Short Term Investment Recommendations

Hello,

I am curious what fellow Fools would invest money in for a short term, 9 to 24 months. There are some conditions: relatively low risk, accessible within a couple of days, better than 6.75% interest.

My business is sitting on a cash reserve that we will need for a project with a start date sometime in the near future (any day now in construction language). I want to better than the current bank rates but I can’t take too much risk.

Any advice would be helpful.

Thank you

Hi, isoworks. I apologize for this delayed response.

First and foremost, any money you are going to need in the next 3-5 years should not be invested at all. That includes equities, ETFs, mutual funds, bonds, anything that is not a cash or cash equivilent (checking, savings, CD or Time Deposit, money market account). This is to protect that cash from market volatility so as to ensure it is there when you need it. If you are retired, you should not invest money you will need as income in the next 5-8 years for the same reasons.

My feeling is you should treat money with which you plan to invest the same way - it is money you are going to need in the short term, so it should not be invested for the short-term until are read to put it to work for the purpose it was saved.

Let me tell you the story of a former premium service called the Million Dollar Portfolio. Launched in 2007 as TMF’s first real-money portfolio service, the promise was to allow subscribers to invest along side MDP as TMF put $1m of its own money into the portfolio. The service decided, since it wasn’t going to invest all of its cash at once, that they would instead put it into a “safe” S&P 500 fund until the money was needed to invest.

Sound familiar?

Well, you can guess what happened. The Great Recession hit, the market tanked, and suddenly MDP’s “cash” position, tied to the S&P500, suffered damaging losses. The joke among members was that the service should be renamed the Half-Million Dollar Portfolio. And it took a long time for the service’s advisors to rebuild the portfolio and even then, it never really reached the kinds of lofty goals it had upon launch.

I get the desire to keep money working during while you wait to invest. But considering the market volatility of last March and the potential for more in the future, would you really want to risk your investable assets by keeping them in the market until their “forever” position? There is a reason that Fools are admonished to not invest any money they are going to need in the next 3 years, even money for investing. Personally, my cash reserve is kept in cash.

Fuskie
Who notes that ever since MDP, no premium service has put its investable cash reserve into the S&P 500 or any other equity investment…


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