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I have $200k and want to set aside for 10 years. I know to be really safe I have to go for 10 year CD. I can get close to 3% CD from my brokerage account.
I am a little greedy and would like to get 5%. What would be the safest investment? Junk bond funds now have a return of 6%. So in 10 years I get extra 10% on the money and I can afford to lose 10% on the principle. The problem is that the funds could lose much more than 10% in value in 10 years. Any other investments do you know of?

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    Additional return comes with additional risk. There is nothing as safe as a CD that will get significantly more return. – D Stanley Apr 27 '17 at 23:19
  • The trick here is going to be splitting up the money. Put most of the money in a CD or some other very protective investment, put some of the money somewhere else. I'd say, "Junk bonds" are probably not in the "safe investment" group. – quid Apr 27 '17 at 23:36
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    What's the worst outcome that you'd be content with after 10 years? – Hart CO Apr 27 '17 at 23:46
  • My expectation is that I will have at least 85% principle left at the end of year 10. That will be 170K. – Tony Apr 28 '17 at 1:36
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I don't think there exists a guaranteed 5% investment vehicle. You have to decide how much risk you're willing to take. Splitting your $200k between CD's and stocks (or whatever higher yield investment vehicle you've found) is a way to get a higher rate without risking it all.

For example if you've got a CD at 3%, and let's say best case is 10% average annual return on stocks, after 10 years here are potential results using various splits from 100% CD to 100% stock:

10 year returns

The best case based on 10% average stock return and 3% CD return is the Total line for each split, the worst-case would be the CD amount only. Reality could be almost anywhere, but not below the CD amount.

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  • Good chart! My worry is that stock could have a negative return in the next 10 year. Like SP500 from 2000 to 2010. Because I only need 5%, I hope I can avoid stock. – Tony Apr 28 '17 at 1:41
  • Yeah that's always the concern, it's easy to point at the historic 10-year averages and think you've only got a 5% chance of losing money over 10-years, but that's not a valid risk assessment. With 130k in a 3% CD, you could put 70k in the stock market and have at least $175k in 10 years, and if the stocks hit 10% average then ~$365k. – Hart CO Apr 28 '17 at 1:59
  • Great Chart. Request if you could supplement this with probable loss scenario, i.e. stocks yield is -25%. Or as OP has explicitly said he doesn't want to loose more than 10%, ideal investment in CD [or guaranteed product] should be 87.5% with a 3% yield would return 90% of original corpus. The balance 12.5% one can invest in riskier investments and a chart can show how much gain or loss on will have depending on various scenarios. – Dheer Apr 28 '17 at 2:59
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Invest in a high quality dividend paying group of stocks. Look up "stock aristocrats" to find longterm quality stocks that have regularly increased their dividends for over 20'years.

10'years is a safe period of time to invest in stocks. If you had bought stocks at their hight in 2007 and kept them through the 40% decline thru 2008 and 2009 and held on to them for 10 years until 2017, you would have earned a 40 % increase from when you purchased them. That is pretty much a worst case scenerio. If you had invested in dividend paying stocks and had earned an additional 2.5% per year, you would have exceeded your 5% goal.

The lifetime yearly return of the stock market is 10%. Time is the only downside, but with ten years, you are almost certainly immune.

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