Looking for a low-risk 10-year investment type with returns.?

Question

From Dec 2009 to Jan 2019 (I am paying off credit cards until then), I will be saving over $750 a month so we can pay cash for a truck and 5th wheel when my wife retires at 60 (I already am retired). My credit union currently offers .75% APY, so its growth is basically negligible. I want something low-risk but offers a better return. I'm looking for investment types (T-bills, money markets, etc), that will allow me to make variable monthly contributions and allow easy access to the money when the time is right (or earlier in case of catastrophic emergency).

Answer 1

Unfortunately, there are no low risk investments any longer. Taxes and inflation did away with those. T-bills are considered to be the least risky, but after taxes and inflation the return is about -2% annually currently. Perhaps worse. In todays world low risk actually really means calculated risk. One thing you should do is have your wife establish a Roth IRA account. It is too late for you. She can put $4000 annually into it and the investments are tax free period. Now for calculated risk. That entails being diverse in your investments. About 20% in a money market account, 20% in a foreign developed market fund, about 10 to 15% in a developing markets fund, about 20% in a large cap fund, about 15% in a small cap fund, the rest in an energy fund. Such an allocation hopefully in 10 years time at $750 a month should yield you about $120,000 to $160,000.

I suggest looking at these mutual fund sites.

T Rowe Price (Captial Appreciation Fund)
http://mutualfunds.troweprice.com/?rfpgid=10875&scn=Mutual_Fund_I_Want_to&origins=prospect

Vanguard (Global Equity Fund)
https://flagship.vanguard.com/VGApp/hnw/FundsByType

Fidelity (a wide variety)
http://personal.fidelity.com/products/funds/funds_frame.shtml.cvsr

Royce Funds (small cap funds)
http://www.roycefunds.com/funds/index.asp?

Answer 2

Schwab has a 4.25% APY FDIC insured checking account. WaMu has something similar. Some credit union in Oregon offers 6%.

There is no magical investment solution to your problem. Chances are, T-Bills and Money Markets are the way to go. If you feel like trying to make a bit more, an Index Fund or mutual fund might be a good move. However, a market crash could wipe you out.

You retired with credit card debt? Scary!

Answer 3

I hate to tell you, but at 0.75%, you're actually losing money when you factor in inflation. (If you pay 25% between US and state income tax, you really only get about 0.56% after tax...and with long-term inflation running at about 3%, your money will be able to buy LESS in a year than it does now.)

Does your credit union have CDs? You should at least be able to get 4 or 5 percent on those. Of course, after taxes and inflation, even that represents very little growth. (5% minus tax in 25% bracket = 3.75% which is only a little above inflation.)

To get real growth relative to inflation, you really have to consider putting at least some of it in stocks. Sure, they go up and down, but over long periods of time, they've historically provided the highest returns of any asset class. Look at this chart of the S&P 500 index: http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my&l=on&z=l&q=l&c=
There aren't many 10-year periods where it hasn't gone up (and nearly all of those are flat, not losses). And not only do stocks provide higher returns, but those returns (dividends and long term capital gains) are taxed at a lower rate so you get to keep more of it.

With a 10-year window, I'd certainly consider a S&P 500 index fund or Russell 2000 index fund from someone like Vanguard or Fidelity or American Century. Or you could buy the SPY, MDY, or IWM exchange-traded funds from a discount stock broker. Those will also mirror major stock indexes. You could just buy a high-yielding bank stock like Bank of America (BAC with dividend over 5%) or Wachovia (WB) or Citigroup (C), but if you buy only one or two stocks, there's higher risk than if you buy a whole bunch like you would be with an index fund or ETF.

Answer 4

Home Depot offers to sell shares directly to thier investors. McDonalds owns the most valuable Real Estate in the world. Used to work for Dean Witter, stock brokerage and my boss had me suggest this company to interested investors because in 1992 it had a return of about 12%. I had a mutual fund through Oppenheimer, it performed great. When I needed tires for my car I just called my financial planner/broker and a check was issued and arrived fast. Mutual funds, you pay into the account, and the interest it earns, rolls over and reinvests its self, and is available to you. Good luck to you!

Answer 5

www.emigrantdirect.com

They offer 5% annual fixed return, risk free, cash is easy to get access to as it is linked to your checking account and it is federally insured. You can put in what you want, take out what you want and the return is much better than what you have right now.

Hope this helps.