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  • Where to invest a large sum for a short period?

    If you had $250,000 that you wanted to invest, but planned on spending in 3 years, where would you invest it?

  • #2
    Id probably ladder some CDs.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

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    • #3
      I have $300k that I plan to use in the next 1-3 years sitting in a Fidelity money market fund FZDXX earning 2.37%.

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      • #4
        CDs are your best option. Get much more exotic than that, you risk not having as much in 3 years as you have right now.
        How can you have any pudding if you don't eat your meat?

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        • #5
          Agreed with the others... 3 years is just too short to really invest in anything. Keep it safe in a savings account, CDs, money market, or similar.
          "Praestantia per minutus" ... "Acta non verba"

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          • #6
            I was thinking CDs. Thanks for confirming.

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            • #7
              I'd go Money Market Account just in case something happens where you need the money in less than 3 years.
              Then you won't have to worry about any penalties associated with CD's.
              Keep your money as liquid as you can.
              Brian

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              • #8
                Originally posted by bjl584 View Post
                I'd go Money Market Account just in case something happens where you need the money in less than 3 years.
                Then you won't have to worry about any penalties associated with CD's.
                Keep your money as liquid as you can.
                Many banks have "no penalty" CDs. They pay a little more than money markets but less than regular CDs.

                Or just buy shorter term CDs. Why get 2.2% on a money market when you can get 2.75% on a 12-month CD? Even if you end up having to cash out early in the 3rd year, you'll still come out ahead.
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                • #9
                  Originally posted by disneysteve View Post
                  Why get 2.2% on a money market when you can get 2.75% on a 12-month CD? Even if you end up having to cash out early in the 3rd year, you'll still come out ahead.
                  For me, the answer to this question is simplicity. I always think about what my wife or heirs would have to sort through in case I died tomorrow, Chasing CD's and savings around multiple banks does not make the cut. 2.37% in my checking account @ FIDO does.

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                  • #10
                    Originally posted by corn18 View Post

                    For me, the answer to this question is simplicity. I always think about what my wife or heirs would have to sort through in case I died tomorrow, Chasing CD's and savings around multiple banks does not make the cut. 2.37% in my checking account @ FIDO does.
                    I hear you on that, though in this case, you could get the CD at the very same bank where the money market is. I've done that with Ally. Most of our money there is in the savings account but a few months ago I bought a CD and I'll probably buy another one shortly. One place. One log in. I am not a fan of going to multiple banks just to get an extra tenth of a percent of interest.
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

                    Comment


                    • #11
                      If you wanted a higher return than savings, and can accept more risk, but not risk the whole amount, covered calls could help.
                      A call is the right to BUY stock at a given price. Every call has a seller and a buyer. The buyer of the call is buying the right to buy the stock if the price goes up.
                      The seller of the call gains income when call is sold. A covered call means the seller already owns the stock.

                      Example- security is priced at $50 and the owner has 100 shares of this stock purchased at $49.50.
                      a person can sell the call for $5 at a strike price of 57.
                      This person has an immediate income of the $5 call
                      If price hits $57, then the 100 shares of stock are sold at 57 to the buyer of the call.

                      If the stock stayed below $57, you keep the stock, and the $5 for selling the call.

                      disclaimer- while this is a very conservative call strategy and example, there is risk and volatility with the $250k in original post. The risk is capped (the risk with covered calls is not infinite, it is limited to stock person owns). I have friends which use this technique monthly to generate income, this does work.



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                      • #12
                        Originally posted by jiM_Mi View Post
                        If you wanted a higher return than savings, and can accept more risk, but not risk the whole amount, covered calls could help.
                        A call is the right to BUY stock at a given price. Every call has a seller and a buyer. The buyer of the call is buying the right to buy the stock if the price goes up.
                        The seller of the call gains income when call is sold. A covered call means the seller already owns the stock.

                        Example- security is priced at $50 and the owner has 100 shares of this stock purchased at $49.50.
                        a person can sell the call for $5 at a strike price of 57.
                        This person has an immediate income of the $5 call
                        If price hits $57, then the 100 shares of stock are sold at 57 to the buyer of the call.

                        If the stock stayed below $57, you keep the stock, and the $5 for selling the call.

                        disclaimer- while this is a very conservative call strategy and example, there is risk and volatility with the $250k in original post. The risk is capped (the risk with covered calls is not infinite, it is limited to stock person owns). I have friends which use this technique monthly to generate income, this does work.


                        This is a beginner strategy to the world of options. I've thought about doing this with some of my securities but so far haven't pulled the trigger.
                        If you own stable holdings it is a good way to make some extra monthly cash flow.
                        Brian

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                        • #13
                          Originally posted by jiM_Mi View Post
                          If you wanted a higher return than savings, and can accept more risk, but not risk the whole amount, covered calls could help.
                          I don't understand this post at all. Clearly I'm missing something but I'm not seeing how this is profitable for either the buyer or the seller of the call.

                          If you sell the call, you need to first buy the stock, so 50x$100+commission, so let's say $5,005.
                          You then sell the call for $5 which basically reimburses you for your commission.
                          If the stock goes to $57, you sell it and make $700 profit, but that is true whether you sold a call or not.

                          If you buy the call, you have the right to buy the stock if it gets to $57. But why would you want to do that? Why not just buy it at $50 yourself and if it goes to $57, you make the profit instead of the other guy?

                          Help me out here. Where's the potential profit?

                          And for someone making "extra monthly cash flow" from selling calls, you must need to own thousands of shares of stock if a call only sells for $5. I'm lost.
                          Steve

                          * Despite the high cost of living, it remains very popular.
                          * Why should I pay for my daughter's education when she already knows everything?
                          * There are no shortcuts to anywhere worth going.

                          Comment


                          • #14
                            Originally posted by disneysteve View Post

                            I don't understand this post at all. Clearly I'm missing something but I'm not seeing how this is profitable for either the buyer or the seller of the call.

                            If you sell the call, you need to first buy the stock, so 50x$100+commission, so let's say $5,005.
                            You then sell the call for $5 which basically reimburses you for your commission.
                            If the stock goes to $57, you sell it and make $700 profit, but that is true whether you sold a call or not.

                            If you buy the call, you have the right to buy the stock if it gets to $57. But why would you want to do that? Why not just buy it at $50 yourself and if it goes to $57, you make the profit instead of the other guy?

                            Help me out here. Where's the potential profit?

                            And for someone making "extra monthly cash flow" from selling calls, you must need to own thousands of shares of stock if a call only sells for $5. I'm lost.

                            Here is a primer on the strategy.
                            It works on stocks that don't move much and can pay monthly cash per share for as long as you own the security instead of a one time sale for profit.


                            What Is A Covered Call & Why Is It So Popular?

                            A covered call consists of buying a stock and selling a call option against the stock.

                            For example, let's say you own a stock that is trading at $100 per share. If 30 days go by and your stock is still trading at $100 per share, you are obviously not making any money.

                            If you sell a call option at say strike price 105 with maybe 30 days to expire, you might get paid something like $2.00 per share for doing so.

                            Now, here's what can happen. If the stock goes up to say $110, you'll be forced to sell your stock at $105 and you'll still keep the $2.00 per share credit. In other words, you'll be up $7 per share instead of $10.00 per share had you just owned the stock.

                            In the stagnant trend when 30 days go by, you'll be profitable by $2.00 per share instead of breaking-even. This is why many enjoy covered calls because they can still make 2% or more per month in a flat market.

                            Learn more in a free class or call us directly at 1-888-297-9165.
                            Brian

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                            • #15
                              Originally posted by disneysteve View Post

                              I don't understand this post at all. Clearly I'm missing something but I'm not seeing how this is profitable for either the buyer or the seller of the call.

                              If you sell the call, you need to first buy the stock, so 50x$100+commission, so let's say $5,005.
                              You then sell the call for $5 which basically reimburses you for your commission.
                              If the stock goes to $57, you sell it and make $700 profit, but that is true whether you sold a call or not.

                              If you buy the call, you have the right to buy the stock if it gets to $57. But why would you want to do that? Why not just buy it at $50 yourself and if it goes to $57, you make the profit instead of the other guy?

                              Help me out here. Where's the potential profit?

                              And for someone making "extra monthly cash flow" from selling calls, you must need to own thousands of shares of stock if a call only sells for $5. I'm lost.
                              There are puts and calls

                              owning a call is the right to buy the stock at the strike price
                              owning a put is the right to sell a stock at the strike price

                              if you buy a call, the buyer is expecting stock price to go up- buy a call with a strike price at $55 when stock is currently at $50, means if stock goes up 10%, you want to guarantee the price you buy.
                              If you buy a put, the buyer is expecting stock price to go down and wants to lock in the price they sell at. Buy a put with a strike price of $45, if stock goes down 10%, you want to guarantee the price you sell at.

                              For each transaction above, there is someone selling the call or put
                              the seller of the call is expecting price to be neutral or go down
                              the seller of the put is expecting price to be neutral or go up

                              If you own the security and sell the call or put, you have limited your downside risk considerably (locking in the price where you lose the security) and can generate income if the security stays neutral. In general, the overall return of covered calls and puts should be commensurate with risk taken (ie higher than savings/ money markets) and have less downside risk than just investing in market outright.



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