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I'm going to be receiving some income which will not have tax withheld (will be getting a 1099-INT) and I'd like to invest it into something relatively safe that will still yield decent return with relatively low risk (maybe low-medium risk with low-medium return) as I will need a portion of this money next year to pay taxes on it. I'd like to avoid having to jump through too many hoops if possible, which could put some high yield checking accounts out. I was thinking of investing it in Total Bond Market, but maybe it makes more sense to invest it in a particular type of bond that will have a more certain return around tax time next year. Thoughts?

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Bond market has some risk to it (albeit minor). In my opinion your timeframe is pretty short and I would just put it into something safe where principal won't be negative.

Match your bond maturity to when you need the money. If you need the money in a year, don't invest in 2-5-10-30 year bonds. Since 1 year yields are basically at 0%, that means just keep your money liquid. Maybe do bank account bonuses with it.

Also, I wish posters here would mention the amount. We tend to give generic advice for any amount of money. But if you told me you were stashing $1000 in BND short-term, I'd say go ahead, because even if it fell 50%, you'd only lose $500. Not a life changing amount of money, unless it's your last $500.

Muscle said:   I'm going to be receiving some income which will not have tax withheld (will be getting a 1099-INT) and I'd like to invest it into something relatively safe that will still yield decent return with relatively low risk (maybe low-medium risk with low-medium return) as I will need a portion of this money next year to pay taxes on it. I'd like to avoid having to jump through too many hoops if possible, which could put some high yield checking accounts out. I was thinking of investing it in Total Bond Market, but maybe it makes more sense to invest it in a particular type of bond that will have a more certain return around tax time next year. Thoughts?

Why don't you just put a third of it in savings and then invest the rest into whatever you want.

Yeah just separate the amount you expect to have to pay in taxes from the rest of it. And just stick it in some .75% savings, if it is not a huge amount, because you will barely make more to be worth the hassle if it isn't a huge sum.

That portion will ultimately be "separated" from the rest for you by your uncle Sam next year anyway, so I don't get why you don't just do it now & move ahead with the remainder into something longer term.



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