short term investment while in fellowship

[threecoins]

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I am starting fellowship this year in a very expensive city, my wife does not work and we have a baby. I have saved up about 150 K from hospitalist work to supplement my fellow's salary just to be able to get by. I will need 50 K each year. My question is: where can I invest this money to generate a decent income instead of having it sitting in the bank. Obviously my risk tolerance is VERY low but I am also not looking for high returns ..any ideas?

 

[redtomate]

Get some high yield CDs from an online bank such as ally.com.

 

[threecoins]

Thanks. I get 0.8 % from my online savings account. I was looking more for something with a 4-6 % yield. Also with CDs I can not draw the money before it matures I am more curious about shares in a bond fund or money market fund?

 

[TexasPhysician]

If you "need" that money within 2 years or so, sticking with 0.8% is the only sure thing.

 

[redtomate]

In today's interest rate environment, getting 4-6% will require you to take more risk than the OP suggested you wanted to take. How bad would you feel if you lost 15k in a few months? That's only a 10% drawdown for you, which wouldn't be unreasonable if you bought long term bonds.

By the way, you can redeem a CD before it matures, just at a penalty. Oftentimes, the penalty isn't that bad. For example, with ally it is only 3 months of interest. It may make sense to purchase a 5 year CD with the intention of redeeming early.

Another way to do it if you want to take more risk is to invest most of it in CDs, and then a smaller percentage of it in an equity fund. Together, you'd have a largely safe portfolio (depending on how you weight the cash and equities).

 

[The White Coat Investor]

I am rolling around on the floor laughing at your two statements.

Where can I invest this money to generate a decent income instead of having it sitting in the bank. Obviously my risk tolerance is VERY low but I am also not looking for high returns

Thanks. I get 0.8 % from my online savings account. I was looking more for something with a 4-6 % yield.

I can get you an investment with a 4-6% yield, but I cannot get one for someone with a low risk tolerance who will be spending the money over the next 3 years. I believe Vanguard's junk bond fund has a yield in that range....lemme check....yup, 5.51%. But they're called junk bonds for a reason.

Heck, I can find you an investment with a 25% yield (not return) if that's what you want. But don't expect to get all the principal back, especially a year from now.

Sorry to be so rude. What you're asking for was entirely possible 5 years ago, but not in today's low-yield environment. Your statements just showed a profound ignorance of today's available yields on safe investments. We'd ALL love a 5% safe yield these days.