Short-term investments

BajtheJino said:
Stocks that pay dividends. Doesn't matter what the cost of the stock is. I used to just buy what I thought would continue to rise over time but realized it wasn't really doing that much for me as I do not have the time or desire to watch it everyday, trade and buy as I need to. So I get dividends. With a modest investment I add about that value each year and reinvest it all in the stock.
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There's an ETF for that. ;)

Although, I'll have to look later on today. You may/probably get better dividends from actually owning the stock. In my high dividend yield ETF I think I received $.33/share for the 1st quarter. I'll look later to confirm, and to see what shares are in the ETF and see how those shares did dividend wise compared to the ETF.
 
The ETF will get you the same yield. The difference is that the ETF is diversified, so the highest yielding companies are somewhat diluted by the lower yielding companies. The trade is that you get less volatility, of course.
 
hammerhat said:
This is a dangerous advice. It's not a binary choice between 2.9% loan and 30-ish% fund. Index funds can go down too. They can be a great long term strategy but horrible short term choice. For example rate hikes (which are almost certainly happening this year by the way) can easily send S&P in red for months or even years. Not understanding the risk and volatility is probably what caused greatest financial disasters including crisis of 2008.
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How do you know that?

Rising interest rates are bad for bonds. Equities might do better, they might do worse. No one knows.

@ATN_Pilot's advice is appropriate. S&P is down 30% next year? So what. Could have been down by that last year or the year after next too. In this particular situation, we are talking about money that the investor can afford to risk.
 
ATN_Pilot said:
The ETF will get you the same yield. The difference is that the ETF is diversified, so the highest yielding companies are somewhat diluted by the lower yielding companies. The trade is that you get less volatility, of course.
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The VIG and DVY are good examples, I own both. They still underperformed the SPY though...
 
drunkenbeagle said:
we are talking about money that the investor can afford to risk
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I probably missed part of the conversation but where did the "money that the investor can afford to risk" come from? The original question was about "short term investments" then at some point ATN_Pilot brought up retirement planning. I would not buy SPY for a short term investment, but hey that must be why my name is not on the Forbes list.
 
hammerhat said:
I probably missed part of the conversation but where did the "money that the investor can afford to risk" come from? The original question was about "short term investments" then at some point ATN_Pilot brought up retirement planning. I would not buy SPY for a short term investment, but hey that must be why my name is not on the Forbes list.
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I'm not advocating putting your short-term investments in SPY. I am advocating not putting it in cash or a savings account, though. Keep a couple months' worth of expenses in the checking account, a few more months' worth of expenses in treasury ETFs, and everything else in long-term equity investments.
 
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ATN_Pilot said:
I'm not advocating putting your short-term investments in SPY. I am advocating not putting it in cash or a savings account, though. Keep a couple months' worth of expenses in the checking account, a few more months' worth of expenses in treasury ETFs, and everything else in long-term equity investments.
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Well i must have misunderstood when you said "Put all of your extra cash there and put it all into an ETF (exchange traded fund) that tracks the S&P 500 or the broad market." But if by "all of your extra cash" you meant "all your cash except couple months here and few more months there" then I agree.

Also FWIW I generally agree with your investment strategy with one small exception. I'd still pay off the car loan at 2.9%. You'd be lucky to get 2.5% off Treasury ETFs, that's before fees and commissions. And that's not a guaranteed return whereas -2.9% on the car loan is in fact guaranteed.
 
hammerhat said:
Also FWIW I generally agree with your investment strategy with one small exception. I'd still pay off the car loan at 2.9%. You'd be lucky to get 2.5% off Treasury ETFs, that's before fees and commissions. And that's not a guaranteed return whereas -2.9% on the car loan is in fact guaranteed.
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Why are you comparing the car loan to your short term holdings instead of your long term investments? Faulty analysis. You should be comparing it to your long term investments, and even a blind chimp throwing darts at the WSJ can get a 7% return long term. Paying off the car loan is absolutely crazy.
 
Because that's what the OP asked about. He didnt ask what to do with his maxed out 401k, that would be a different story.
 
hammerhat said:
Because that's what the OP asked about. He didnt ask what to do with his maxed out 401k, that would be a different story.
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No, he asked what to do with his extra money so that it's working for him instead of just sitting there. And the answer is to invest it, not pay off a car loan that is essentially free money at today's interest rates.
 
ATN_Pilot said:
No, he asked what to do with his extra money so that it's working for him instead of just sitting there. And the answer is to invest it, not pay off a car loan that is essentially free money at today's interest rates.
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It is also fair to say that "short term investment" is a bad way to characterize this type of savings. We aren't talking about money that will be spent in the next 30-120 days, where a money market or other cash instrument is appropriate.

We are talking about money that is to be invested seeking the best return, and the OP would like to keep relatively liquid.

An ETF is totally appropriate in a Roth IRA or taxable brokerage account. Either way, it can be taken out anytime penalty free in less than 72 hours.

While there is risk, the return makes up for it. I would put it this way - having money in a broad market equity ETF is like getting to play the house odds at a casino craps table. You might hit a few 7's one the come (especially if Todd is shooting), but over time it is totally the side to play on. It is also the one case in life where doubling down after a paper loss will always be the smart play.
 
I'm not an expert(probably the second dumbest on the the boards) and someone will probably correct/critique this post. Which is fine by me!

I've been throwing 500 a month into the SPYV(Yes, I know SPY is better for dividend yield. UGH! Whatever... :) ) for 6 years now, 3000 a month the last 2 years. I don't know enough nor have worked out a system to throw it all into individual stocks.

Between investing that and dividend re-investing, I'm dollar cost averaged out at about 91. It's trading at 103 as of today. I put another 1500 in this afternoon. The math and past performance says it'll all work out. When it goes down, that's even more shares. When it goes back up, $$$$. Love love LOVE indexes that track the market when your in the learning phase. It will still make you money while you figure out how to properly make more than the market with individual stocks.

Like others have said, it's really never a bad time to get into an S&P 500 index. You can always dollar cost average down while it dips and dividend re-investment is still growth(I would almost argue, most of your growth, just taking a glance at how it performed for me). In my mind... :)

That being said, I threw 20k at a biofuel company a year ago and it made me about 40k a year later, yesterday actually. Pulled out of it this morning, "HI-OOOH". I didn't realize at the time that their management was so awful, so I'm out. Maybe it'd make me a fortune much later, given their product, but that is a highly speculative and risky investment that I'm not comfortable with having such a large % of my money in. Might buy back in with a more appropriate amount when it surely dips next week. I'm confident in their product, just not the company. You get lucky betting on red sometimes. Calculated Investing is better and the "idiots ETF" does work OK IMO.

VWLEX seems to have done pretty well for people I know that are into that. They aren't accepting new investors as of at least today though.

Oh, and debt is a tool! I learned the hard way
 
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ATN_Pilot said:
I'm not advocating putting your short-term investments in SPY. I am advocating not putting it in cash or a savings account, though. Keep a couple months' worth of expenses in the checking account, a few more months' worth of expenses in treasury ETFs, and everything else in long-term equity investments.
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How do you pick a treasury ETF? I did a quick google search and hit http://etfdb.com/type/bond/Treasuries/

That type of investment looks like a dartboard! I have heard, on this site, that cash is king for 6 months worth of expenses in a savings account.
 
Jafari RastaMan said:
How do you pick a treasury ETF?
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Your brokerage probably has one that is commission-free. Go for that. You want a regular treasury ETF, not anything special like I-Bonds or a blend with munis or anything like that. Just old fashioned treasury bills.

I have heard, on this site, that cash is king for 6 months worth of expenses in a savings account.
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The people you've heard this from will die with a lot less money than the people who don't say such nonsense.
 
ATN_Pilot said:
Your brokerage probably has one that is commission-free. Go for that. You want a regular treasury ETF, not anything special like I-Bonds or a blend with munis or anything like that. Just old fashioned treasury bills.



The people you've heard this from will die with a lot less money than the people who don't say such nonsense.
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I use Fidelity. Is something like FZFXX (https://fundresearch.fidelity.com/mutual-funds/summary/316341304?type=o-NavBar) what you are talking about? At .01%, I think it is about as good as my HSBC interest rate...
 
Jafari RastaMan said:
I use Fidelity. Is something like FZFXX (https://fundresearch.fidelity.com/mutual-funds/summary/316341304?type=o-NavBar) what you are talking about? At .01%, I think it is about as good as my HSBC interest rate...
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No, that's a money market fund. I'm talking short-term government treasury bonds. Something more like this: https://fundresearch.fidelity.com/mutual-funds/summary/315911859

The usual disclaimer about this not being financial advice, yada, yada, yada...
 
ATN_Pilot said:
No, that's a money market fund. I'm talking short-term government treasury bonds. Something more like this: https://fundresearch.fidelity.com/mutual-funds/summary/315911859

The usual disclaimer about this not being financial advice, yada, yada, yada...
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Thank you.

The long term history looks good. Not sure what rising interest rates will do, but they haven't seemed devastating in the past. Dropped a stack of high society in there today. My order for USL at $22.50 never quite made it (went down to $22.94). Guess I was too conservative on that one.
 
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