Q: My wife and I recently sold our house but won't need to use the proceeds to buy our next home for another six to 12 months. What's the best place to keep the cash in the meantime?
Since you need the money relatively soon to buy another home, let's assume that your risk tolerance is zero for this money.
Until recently, you wouldn't be able to expect much of a return from a risk-free investment. Thankfully, the improved economy and accompanying interest rate hikes have changed that a bit.
For example, six-month Treasury bills yielded just 0.08% two years ago, but now you can actually get a 1.97% annual rate of return. If we're talking about $50,000, this translates to a return of $492.50 over a six-month holding period. It won't make you rich, but it's certainly better than nothing.
If you don't want to go through the trouble of buying Treasuries through an investment account, it's even possible to find similar returns with a savings account or CD, although you'll probably have to look online. Most branch-based savings accounts still haven't passed much of the Federal Reserve's interest rate increases on to consumers.
Marcus by Goldman Sachs offers excellent rates on both as of this writing, with a 1.60% APY on their online savings account or a 2.20% APY on a 12-month CD, if you have that much time. Of course, shop around, as the best rates may be a little different when you read this, but the point is that there's no reason your money can't be completely safe and earn you a decent return at the same time.
