billios996

Hi all
I am putting cash away for down payment on a 2nd house. I'm looking for a relatively safe investment for ~ 5 years that will return ~ 5% with minimal expense ratio and load. Sadly, I'm a bit clueless. I don't have a problem researching, but I'm not sure where to start or if such an investment even exists.

I was thinking to start with bond index fund like Vanguard Total Bond Market Index Fund. Then I read an article that managed bond funds, eg Vanguard Intermediate-Term Tax-Exempt, outperform index funds due to the nature of the bond market.

Dividend stock funds catch my eye as well.

Opinions would be appreciated!

billios996

nobody?

hirev

Safe and short term are relative terms. To vague.
You are probably better off with an indexed mutual fund, no hassle, limited risk, limited returns. timing is everything.

Chris S

Avoid mutual funds, they suck for various reasons - taxes, fees, etc. ETF's are much better IMO.

IMO, bonds have very limited appeal currently. Think about it....yields are near historic lows, and when rates inevitably rise, bond prices will go in the toilet. No upside, but lots of downside risk.

If you're putting cash away a bit at a time, I'd just invest in some index ETF's on the DJIA, S&P 500, maybe some sector funds if you have any you particularly like. By dollar cost averaging over the years, you shouldn't expose yourself to too much downside risk.....just go more conservative the closer you get to needing liquidity.

hirev

Indexed funds , how do they differ from Mutual Funds?

Chris S

an index fund can be a mutual fund, ETF, or possibly even some other form (privately managed?). Indexing basically means trying to match the underlying asset weighting and performance of an index or avg. such as DJIA, S&P 500, Russell 2000, etc. By doing so, you minimize the need to actively trade the account, and therefore, transaction costs. Since it doesn't take research or even a rocket scientist to manage an index fund, management fees s/b a lot less as well. Given that most actively managed funds fail to beat the indices they target, indices tend to be worthy of consideration. I'd just recommend going w/ ETF's over mutual funds for various reasons.

billios996

my 401k and IRA are all index funds for that purpose. I didn't really consider it for a short term application.

DaGou

guess that depends, if you had it in for the last five years you probably made a boat load of cash, a great "short term" investment. The next five years we may not see record highs every other week. Everyone expects a market correction after this glorious bull run. Going forward will five years be enough for the market to take its dip and make new highs again? I wish I knew.

When you find that 5% return on investment, no matter what the world is doing, no risk investment, please let us know. Risk VS ROI, everyone wants to eat their cake.

If a little more risk is acceptable the Global Dominating Dividend stocks might fit the bill. Stuff like MacDonald, Coke, Proctor Gamble, Microsoft, Walmart, Johnson&Johnson, and the list goes on. Slow steady growers that pay dividends.

http://stansberryresearch.com/invest...idend-growers/

Bottom line there are no investments out there that pay 5% with 0 risk. Zero risk is a money market or a credit union paying 0.8% or something.

hirev

Want to chime in, agreed in spades that risk=return. If you can find 5% any place there is most likely risk, but that's a healthy return. I still enjoy individual stocks as the best way to make money in this market, no matter where it goes. Timing is everything.

s2000Junky

Buy gold and silver, or stuff the cash in your mattress. The system is no longer designed to work for common folks. If you don't have enough money to gamble, then dont gamble it. Becuase thats what investing in the manipulated market is, one big gamble. It only works for those manipulating it.