Where to conservatively invest

[Anonymous]

We have about $800,000 split between a HYSA and a fidelity Money market. Both have been about a 4% yield. We are a high income tax bracket also. Where should we put this money so it is conservatively invested but we are not losing all returns to taxes in your opinion?

[Anonymous]

Anonymous wrote:We have about $800,000 split between a HYSA and a fidelity Money market. Both have been about a 4% yield. We are a high income tax bracket also. Where should we put this money so it is conservatively invested but we are not losing all returns to taxes in your opinion?

A conservative thing to do (there are many examples) is to take 50% and buy 10-year treasuries...you will earn 4.3% but avoid state tax.

Take the other 50% and just buy an S&P index fund. The dividend yield on the S&P is 1.19% but taxed at 15%.

It's hard to understand how define conservative. Clearly, the S&P index fund price will equate to daily movements in the S&P, and in theory your dividend yield will increase over time as companies grow and increase dividends.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We have about $800,000 split between a HYSA and a fidelity Money market. Both have been about a 4% yield. We are a high income tax bracket also. Where should we put this money so it is conservatively invested but we are not losing all returns to taxes in your opinion?

A conservative thing to do (there are many examples) is to take 50% and buy 10-year treasuries...you will earn 4.3% but avoid state tax.

Take the other 50% and just buy an S&P index fund. The dividend yield on the S&P is 1.19% but taxed at 15%.

It's hard to understand how define conservative. Clearly, the S&P index fund price will equate to daily movements in the S&P, and in theory your dividend yield will increase over time as companies grow and increase dividends.

Does this take into consideration the next few years under Trump or is it just advice in general?

[Anonymous]

You are losing it to inflation. Is money important you at all? You didn't even do the math.
Keep it where it is as your well being is more important to you than making this money last.

[Anonymous]

When do you need this money? If it is 5 years or more from now then I’d invest in ETFs.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We have about $800,000 split between a HYSA and a fidelity Money market. Both have been about a 4% yield. We are a high income tax bracket also. Where should we put this money so it is conservatively invested but we are not losing all returns to taxes in your opinion?

A conservative thing to do (there are many examples) is to take 50% and buy 10-year treasuries...you will earn 4.3% but avoid state tax.

Take the other 50% and just buy an S&P index fund. The dividend yield on the S&P is 1.19% but taxed at 15%.

It's hard to understand how define conservative. Clearly, the S&P index fund price will equate to daily movements in the S&P, and in theory your dividend yield will increase over time as companies grow and increase dividends.

Does this take into consideration the next few years under Trump or is it just advice in general?

OP, what is going to happen for the next few years? What is it to consider? The answer is NO ONE KNOWS! Looking back at 2016, many posters and analysts predicted a stock market collapse under Trump, yet the market saw significant growth during his term, with the S&P 500 rising about 50% from 2016 to 2020, despite volatility. This highlights how tricky it is to forecast economic or global events.

[Anonymous]

OP here, I didn't ask the Trump question. We may need some of the money, about $500,000 within the next five to years, which is why we've been putting it in a money market and now it seems to be too much, and I worry about taxes and inflation. The bond suggestion is a good one, so perhaps we put what we won't need in 10 year bonds and the rest in an index fund.

[Anonymous]

I like the treasuries suggestion. I don’t think ETFs and Index funds are considered “conservative” because regardless of how well they have done, there is always a chance you can lose money.

[Anonymous]

ETFs are not conservative but it seems foolish to not invest at least some of the money in the market since you don’t need a portion of it in the next 5 years.

[Anonymous]

10 years is a long time to lock up the money. Perhaps build a bond ladder. I would use mini bonds if you’re in a high bracket. If you need most of those funds I would not put them in the market. Depends if this $800k is everything or if you separately have an emergency fund and retirement savings etc.

[Anonymous]

Anonymous wrote:We have about $800,000 split between a HYSA and a fidelity Money market. Both have been about a 4% yield. We are a high income tax bracket also. Where should we put this money so it is conservatively invested but we are not losing all returns to taxes in your opinion?

Didn't let the tax tail wash the dog. How much risk are you willing to take?

Vanguard tax managed balanced is a great fund, but might be too volatile for you. Or you could go with something more conservative like one of the vanguard life strategy funds. I think their income fund is 80% bonds.

[Anonymous]

Anonymous wrote:10 years is a long time to lock up the money. Perhaps build a bond ladder. I would use mini bonds if you’re in a high bracket. If you need most of those funds I would not put them in the market. Depends if this $800k is everything or if you separately have an emergency fund and retirement savings etc.

AAA Muni bonds and treasuries effectively pay the same after-tax rate.

If you want something still fairly secure but get more interest then you can pick just like an A muni bond but you want to make sure it is not a special purpose vs a general fund muni.

Special purpose means maybe they issued munis to construct an airport and then then the revenue from airport pays back the bonds. If for some reason the airport defaults, then the bonds default…no obligation for the state to step in and cover.

[Anonymous]

Thank you everyone! I will research all these options. And to answer a question, we have other savings for retirement.