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Can I use my mutual funds as a savings account?

I have around $75,000 sitting in a money market savings account. This is pure savings. I don't plan on needing any of it for at least 2 years. Should I park it in a mutual fund (or a few) and pull out what I need when I need it or continue to contribute as I save? The money market does not pay much interest.

Mutual Funds
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October 2017

Great question! The answer is once you put together your emergency fund, you should invest your other savings. Here's something to think about: The markets are volatile in the short-term (0-3 years) but over the long-term they tend to go up. Therefore, because your goal for your money is considered short-term, you should be careful in the amount of risk you are taking. You do not want to face a drop in the market when you need the money! Here's how I would aproach it:

1) Anything you need within a year, invest in a cash like investment. (Money Market, Savings, Checking)

2) Anything you will need within 1-3 years, invest in a conservative investment. (CD ladder, short-term bonds, ...)

3) Anything you will need within 4-7 years, invest in a moderate risk investment. 

4) Anything longer term, you would be able to take more risk for possibly more growth.

Find out exactly what your goals are for this money and invest your buckets accordingly.

I hope this helps.

 

October 2017
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