Dear Community Members
I’m a beginner in Investment area and looking for short term investment options only because my project/job visibility currently is for around 3 years. I’m at 40. I might need to move out of US in case project doesn’t get extension. Currently I have ~26K in 401K invested in T. Rowe Price Retirement 2050 fund in fidelity. I have cash around 25K. Kindly advise on below queries:
(1) Should I keep or take out money from 401K considering short term visibility. I know about early 10% withdrawal penalties and taxation.
(2) I was thinking about opening high yield saving account but after some research I found that since I already have fidelity account so better to open a brokerage account where I can earn 4% interest rate which is more than popular HYSA like CapitalOne 360, American express saving, Ally etc. Is opening brokerage account in fidelity is wise decision?
(3) I’m also planning to buy some Index funds so how about starting with FXAIX and how much should I start with?
(4) Any recommendation on searching low cost EFTs or T-Bills or Fidelity CDs?
Any other investment recommendations would be really helpful.
If you are setting aside money that you will need in 3 years then you are a saver, not an investor. You can’t take on that much risk in such a short timeframe. Your best bet would be a high-yield savings or money market account.
Got it. Thank you for your input on this. Since I already have fidelity account so now I’m going to add money in brokerage account because money is just sitting in checking account. Apart from this how about adding some money in only Index fund or ETF and taking out in around 3 years? I can understand that I need to pay taxes during withdrawal but hope I’ll get some profit as well in 3 years. Isn’t it?
Again…my advice here for a 3-year window is that you cannot invest…only save.
I cant find exactly what I am looking for, but here is an article about rolling returns of the S&P by time invested. What this shows is that for all 3 year periods over the last 30 years, you would have lost money in the market roughly 20% of the time. Me, personally, I am not willing to roll that dice. Further causing me concern is that the market is at historically high multiples right now.
Got it. Thank you for sharing that article. That is a kind of deciding factor whether short term investment is a wise choice or not.
Are there any recommendations on 6 month / 1 year CDs or T-Bills considering short term investment as I understood 3-year timeframe is not for investment.
