Short-term stash
Kimberly Lankford. Kiplinger's Personal Finance. Washington: Sep 2001.Vol.55,
Iss. 9; pg. 101
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Abstract (Document Summary)
Lankford discusses short-term investment options. She suggests one-year certificate of
deposit, money market mutual funds, and tax-free money market funds.
Full Text (394 words)
Copyright Kiplinger Washington Editors Sep 2001[Headnote]
Q&A | What is the BEST INVESTMENT for money you will need in as soon as a year?
My wife and I sold our house and are taking a trip around the world. We plan to buy
another house in about a year. We want to preserve capital and also earn a fair return.
What do you suggest? -JIM RUBLE, Montgomery, Ala.
Get ready for yield shock. Rates on short-term IOUs have tumbled. But with only a year
to go before you'll need the money for the new house, those are the kinds of investments
you'll want to focus on. You don't want to invest short-term money in stocks or longerterm bonds because you'd be putting your principal at risk.
Consider a one-year certificate of deposit. The top one-year CDs recently yielded 5%
(for more top yielders, turn to page 119). The highest-yielding CDs pay considerably
more than Treasuries of similar maturity. Don't invest more than $ 100,000 in any single
CD account. That's the maximum federal insurance on bank accounts.
If you're not sure when you'll need the money, your best bet is a money-market mutual
fund. You won't turn cartwheels over money-fund yields (the top choices sport 30-day
yields of just above 4916), but you won't have to worry about getting hit with early-withdrawal penalties, as you might with CDs. See our listing of the highest-yielding
money funds on page 119, or check www.imoneynet.com.
If you're in a high tax bracket, don't forget the tax-free route. The top tax-free moneymarket funds carry 30-day yields of about 3176. For someone in the top 39.196 federal
tax bracket, that's equivalent to 4.9% from a taxable investment. For more on taxableequivalent yields, visit www.investinginbonds.com. The site also provides prices and
yields for representative municipal bonds. Got a question? See page 6 for information on
how to send it to us.
KEY BENCHMARKS
Trailing price-earnings ratio of S&P 500 index:
Latest: 26
Month ago: 27
Year ago: 29
Yield of S&P 500:
Latest: 1.3%
Month ago: 1.3%
Year ago: 1.1%
Yield of 30-year
Treasury bonds:
Latest: 5.9%
Month ago: 5.6%
Year ago: 5.7%
Yield of long-term tax-exempt bonds:
Latest: 5.3%
Month ago: 5.2%
Year ago: 51%
Price of gold per ounce.
Latest: $265
Month ago. $272
Year ago: $283
SOURCES: Standard & Poor's Fund Services; The Bond Buyer: international Financing
Review. Figures to July 9