Money Market Funds High Yield
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Tom Said:
Highest yielding "safe" funds in Vanguard family of funds?We Answered:
If your willing to take some slight risk, you can try the Vanguard Short-Term Tax-Exempt Fund. If you are willing to take some slightly more risk, the Vanguard Limited-Term Tax-Exempt Fund. Looking at their graphs, you can see they have slight fluctuations in value.You haven't stated what state you live in. A state based mutual fund may give you state tax free interest, too.
You can also consider putting a small amount of money, say 10% in a stock mutual fund. You may not want to put all your money in a stock mutual fund, but 10% would be a conservative approach.
Vickie Said:
How should I divy up my 401K?We Answered:
Matthew,First off, great job on your savings. At age 31, you are way beyond your peers as far as saving for retirement. That said, if you can invest more that will only help your cause, but it looks as if you are doing a fine job of saving currently.
If you don't like the volatility of stocks, then you absolutely need to stay away from the high yield fund. The DWS High Income fund you mentioned lost 24% last year. Considering the S&P 500 lost 38%, you still would have suffered a large loss last year. Junk bonds tend to have almost as much risk as stocks. The standard deviation or measure of risk for the DWS is 12.89%. The standard deviation of the stock market is 19%. So go ahead and rule that option out.
I do think you should be able to handle the Pimco Total Return fund. It is a very diversified bond portfolio with mostly high grade corporate, government, and government agency (Ginnie Mae, Fannie Mae, and Freddie Mac). There is some volatility, but you should be able to handle it. The worst one year return was in 1999 when the fund lost 0.75%.
You do need to have some investments beyond a money market as the money market won't even provide a return above inflation. So you may want to put 50% in the money market and 50% in the Pimco fund. But, stay away from the high yield fund.
Best,
Kirk
www.swimupstreamtowealth.com
Arthur Said:
could funding a high yield savings account from credit cards make money?We Answered:
Your specific plan wouldn't work. The transaction fees and the fact that credit card companies don't allow a grace period for cash advances make this a sure loser.However, a similar idea has indeed made money for me through the years. Basically you need to find a credit card that is offering a zero percent teaser rate for six months or a year on balance transfers. Most companies will allow you to deposit the balance transfer into your checking account. From there you transfer it to the highest yielding account you can find and earn interest until the teaser rate expires.
Be forewarned that virtually all cards change some sort of balance transfer fee, so even a zero percent offer isn't really free money. Also, you will have to pay taxes on the interest you earn. Unfortunately, the balance transfer fees have mostly gone up dramatically in the past year. It's no longer unusual to get charged 3% of the balance transfer amount in fees up front, which makes it difficult to find a sufficiently high yielding account to make a profit. Nevertheless, if you can make enough interest to offset the taxes and fees, you will make a small profit on the deal. Just make sure that you don't miss a payment and get hit with penalties.
Maureen Said:
How should I allocate my 401K among these 3 options?We Answered:
If you have zero tolerance for risk, you are giving up return for safety. That's it. End of story. You must save more and spend less.If your self description is accurate, you do not belong in a junk bond fund for three reasons: (1) your risk profile (junk bond funds are exposed to more risk than the most conservative stock funds), (2) total dollars under management (A bond portfolio needs only a tiny smidgen of junk to diversify -- less than $500k should not bother), and (3) your option isn't a particularly good fund -- not bad, but not compelling either.
Left with your choices and your profile, I would recommend you start with 50/50. Look at you balance once a quarter, no more than that. If you are okay with your choices after a year, I would recommend you bump it up to 75% PIMCO. I would also strongly recommend that you hold your nose and put 10% into a low cost stock index fund if you have such an option. If you can limit yourself to a once a year review, I would also strongly recommend you do that as well. Folks who are risk adverse are better served by less attention to their investments than more -- pick a plan, stick to it and leave it alone.
If you are going to invest in cash and bonds only, you need to save a lot more (a LOT more) than the 31yo who invests at least 50% of his money in stocks. Most models say 7% per year every year for the 30yo who invests in stocks (60%s/40%b model) and 12%-15% per year every for the 30yo who avoids stocks.
If you wish to compare yourself to the "average" saver your age, figure out what 10% of your income has been for every year that you have worked so far. Add it up, compounding interest yearly at 2%-3% and you have an estimate of what a saver with your exact income flow would have.
If you wish to compare yourself to the super savers, take your current income, multiply it by your age and divide that number by ten. If you want to be at the top of your game, that's the number.
(Full disclosure: I have retirement assets in the administrative class of PIMCO Total Return fund. I consider Bill Gross one of the best investors on the planet)
Morris Said:
Money Market Fund (4.63% APY) vs. E*Trade High-Yield Savings (5.05% APY)?We Answered:
The previous poster... I don't know what he's thinking.Your question is about a money market fund and E-Trade's High Yield Savings. As you already noted, E-Trade has a higher rate of return.
There are only two other differences that I can see:
1) Insurance: E-Trade Savings is FDIC insured, which means your money is guaranteed. A money market fund is not, however the risk of you losing money is next to nothing. Conclusion: No difference.
2) Access: Both are on demand. Because E-Trade is online, you can easily transfer money to your bank account to access your money, so without further details, that seems the same as a money market account. Conclusion: No difference.
Pick E-Trade! I don't have them, but of those 2 choices, choose E-Trade.
Douglas Said:
What are some of the money market fund with the highest yields that are FDIC insured?We Answered:
Do you mean a money market fund, or a money market "account?"Money market funds are completely different from money market accounts and money market instruments. Money market accounts are basically special kinds of savings accounts that you can open at any local bank, and a money market instrument is a form of highly-liquid short-term debt security. Furthermore, unlike a bank account, returns from money market funds are not guaranteed even though they are lower risk. Their stability rests solely upon the investments that make up their portfolios and it is possible for the fund to lose money, although the odds of this occurring are rare.
Taxable funds mainly invest in U.S. Treasury securities, government agency securities, repurchase agreements, CDs, commercial paper and bankers' acceptances. Many other varieties of different investments are eligible for taxable money market funds. For instance, if you are partial to the housing sector, you can buy a money market fund that solely invests in Fannie Maes.
Tax-free funds, on the other hand, do not come in such wide varieties. These funds invest in the short-term debt obligations issued by federally tax-exempt entities and are usually lower yield. In some areas, you can purchase tax-free funds that exempt you also from state and local taxes; however, these kinds of exemptions are exceptions rather than the norm, so be sure to check out all the details before you decide to purchase one.