I’m tired of my money sitting in a savings account, not earning any real interest. What’s a good way to invest my money? I’ll need it to be accessible in somewhere between a 5-10 year span, and able to incrementally increase the size of the investment.
The stock market is right out. I had stock once, and watched the price of those stocks obsessively. I couldn’t stop freaking out over every dollar up or down. I need something I can trust to grow at a reasonable rate, that I don’t have to pay too much attention to.
Some places are offering some pretty high interest savings accounts. According to BankRate, a 5 year CD is running about 2.4%, but I know my Credit Union is running about 2.2% on CHECKING accounts provided you meet certain requirements (eStatements and 12 debits per month or something like that). Not sure what Money Market accounts are yielding these days.
If you take a broader view of risk which includes inflation, it’s impossible.
Any FDIC account that allows immediate withdrawal will pay less than the inflation rate. Any account that pays more than the inflation rate requires that you lock up your money for a time period that allows for inflation to rise above your return.
Similarly, you can get long term bonds that are above the current rate of inflation, but these will decrease in value if interest rates (& inflation) rise, which means that you’ll again face a “penalty for early withdrawal”.
Any stocks will rise and fall with the market and then some.
While that is not as risk-free as a bank account, the returns can be enough higher (even if you stick to the low-interest, low-risk loans) that it might meet your requirements for at least a few thousand dollars.
But you need to figure out your own risk tolerance and as always, DIVERSIFY.
Individual stocks can be quite risky, and are generally not recommended for casual investors. However, that doesn’t have to rule out all stocks: a mix of low-cost index funds give you a much less risky way to invest in the stock market. Funds like VFINX (S&P500), NAESX (small cap), and VGTSX (international) are all good choices, IMO. You could buy some shares of VBMFX (bond index) to reduce your volatility even further.
With a 5-10 year time frame, I think you’ll end up way ahead with index funds than with any sort of interest-bearing account, provided you can keep yourself from freaking out and selling if the market dips between now and then.