I’m having a hard time answering what to do with money that you may have to spend within the next five years. Everything past that is going into low cost index funds, but what about within the five year mark. Any help would be greatly appreciated!
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I am curious to hear what Jeremy has to say, but I have always seen arguments pushing for keeping it in something really conservative, risk-wise, like a high interest savings account
Hi Max! That is a really tough time period to consider. It is long enough to want to save but short enough to not want a lot of risk. Depending on the amount of money and if you are serious about saving it for at least 2+ years, you could look into Bond Funds. Just like S&P500 Index funds, there are also bond index funds made of a conglomeration of various company and governmental bonds. This will offer you a low risk way to save your money and yet also provide you with some modest dividends and ROI. An example of a bond fund that I know of is ticker PONAX.
(Edit: Side Note: PONAX does have higher fees associated that what we generally aim for, but on a small time frame, it won’t eat into your growth like it would over a period of 15 - 25 years)
As Tyler mentioned, an HYSA is also a safe way to go! So, depending on your real time frame, amount of money your planning to invest, and risk tolerance (between none to low to moderate): A collection of bonds within a fund or an HYSA could be the way to go.
Yeah, this question always hurts a bit because it feels like you should to put your money to work. But when you break down the math, there just isn’t much upside potential for growth over such a small time frame, and plenty of risk of volatility. So I’d just throw it in a savings account.
Here’s a post that breaks it down: