How to invest a small amount of money

[BrettS]

OK, so this is really pretty much completely off topic, but I know there are a lot of smart people on these boards and I really don't know where else to go with this.

I have about $2000 saved as an emergency fund right now and I'm trying to figure out what to do with it. Obviously I don't want to put it somewhere where we won't be able to get to it at all if we do need it, but I'd rather not let it sit in a savings account earing .2% or whatever the going rate is now.

I have other money set aside to cover an unexpected car repair or other small things that may come up... this money is more for a major emergency... loss of a job or something like that. Hopefully money that we won't need to get to for many years (if at all), but still something that should be reasonably accessible if something bad does happen. I'm also planning to add to it over time, but this is what I have to start with.

I'm not totally against putting in a CD or something like that where there would be a fee if we needed to access it. Obviously I'd rather not pay any fees, but I'm willing to take the risk that we won't need to access the money and by locking it away it seems like we might be able to get a better interest rate. I also don't think it would be bad if it was invested somwhere that might take a few days... or even longer to liquidize it. Even in the event that we do need to get to this money we should be able to deal for a short time with what we have elsewhere that's more easily accessible.

So, after all that, do you guys have any advice for me?

Thanks much,
Brett

 

[Colleen27]

I'm interested too. Right now our emergency fund is in a risk-free CD earning a whopping .3%. Our regular savings is earning .15% at the moment so the CD is an improvement, but if there's a better low/no risk liquid option out there I'd like to hear about it.

 

[eliza61]

So I would probably go with a boring CD. LOL.

couple of things you might want to look at. Money markets generally give you a bit of flexibility so you can keep this a bit "liquid" while earning a higher interest rate. The con side of it is that many banks require a big minimum investment (the lowest I've seen is about 2K-2500) dollars.

Nowadays, many on line banks have "no penalty" cd's where you can deposit the money and if you have to close it, you don't get whacked with a penalty. Ally bank is one.

Now mutual funds are also a popular tool, basically you are "pooling" your money with a few hundred thousand of your nearest and dearest friends and investing. The great thing about them is that you can diversify in stocks that would take a lot of moola to buy and you also can sort of not follow them because they have a paid professional to do that (fund manager). The con on these is the "paid professional" part. mutual funds usually have "fees". hey some one's got to pay that brillant business school guy to manage the fund. LOL. Some times those fees can be a bit hefty.

I did see a commercial for USAA no load mutual funds.
Ingdirect has some thing called "sharebuilder". It lets you invest as little as 16 bucks a month (4 bucks a week) into a mutual fund or into stocks and you don't have a minimum. but remember mutual funds are directly tied to the market. You can very easily lose money. so if you think you may want to use it soon, mutual funds may not be the way to go.

http://content.sharebuilder.com/mgdcon/jump/consumer/investmoney/b/pricing.htm

with 2K I would probably put it in an ING no fee cd maybe 9 or 11 months.




DISCLAIMER I am not a investment "any thing". At most I can say is that I read alot. I have done some idiotic things in my life financially

 

[Figment1983]

VEGAS!!

I would check out etrade and check out some no-load mutual funds.

 

[Scubee]

To completely avoid the risk of early withdrawal fees or of principal loss, you're probably looking for a money market account. I personally use ING Orange Savings (acts very much like a money market) for funds I'm keeping in an emergency fund or on a short-term basis. There are no minimums I believe. I link to it a standalone savings account at my local credit union. This allows me to easily and electronically move funds between the two accounts.

 

[eliza61]

VEGAS!!
I would check out etrade and check out some no-load mutual funds.

LOL. I definetly did better than the banks the last time I went. and had some very interesting entertainment.

 

[MomToOne]

Personally, since you only said you had enough other funds for a "small" emergency stashed away, I'd just keep this $2000 in a standard banking account. Life has a way of throwing much larger emergencies at you without much notice, and you may need to draw on that $2000 any time. Case in point - my water heater went out this week. Due to several complications (old house, new building codes) the stupid thing is costing me almost $3k to replace Thankfully, I have those funds and much more just sitting there, waiting to be moved immediately from Savings into Checking to cover that check when I write it tomorrow! And of course, tomorrow there may very well be another emergency....

 

[runwad]

I second the ING savings account, I believe the interest is .8% not a lot I know but better than the .2 at the bank and still has the same functions of the brick and mortar bank savings account.

 

[ICF]

Ally bank savings accounts i think is at or near 1%...so is their 1 year CD

 

[dhardawa]

You might check with some credit unions to see if they have specials. The one at my work has a checking account that is paying 4% right now.

 

[peacelover]

I like Discover Money Market account.., also you could check bankrate.com to see who is paying the highest interest.

 

[amcnj]

I would agree with checking on-line banks savings account rates. They can be the same or higher than CD rates, and you can link the account to your checking account at a brick and mortar back and move money between them at will (though it can take 2-4 days for the money to move). But at least this way the funds are not tied up like they are in a cd.