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a friend has 100K sitting in a savings account, earning interest. This cash must be available for use at any time. It currently earns about 4% interest, but is taxed at the 28% bracket, giving a net rate of about 3%.

What would be a better investment, considering the short terms needs? The investment must be relatively safe since the cash needs to remain available. The main issue is to invest in something that would defer or eliminating tax liability on any earnings. Any net rate greater than 3% would be acceptable.

My thought is a mutual fund of some sort. But which if any? Or would another route be better? Any suggestions would be greatly appreciated.
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<<<<<
What would be a better investment, considering the short terms needs?
>>>>>

A few ideas-
1) Better money market. Net.b@nk is currently offering a yield of 5.13%. Others certainly offer a similar rate.

1) A tax-free money market. Very liquid, no taxes. For the year ending in March, avg. yield on these was 2.8% (Lipper Tax-Exempt Money Market Fund Average).

2) CD's. If you buy a "ladder" of CD's, (i.e. 1 maturing in 3 months, 1 in 4, 1 in 5, etc), you can get 5-6% pretty easily. These are less liquid than the money market, and you'll generally forfeit 1-3 months of interest if you cash them out early. This may or may not be an improvement, depending on how likely this is.
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<<This cash must be available for use at any time. >>

In that case, it *must* be kept in cash or near-cash.
You cannot put it into stocks, period. Take a look at the large dips that the market has taken in the last year to see why. If you need the money during a dip, you are gonna be in a world of hurt.

Your best bet is a money-market fund.

Ray

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In addition to trying to get a better rate from other money-market funds, see if your friend can join a credit union through work or some other affiliation, including relatives. My credit union currently gives 5.00%/year for an insured savings account, compounded daily, credited quarterly.

Zev
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I am curious as to why one would need 100,000 at short notice.
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Canth wrote,

I am curious as to why one would need $100,000 at short notice.

How about bail?

intercst
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Canth wrote: "I am curious as to why one would need $100,000 at short notice."

intercst responded, "How about bail?"

Not that I know, but how about proceeds from sale of priot house, renting while waiting to close on different house? Just a thought.

Regards, JAFO
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