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How would you invest $33,000? It must be very low risk and available in 3 years for withdrawal without penalty
Question : How would you invest ,000? It must be very low risk and available in 3 years for withdrawal without penalty
I am advising a treasurer of a non-profit organization that has received $ 33,000 to invest. The money is in the name of the non-profit and sitting in a money market account at the local bank earning about 3.9% interest. The account is “owned” by the non-profit and is associated with their Employer ID Number (EIN). It cannot be put into personal accounts, IRA’s, etc. for this reason.
Where would you suggest we put this money in order to earn the best return on it? It cannot be invested in anything where there is a risk of loss due to the organization’s charter and a decision made by the board. I was thinking perhaps a CD would be a good idea, but with the rate at 5.5% at the bank where it is held, I don’t know if that’s the best use of the money. The money must be available for complete withdrawal and use in 3 to 3 and one half years. Ideas?
best ira cd rates
Best answer:
Answer by Papa John
Not sure why you are advising them, and you need to ask us. The CD route is risk free. But buy short term CD’s, so when rates go up, you won’t be locked in for long at a lower rate.
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#3 written by Rocky S 1 year ago
The first thing is that you don’t want to lose any money and you only have 3 yrs. So Their is only a money market fund or a bank CD . Vanguard has The prime Money Market Fund it is about 5.10% with very low to no risk and your Bank CD with no risk. These are your only choice’s right now. Anything else has risk and you don’t want that.
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#4 written by cowgirlblu2 1 year ago
If it had to be low risk then I would have to invest it in an online savings account compounded monthly at least 4.5% or more.
Another way is short term Certificate of Deposits. CD laddering may be the best way to get high yields and sufficient access to your cash. CD laddering is your best option for a savings portfolio that will deliver both interest income and available cash.
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#5 written by chris_in_columbia 1 year ago
I would advise one of the following:
1) Long-term CD – you will get a rate around 5.5%.
2) Short-term CD – not locked in long-term, and if the rate goes higher, you can take advantage of the higher rate. The danger is if the interest rate drops, then you will be stuck with a lower rate.
3) Preferred stock – many companies, in addition to common stock, also have preferred stock. The stock does not have any voting rights, but does pay a dividend. Some companies pay very well on these dividends. You can check around and see if you can get anything better than 5.5%.
4) Municipal bonds – these are bonds that might fund a particular project in your area, such as building roads, schools, or a public swimming pool. These are tax-free, however. I’m not too familiar with non-profits, but if they don’t pay taxes, then I would not recommend municipal bonds. They are better for individuals and companies that normally pay high tax rates. The danger is that the project gets mismanaged and you have difficulty recovering the principal, although that is somewhat rare…but I figure you should know the risks.Do NOT buy corporate bonds because while they could pay a higher interest rate, there is a possibility of declining principal that could offset the interest rate.
If you absolutely must not lose money under any circumstances, I would advise them to start with short-term CD’s (3-6 months) and reinvest the money each time upon maturity. If the Fed starts thinking about lowering interest rates, then move the CD’s to a longer term after the next 3-6 month maturity. So they would need to keep an eye on what the Fed does, but maybe they think that’s too risky. If 5.5% is great for them, then just go with the longer term right off the bat.
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3 years? stocks are a no no,
bottom line, stocks are a bad idea, with only 3 years trying to get more than %5-%6 is going to be risky.. if you had longer i’d say stocks, but it would be foolish.
a 3 year cd seems appropriate for your time horizon.
or
simply a high yeild savings account… i really like:
https://www.emigrantdirect.com/EmigrantDirectWeb/index.jsp
5.05% interest.. no fees or minimums of any kind.
but i’d go with the CD if you can get more than 5.05%