I have a fairly large sum of money from the sale of our home. I will be rolling it into a new mortgage, but not until March. I'm wondering what the best option is for that money for that time period.
Sun Aug 23, 2015 2:13 pm
blixet Preferred Member
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You can probably get around 1% on a money market account online. If it is enough to worry about the FDIC limit, you can break it up into a couple of accounts at different institutions. The main thing is safety of principal rather than return over the short period.
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Sun Aug 23, 2015 4:14 pm
oldguy Senior Member
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quote: I have a fairly large sum of money from the sale of our home. I will be rolling it into a new mortgage, but not until March.
I normally convert my short-term needs to longterm by investing in longterm vehicles and then managing my shortterm needs with loans.
EG, in your case I would invest the money into the SP500 Index Fund - and then get a near-100% 30 year, fixed rate loan on the new house. In effect, you would be getting the 11%/yr average return - and paying 4% or 4.5% for the use of the money.
Sun Aug 23, 2015 8:00 pm
christcorp Preferred Member
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The original poster doesn't give enough info about themselves, age, income, other investments, etc. I say this, because old guy is legendary for giving excellent advice. But an S&P 500 isn't necessarily the best investment for all people. Especially for a large some of money. Don't get me wrong, I have some of my money in an S&P500 fund. But you can't look at the last 50 years, the average return, and determine any future from that. Not any longer. The market has changed too much. And most people investing, start late, and don't have 50 years to work with.
For instance, year to date, the s&p500 is in the toilet. Yet, over the past 3-5 years has done well. But over the last 10 years has been just slightly over 7%. Over the last 15 years, just over 4 %. Over 20 years, over 9%. So while I definitely believe in investing in the s&p500 funds, a lot depends on how much, percentage of investment, time to work with, and types of other investments you have.
As for short term I investments, there's not a lot you can do with money for less than a year; risk free. But old guy does bring to the table excellent advice about investing it, above the interest you will pay for a mortgage, and finance the home at 100%. If you can get a 4-5% mortgage, then you can easily get investments that can average above that. Even include an s&p500 fund in the investment. I'm simply saying, I wouldn't put it all in a 500 fund. The 10% return is over a period of time that you may or may not be able to profit from.
But I am a firm believer, that when buying a house, you either finance it all, or you finance NONE of it and invest what would have been your payments. Some will disagree with that, but it's done me well over the last 40 years. If you have money to put down on a house,, looking for a lower monthly payment because you need that, then the house is probably more than you can afford. You don't gain much rolling equity from one home into another. On the other hand, if you can roll over athe equity, add some from savings, and have no mortgage, then you can invest each month what would have been your mortgage payment.
Everyone has their opinions, and that's mine. But as far as specifically answering your question about safely investing a large sum of money for about 6 months, there's nothing that will give you any worthwhile return while being safe and liquid after 6 months. I'd say sit on the money for now. Then, research what old guy mentioned as far as not using the equity on the new home, but rather investing it for an average return that is higher than the interest rate of a 4-5% 30 year mortgage. Of course, if you don't think you can handle the monthly payments of the new house without a substantial down payment, then you really need to think if the house is too expensive, or if you have the means to buy the new house with no mortgage.
Sun Aug 23, 2015 9:02 pm
ewright New Poster
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Thanks, all. I appreciate the options.
Mon Aug 24, 2015 7:02 pm
Jan New Member
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I would not recommend putting money in the markets on a short term basis they are currently way too volatile. Most of the traditional short term investments available currently pay rates so low that when you factor in the inflation rate and fees you will find you are losing money. Personally I would put my money into gold or silver they have traditionally been a store of value and have been the only true money since biblical times. The U.S. dollar is likely going to lose it's status as a reserve currency as a number of countries around the world have already made agreements to bypass the the U.S. dollar. In troubled times gold and silver have always performed well.