Hi all,
due to some circumstances, I have gotten a pre-payment of my salary in one installment and am looking for a helpful way to “park” it.
There will be ca. 50k in the account from Jan onwards; from August onwards, I will need ca. 3k/ month for a year (by then the money should be around 0).
Since this is salary, I am very risk averse with this. Does someone have suggestions where to best “park” it to at least make it work a bit?
Why not a regular bank account?
If you are very risk-averse, need th emoney and it’s only for 9 to 14 months, I would still put in a bank account. 0% is better than -1%.
If it is your salary for the next 9-14 months and you will spend all of it without taking a part for investing, just put in a Bank account of your choice.
Paying your taxes in advance might give you a little interest depending where you live.
Short term bond ETFs have much lower price fluctuations compared to other types of bonds/stocks.
If you want max safety go for USD treasury bond ETFs (e.g., SHY or VGSH). You will get about ~1.3% yield.
Slightly higher risk are short term investment grade bond ETFs (e.g., BSV). You get ~1.9%.
For both of these types of investments the currency risk (the USD-CHF exchange rate) is probably the biggest thing to worry about. Can be either a positive or a negative.
Consider also the forex transactions, the spreads and the 15% taxes on dividends. I think for 50k you can expect in the order of 10-15$ for two currency conversions + spreads when getting in and out of an ETF. Pay attention to the dividend ex dates also.
Here I would also recommend an ETF just like @zurich3120 does. So you could also take a look at VTIP which is Vanguard’s Short-Term Inflation-Protected Securities ETF. TIPS are considered as the safest bonds as far as I know but there is not much performance of course. Still for this YTD it’s up with 3.7% which is quite a lot…
But this is USD, if you convert to CHF you are down this year…
Ouch, you are totally right, thanks for precising this important fact! If my calculations are not wrong USD/CHF between 01.01.2020 and today has lost 8.4%
Yeah, I’m doing exactly this! I cash my dividends each month (BSV Yield is 1.5%), and I’m making a fortune… in USD, which means I’m down by 4-5% this year (including dividends) -.-
CH bonds have the same expected return as USD bonds in CHF, so negative returns. The central bank interest rate difference will devaluate the USD. At this point there are only a couple of investments that make sense IMO.
I generally agree that it is not worth the bother of looking for a place for such a sum.
There are some savings accounts that give you a bonus interest for up to a year (0.7 % at WIR or similar amounts if you look a bit further), but even this is unlikely to give you more than 350.00 taxable interest income on your 50’000. Hardly life changing.
It’s 29 CHF per month at best pre tax, and maybe 20 after tax per month.
I’m sure there are easier ways in your life to save that kind of money.
Here’s some food for thought for gamblers out there.
Just something I’ve considered doing myself:
If you’re willing to gamble a bit, you could park 30’000 in a savings account and use 20’000 to buy Barrier Reverse Convertibles. These give a high interest if a basket of shares doesn’t fall below a certain threshold.
Some of these have durations of 6 to 12 months and a coupon of 6-13 %. So, worst case, you get the coupon and the shares, best case you get an interest and your money back.
Please note that money invested in BRCs is lost if the issuer goes bankrupt.
Again, this is basically gambling with a very small likelhood of a total loss and a potential upside of 2000 on 20’000.
Again, please look in your life if you cannot optimise your expenses in a way that will yield a better result.
If none of the shares falls
If you loose, you get everything in the worst performing shares. That means you will loose more than the basket of shares.
Thanks for this correction.