$300,000: looking for 2 year long safe investment

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rcwreck
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$300,000: looking for 2 year long safe investment

Post by rcwreck »

Simple question from a newbie: my elderly father-in-law in Oregon has approximately $300,000 to invest. It is currently sitting in a savings account in a bank earning negligible interest. He does not need this money anytime soon, i.e. not for years. He is extremely risk adverse.

What is his best investment option where his odds of losing money is slim? Looking at a two year investment horizon but flexible. Something very safe.
Last edited by rcwreck on Wed Jun 29, 2022 3:49 pm, edited 1 time in total.
toddthebod
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Re: $300,000: looking for 2 year long safe investment

Post by toddthebod »

rcwreck wrote: Wed Jun 29, 2022 3:13 pm Simple question from a newbie: my elderly father-in-law has approximately $300,000 to invest. It is currently sitting in a savings account in a bank earning negligible interest. He does not need this money anytime soon, i.e. not for years. He is extremely risk adverse.

What is his best investment option where his odds of losing money is slim? Looking at a two year investment horizon but flexible. Something very safe.
Which is it, he doesn't need this money for years, or a two year horizon?

Regardless, the safest place that will at least earn a bit of interest is probably short term treasuries. If you have a specific time in mind, I'd go with buying Treasuries that mature on that date. Otherwise set up a ladder. All the major brokerages make this easy, and unless the US government defaults, you will never lose principal.
exodusNH
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Re: $300,000: looking for 2 year long safe investment

Post by exodusNH »

rcwreck wrote: Wed Jun 29, 2022 3:13 pm Simple question from a newbie: my elderly father-in-law has approximately $300,000 to invest. It is currently sitting in a savings account in a bank earning negligible interest. He does not need this money anytime soon, i.e. not for years. He is extremely risk adverse.

What is his best investment option where his odds of losing money is slim? Looking at a two year investment horizon but flexible. Something very safe.
Short term Treasuries - no limit. If it defaults, we're all screwed
MYGA - state guaranty limits would apply. Might need 2-3
Brokered CD - FDIC limits would apply. Would need two CDs from different banks
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JoeRetire
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Re: $300,000: looking for 2 year long safe investment

Post by JoeRetire »

rcwreck wrote: Wed Jun 29, 2022 3:13 pm What is his best investment option where his odds of losing money is slim? Looking at a two year investment horizon but flexible. Something very safe.
Don't invest.
Consider an online savings bank or CDs.
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acejacksingh
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Re: $300,000: looking for 2 year long safe investment

Post by acejacksingh »

T-Bills or I-bonds could work based on the information you provided.
mr_brightside
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Re: $300,000: looking for 2 year long safe investment

Post by mr_brightside »

just put it in a High Yield Savings account. most are at 1.0% APR now or slightly higher. FDIC insured. No loss of principal.

He'd get at least $250 / month in interest. And rates are likely to increase in the near future...

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Topic Author
rcwreck
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Re: $300,000: looking for 2 year long safe investment

Post by rcwreck »

These are great suggestions, thank-you everybody! I will pass this information along to him and go from there.
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Kevin M
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Re: $300,000: looking for 2 year long safe investment

Post by Kevin M »

Take a quick look here: https://fixedincome.fidelity.com/ftgw/fi/FILanding. It shows 2-year Treasury at 3.04% and 2-year CD at 3.30%.

The Treasury is exempt from state tax, so the taxable-equivalent yield (TEY) might be close the the CD. Treasuries are much more liquid, so better if there is any chance of selling before maturity.

For maturity of one month or less, stick with a money market fund. Best yields at Vanguard and Fidelity were 1.38% as of yesterday, and the Vanguard Federal Money market at 1.38% probably is partially exempt from state tax, so TEY could be even higher.

HYSA definitely not competitive at 1%.

FDIC insurance covers up to $1.25M if you have five beneficiaries, or up to $500K with two. Or, a joint account with two people is covered up to $500K.

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Kevin M
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Re: $300,000: looking for 2 year long safe investment

Post by Kevin M »

acejacksingh wrote: Wed Jun 29, 2022 3:48 pm T-Bills or I-bonds could work based on the information you provided.
I bonds could not work due to the $10K annual limit, before tricks, and maybe $70K with multiple entity accounts and gifts. This is $300K we're talking about. I bonds could help for some of it.

T-bills would not work for 2-year investment horizon, because max term is 52 weeks. A 2-year T-note would work.
If I make a calculation error, #Cruncher probably will let me know.
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AerialWombat
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Re: $300,000: looking for 2 year long safe investment

Post by AerialWombat »

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IowaFarmBoy
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Re: $300,000: looking for 2 year long safe investment

Post by IowaFarmBoy »

If he is uncertain about when he might need it (i.e., the 2 year time frame is an approximation), he might consider doing a 3 year ladder of treasuries and/or brokered cds. That would be very safe, give a decent return and allow access to some of his money fairly continuously.
SantaClaraSurfer
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Re: $300,000: looking for 2 year long safe investment

Post by SantaClaraSurfer »

IowaFarmBoy wrote: Wed Jun 29, 2022 4:42 pm If he is uncertain about when he might need it (i.e., the 2 year time frame is an approximation), he might consider doing a 3 year ladder of treasuries and/or brokered cds. That would be very safe, give a decent return and allow access to some of his money fairly continuously.
I second this. We have a One Year ladder for some of our college funds using the Ladder tool at Schwab. You can use CDs (for a slightly lower rate) or Treasury Bonds and T-Bills (which have been my preference.)

It's simple, and works quite well. The rates are competitive from what I can see.
mega317
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Re: $300,000: looking for 2 year long safe investment

Post by mega317 »

"Safe" is not a thing. You have to pick which risks to which you'd like exposure. If the value of the money pot needs to be no less than nominal $300,000.00 in 730 days, that is a different answer from one who wants to somewhat maintain purchasing power in 730 days, or one who has a fuzzier timeline and wants to try to earn a little more than bank interest.
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Kevin M
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Re: $300,000: looking for 2 year long safe investment

Post by Kevin M »

mega317 wrote: Wed Jun 29, 2022 5:25 pm "Safe" is not a thing. You have to pick which risks to which you'd like exposure. If the value of the money pot needs to be no less than nominal $300,000.00 in 730 days, that is a different answer from one who wants to somewhat maintain purchasing power in 730 days, or one who has a fuzzier timeline and wants to try to earn a little more than bank interest.
Good point. I am going 50/50 nominal/TIPS for maturities from 1-year to 2-year, nominals only at less than 1 year, and TIPS only for maturities beyond two years and less than five years. I include box spreads in my nominal allocation.
If I make a calculation error, #Cruncher probably will let me know.
WhiteMaxima
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Re: $300,000: looking for 2 year long safe investment

Post by WhiteMaxima »

Pay down debt is the safest investment now if the debt interest is higher than 3%.
protagonist
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Re: $300,000: looking for 2 year long safe investment

Post by protagonist »

$10K in I-bonds. If he takes the money out between 1-5 years from now he will lose 3 months interest. It will grow tax-free until withdrawal.
If he doesn't need the money until sometime in 2025 or later he can buy TIPS with the rest and be pretty much guaranteed to keep up with inflation at today's TIPS yields. If he needs it in 2024 he would lose about a half percent to inflation.
He would, however, have to pay federal income taxes on the gains if held in a taxable account.
That is about as safe an investment as is possible right now. Both investments are state tax exempt.
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