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Our building has all of our reserve fund (150K) in money market funds (Vanguard) returning around 2% which is less than the rate of inflation. We would like to put about half the funds in another investment vehicle that would not need to be liquid that would return around 5-6%. Any suggestions? (Our three-month maintenance income (required minimum for a RF) is 50K). Also- does anyone have any suggestions on higher interest liquid investment options.
We're a 24 unit co-op
Have you read this Habitat article?
Investing Is Easy Doing It Well Is Hard http://www.habitatmag.com/publication_content/2008_may/web_exclusive_adaptations/investing_reserve_funds May 2008 Hotline - Reserve Funds
Accumulated some extra funds? Habitat examines some ways to make use of those funds and grow them.
We've been satisfied by NCB (f.k.a. National Cooperative Bank) "CDARS" program. CDARS is a network of FDIC-insured banks whereby the depositor's fund are split among various CDs so that each CD's principal and accrued interest is protected in full by FDIC insurance. In other words, it saves you the hassle of buying brokered CDs or going to different banks to ensure that no more than $100,000 in principal and anticipated accrued interest is deposited at any one FDIC insured bank. You can also ladder the CDs in the CDARS program if you want to go longer on the maturity curve to secure higher interest rates.
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Two suggestions. First, we keep our reserve fund in multiple CDs with rolling maturity dates. This way, each chunk can be locked up for a longer term -- so we get a somewhat higher interest rate -- but there's always a chunk of the money available every 30 days, should we need it.
Another possibility is triple-tax-free municipal bonds. These can pay as much as 3% interest (last time I checked), and the interest is completely non-taxable, so your effective yield is even higher.
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