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Question:


Aside from a savings account, money-market account or certificate of deposit, what is a good, low-risk place to park a large sum of money?
-Creole77


Answer:


It all depends on how long you’re planning to use the parking space. The longer that you can tie up your money, the more risk you can afford to take and the higher the returns are that you can go after. If you’ll need your money in a matter of weeks or months, then those options that you mentioned are probably the right ones. By contrast, if you’re in your 20s or 30s and you won’t need the cash until retirement, then a well diversified investment portfolio of domestic and foreign stocks and bonds, with some commodities and real estate sprinkled in, is likely to be a more sensible and lucrative choice. For periods of a few years, something like a medium-term high-grade corporate bond fund makes sense, and if you’ve got a bit longer than that, then a fund that holds blue-chip stocks with high dividend yields could work.
 
Before you consider any of these, if you’ve got credit card balances or other debts, you should pay them off or at least pay them down substantially. Remember, not paying debt at a typical credit card rate of 12 percent is equivalent to earning 12 percent in an investment, and few investments can be counted on to produce that kind of return. You didn’t say how large your large sum of money is, but the fact that you think it’s large means that it’s important to you, so maybe the best move is to consult a fee-based financial adviser who can get to know you and make some recommendations that are in line with your personal needs.
-Conrad de Aenlle



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