Quote:
Originally Posted by cabo35
If you pulled 250k out of the stock market....where would you put it?
I know its tempting, but, please play nice with the question.
Consider:
Preservation of wealth in the short and long haul.
Safety of investments?
Return on investments?
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Cabo,
First of all, I really try hard never to tell anybody what I think they should do with money. But this is just a hypothetical you are putting out here so I will hypothetical right back atcha.
It sounds like you are asking about the formula for what I call "the cost of sleep."
There are two key words in your question:
preservation and
safety. If that is truly all that is important, and ROI, not so much, I would use short term CD's in banks insured by the FDIC.
I would split it up maybe, even though I think the FDIC is insuring up to $250,000 now. But I think that might be slated to revert back to $100,000 at the end of the year. I have not looked at the FDIC website for a while. But it explains all that and has something where amounts can be plugged in to check what would be insured. It is not just a flat amount. It has to do with how the accounts are named.
CD rates are so low right now, it is painful to even ask about them. The reason I said short-term CD's is that I do not see how they can get a whole lot worse and I have wondered if inflation will cause rates to go up over the next year.
Those double-digit CD's I held in the early 80's were freakish I know. I knew it was not right even then. Those double-digit CD's paid Boomette's tuition. I do not expect rates even close to those, nor should they be.
But how inflation cannot set in and affect rates, I do not know. But they will find a way to pay us nothing is my guess. Even so, short term CD's are what I would use. Of course, rates could also get lower. So who knows how CD rates will be down the road.
(I will try very hard now not to start in here on a rant about the Fed over the past several years.)
So back to those CD's. Painful though those rates may be, FDIC insured CD's pass my cost of sleep test. I am so unsophisticated as an investor that I cannot even imagine buying a CD on the internet. I like small, bricks and mortar banks that shelve their mortgages and do things the old-fashioned way. And where when I go there, they say, "BOOMER!" You know, like on "Cheers" when they say, "NORM!"
I never invest in anything that is not liquid. Let me clarify that. By liquid, I mean CD's and stocks that, of course, I could take a hit on for cashing in at the wrong time, but that would be my decision. I have to have those decisions all in my own hands. I refuse to tie up in an annuity. I do not understand annuities. I do not try to understand annuities. I cannot turn it over. But that's just how I am.
And since you said "out of the market" I will not go into dividend payers like utilities. Who knows anyway about those. Somebody might decide they are not green enough or something like that. But we just bought more utilities.
Cabo, I know my answer was 101 and you already know that stuff. I wish I had a really good answer. And I know the thing about how low rates lose against inflation. But the principal remains. And sometimes all I can do is try to hang onto the principal, even though inflation eats away at it. But also, I just cannot let go of those dividend payers. Even though they take a hit in price, the check is still in the mail. For now.
It was not supposed to be like this.
And that was all just hypothetical. I know nothing.
Boomer