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I have recently pulled my investments out of the stock market and am looking for another way to grow my funds. However, in light of past recession fears I do not want to invest in any way that would be negatively affected by a recession (if one were to happen). However, I also do not believe a recession is guaranteed to happen, so I do not want to bet this investment on a recession happening. I should also state that I am a young college student so I would most likely be limited by any investments that have a high capital requirement. Also, if this investment were to be locked in for a certain amount of time I would prefer that it be around the length of a year (EX: Certificate of Deposit). After a year I will most likely put this money back into the stock market with no fear of a recession happening. What form of investment would you recommend I put this money into while I wait out fears of a recession?

EDIT: I plan on using this money to pay for my bachelors degree. I currently am at a community college which I manage to pay out of pocket for. Stocks were the only investment I had. Currently all my assents are in a savings account.

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    What is this money for? That'll tell us if we think that taking all your money out of the stock market was a wise idea.
    – RonJohn
    Dec 31 '19 at 6:32
  • Also, you said "stock market". What about money you had invested in bonds?
    – RonJohn
    Dec 31 '19 at 6:33
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    You are trying to time to the market, which is a losing proposition.
    – Aganju
    Dec 31 '19 at 6:35
  • Lastly, what does the question title have to do with the body of the question?
    – RonJohn
    Dec 31 '19 at 6:50
  • RonJohn-I plan on using this money to pay for my bachelors degree. I currently am at a community college which I manage to pay out of pocket for. Stocks were the only investment I had. Currently all my assents are in a savings account. As for the title, it is peer edit mistake I made. I was previously set on placing this money in a new saving/checking bank account in order to receive a new account bonus. After a little research I found that this method most likely not suffice to my needs.
    – asmith75
    Dec 31 '19 at 7:19
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Based on your comment that this will be needed soon for tuition, removing the money from the stock market was a Good Idea.

I'd put the money in a combination of high-yield savings account and high-yield 12 month CD(s) from an online bank. They're just as safe as regular banks, but pay interest rates that almost keep up with inflation.

Two which I would recommend are (alphabetically) Ally Bank and Capital One 360.

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    Hi RonJohn. I appreciate the fast response and find your input very helpful. May I ask why you recommend both a CD and a savings account? Wouldn't it be more beneficial to place the entire amount in a CD due to the CD paying a higher interest rate? It is my understanding that aside from inflation a CD is relatively risk free.
    – asmith75
    Dec 31 '19 at 7:48
  • @asmith75 there's little chance that you'll need the money exactly at some multiple of 12 months. Thus, it'll live in the savings account for some fraction of it's time at the bank. (At this time, every other CD besides "12 months" offers a rate that's lower than the online savings rate, so it should go in savings for any time except multiples of 12 months.)
    – RonJohn
    Dec 31 '19 at 8:19
  • Thank you for the explanation RonJohn. I appreciate your knowledge on this topic and will be certain to take your advice into consideration.
    – asmith75
    Dec 31 '19 at 9:16
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Stocks were never the best choice for tuition that is needed in a couple of years. Many parents save for their child's education though a 529 plan. In most of these plans the default setting is to become more conservative as the first year of college approaches. By the time high school ends they are in 100% fixed income investments.

The reason they want to avoid stocks when they are in draw-down mode, is that any drop in the market can impact the ability to pay tuition. That drop could be a blip as tuition is due, or a correction that lasts a semester, or a recession that takes multiple years to recover.

You want safe investments. If you know you will need $x for the tuition in Y months you can look at CDs, put you should know that there can be problems if you need to cash out more money or you need it sooner.

Always look at FDIC or NCUA backed savings accounts or CDs. Other choices include US treasury bills. They are 100% guaranteed, you don't need a broker, and you can pick from many different lengths and can even automatically roll them over.

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  • T-bills yield less than high yield savings accounts and CDs, and you owe federal taxes on them. Thus, unless you live in a place with high city and state taxes, what's the benefit to owning them over putting your money in Ally or CO360?
    – RonJohn
    Dec 31 '19 at 17:52
  • It is another option. They are secure. I have found it much easier to move money into the Tbills. Plus those CD's and savings accounts will also be taxable. Dec 31 '19 at 18:19
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    Easier than clicking a "few" buttons to ACH money from your bank to Ally/CO360? Also, HY online bank accounts also yield more, offsetting the need to pay state/local taxes. (I'm not trying to be argumentative; you know so much about PFF, so I must be missing something here.)
    – RonJohn
    Dec 31 '19 at 18:39
  • I agree with RonJohn. From what I've seen of recent treasury bill auctions the interest rates offered are inferior to any high-yield CD offered by Ally that has a term lasting more than 12 months. However, For periods shorter than 12 months it appears to me that treasury bills offer more generous interest rates than the comparable CD's offered by Ally. You guys are clearly more knowledgeable than me on this so there is a high chance I may be misguided somewhere. I am viewing recent treasury bill rates at this page: treasurydirect.gov/instit/annceresult/annceresult.htm
    – asmith75
    Dec 31 '19 at 22:11

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