There are a several options for you to look at. The least risky are
FDIC insured bank deposits (make sure you deposit only $100,000 at
each bank to ensure full protection).
The best yield on a CD is 3.39% ("High Yield Rates for 3 month CD"
Bankrate.com http://www.bankrate.com/brm/rate/high_ratehome.asp?params=US,416&product=13&sort=3)
Savings accounts are currently yielding up to 3.44% ("Money Market
High Yield ( MMA ) and Savings Account Rates" Bankrate.com
http://www.bankrate.com/brm/rate/mmmf_highratehome.asp?params=US,416&product=33&sort=2).
Many of these are liquid, even allowing a limited amount of check
writing and/or debit card usage against them.
Short-term bond funds are another way to go, but they are potentially
more volatile and are generally yielding less than these instruments.
Money market funds, while safer than bond funds, are not as safe as
these instruments and are also yielding less.
Three-month Treasury bills are considered to be risk free and are
yielding 3.145% ("Short-term T-bill rates up" By Associated Press, The
Boston Globe (July 6, 2005)
http://www.boston.com/business/articles/2005/07/06/short_term_t_bill_rates_up).
A floating rate fund is more adventurous but also yields a little more
(30 day yield of 4.15%). I question whether it is worth the
additional risk, though. A good one is Fidelity Floating Rate High
Income Fund http://personal.fidelity.com/products/funds/mfl_frame.shtml?315916783.
You would be charged a redemption fee of 1% if you do not stay in it
for at least 60 days.
A good discussion of short-term investing options can be found on
Fidelity's website at "Short-Term Investment Choices"
http://personal.fidelity.com/products/fixedincome/shortterm.shtml.
Since you need the money in a very short time, I strongly encourage
you to consider risk when making an investment choice. The minimal
additional amount of yield you will gain, particularly after taxes,
simply is not worth anything more risky than an FDIC insured account
in my opinion. I have personally opted for a high yield savings
account for my short term savings.
Sincerely,
Wonko |
Request for Answer Clarification by
ozyman-ga
on
08 Jul 2005 13:12 PDT
Hello,
Thank you, I appreciate your thoughtful answer. Just one quick clarification.
To get the $100,000 FDIC insurance, do I really have to open accounts
at different banks, or do I need to open several accounts at one bank?
I have trouble visualizing multi-millionaires having to have
relationships with 15+ different banks.
Thank you.
|
Clarification of Answer by
wonko-ga
on
12 Jul 2005 08:18 PDT
Most wealthy people do not keep most of their funds in FDIC-insured
accounts. Instead, they typically own stocks, bonds, and real estate.
There are some banks that will open a large account for a depositor
but then deposit the amounts among multiple banks who then redeposit
it with the first bank so that the depositor does not have more than
$100,000 in any given bank, but all of the money winds up at the first
bank. This makes things easier for the depositor, but it is more
expensive.
Sincerely,
Wonko
|
