IRA into this fund, and I am more conservative than most investors I know.
Im in Jax if you ever want to get together and discuss (and eat something of course...er...hotwings or barbq). PM me if interested. I am not a financial expert and dont work in that field....so my advice is worth what you paid for it.
Hope this helps...
I told him about the I bonds, but when I went to research it, the new rate hadnt come out yet.