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Here's a starting point. Divide up the money this way:
Long Term (retirement, 10+ yrs):
401k, IRA
Stocks
Mutual Fund types CAP, AggGro, SML, MID, GRO, Sector. Choose 2 or more.
Intermediate Term (5-10 yrs):
Stocks
Mutual Fund types CAP, AggGro, SML, MID, GRO, G&I, Sector. Choose 3.
Short Term (1-5 yrs):
Cash
CD's (staggered)
Mutual Fund types Bond, Balanced,G&I
Traditional advice is if you need the money within 5 years, don't
put it in stocks because of the downside risk. If you have too
much in too few stocks, you wouldn't be able to hold through any
down periods. The more diversified you are, the less the chance
that *all* will be lower. The other bit of advice that I was
brought up with is "don't invest what you can't afford to lose".
This is why I put stocks in the intermediate category, and not
in the short term.
-Austin
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| Also, since you are in the Bay area, check out Coast Federal's Liquid CDs.
You can add to the balance at any time and you can have two withdrawals
without penalty during the term. The yield is comparable to standard CDs
in other financial institutions; I haven't checked it recently though.
Opening balance is $500.00 (this is good for kids BTW -- my 23 yr old
daughter found this one). Coast also offers a free checking account for
5 years -- handy if you need a local bank. I sure wish DCU had a local
branch for us.
Great Western has just introduced a CD that allows you to withdraw all money
after 7 days with no penalty. Minimum is $2500.00 and the yield is 5%.
Watch the ads, if GW is doing this, other banks will probably counter with
something comparable.
SQ
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| .1 Yes, I have those set up already, espec. for long term
Even though I consider stock (esp. ESPP) as short term,
in reality I do not.
.2 Susan, thanks for the pointer. I'll check Coast out.
Would US Savings Bond (direct purchase from paycheck) be
a viable intermediate vehicle? Would you consider a Money
Market Fund like Strong?
Others?
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