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How to invest MBA Savings

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How to invest 60k over two years for an MBA program

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Joined: 15 Apr 2013
Posts: 27

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Location: United States (TX)
Concentration: Finance, Healthcare
GMAT 1: 710 Q47 V41
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New post 15 Aug 2016, 11:09

Thanks in advance for your input. I'm planning on matriculating to a full-time B-school in the Fall of 2018. My wife and I decided to downsize to an apartment and cash out of the real estate market. We sold our home and have around 60k in profit that is going to be set aside for B-school (extremely grateful for this provision!). I will most likely use the money for living expenses during the program, and will take out loans for tuition.

My question is- how would you invest that 60k in the time leading up to the program? Here are a few options I've considered:

- 529 plan. Downside is if the MBA falls through- I'll be penalized for using it on other things.
- CD or bond- low interest, low risk.
- Low risk mutual fund- higher risk than the CD or bond, potential for greater return.
- Head to Vegas, win big, screw loans. 8-)

(obviously joking)

I have about 24 months before I'll need to draw on the funds. What would you do?

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New post 24 Aug 2016, 22:53
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Good job on taking advantage of the RE market!

This question probably applies to anyone who has $60K and a 2-3 year spend horizon so everyone is out there hunting for the answer (with exception of the 529 option that is on the table for you).

Ultimately it depends on how much fun you think it will be to develop an investment strategy vs. how burdensome it is. While I don't think it is going to be possible to generate substantial growth/dividends from this sum, you can still do well and get 10%+ perhaps if things work out, so definitely worth the hassle. Of course, the yield reality is that CD's and savings accounts are not going to produce more than just 1-2% per year since the rates are low. Stock market is doing better than ever, which some feel means, it is not a great time to buy, esp with your short-term horizon. Bonds and date-based funds are going to be just weak in terms of the yield.

I am not an investment adviser and you should research it on your own. However, you could built out a custom portfolio with 20-30% in Stock funds (growth), 20-30% in Bonds and 20-30% in Cash CD's/High Yield Savings accounts. You can then start with cashing out your best performer (either stocks or bonds) and then draw down the other instruments. Make sure you consider the tax implications. There are good and bad - good is that you won't have much income in school years but you will be taxed on dividents along the way so you may want to consider tax-free bonds (depending on your tax bracket). This would give a good chance to capture any growth from equities but also protect yourself with bonds and cash. Should the worst case happen and some of your equities go down more than 10%, you can always not sell them and wait for the market to recover. However, the percentages should be based on your risk tolerance, at our age, it tends to be pretty good since most of our productive lives are ahead.... and yes, get a life insurance.

Good Luck!

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How to invest MBA Savings   [#permalink] 24 Aug 2016, 22:53
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How to invest MBA Savings

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