My first post. Perhaps a complicated question that was hard to google so I turned to this community.


I have a well diversified portfolio of mutual funds, American Funds, a few stocks, a pile of junk silver, a couple income properties, and I recently took some of my money and invested in a small business my friend owns. I know less about investing than my portfolio shows because much of it is inheritance. I know how there can be a long conversation about how investing in a small business owned by a friend can be a horrible idea, but I did it and dont want to discuss that here.

The amount I invested was $25,000 payable over 5 years. I want to keep this money separate and continue to invest it in local small businesses. What I want to know is how I should invest the money that is paid to me monthly until the loan is over? I want something that is somewhat liquid, has a small level of risk, but doesnt fluctuate drastically like the stock market has been. Part of my portfolio is in an S&P 500 index fund, but that can change a couple points in a day. I dont want to have to take a hard hit or time my investments so I dont lose money.

I dont know much about the bond market, but I was wondering if that is what I want. Slow steady growth. A little better than a CD.

I guess I'll stop rambling to see what you folks have in mind.

thanks.

You could put the money in a money market account or even a short term bond fund. Both of those can be accessible by writing a check. The money market will pay a little less than a CD while the short term bond fund should pay a little more. This is not a great time to invest in bonds but if you stick with short term and treat it as a cash investment you should be protected.

Option 1: High yield savings account such as ING Orange Savings account: http://home.ingdirect.com/orange-savings-account

There are many other options besides ING.

This is the safest and probably best answer. You'll get about the same yield as a 5 year CD.

This is very liquid money with no minimum. Obviously you'll have to check the terms and conditions for the particular option you choose.

Option 2: A bond mutual fund. I use vanguard and have my business starting monies in their Short-Term Investment-Grade bond fund. The symbol is VFSTX and the minimum investment is 3k. The "Admiral shares" VFSUX offer lower fees but you need a 50k minimum investment.

For liquidity, this option also has check-writing privileges but checks must be over $250.

Thanks for the thoughts.

I guess I wouldn't need to write checks from it, but that does sound nice. I would be willing to have to wait a few days for transactions to happen.

Do you purchase VFSTX directly from Vanguard? I think I might go with something with a slightly better rate of return, but Im not sure. Still have to figure out plan. My current bank offers a great interest rate because I have direct deposit, but the interest rate lowers with the higher amount of cash I have with them.

I might buy some VFSTX and VBIIX to add a little risk/return to it.

Yes, I use vanguard directly.

Check out this 10 year chart of VFSTX, VBIIX, and SPY to give you an idea of the volatility http://imgur.com/BuSFm against the S&P500.