Hi there! Would it make sense to put my down payment funds into SGOV? It seems like a very low-risk option and could yield about 1% more than my high-yield savings account (for now). Any advice or alternatives out there?
Think of it less as investing and more as setting aside your funds in something like treasuries or a treasury equivalent.
I think it’s a good move! I’m in NJ, so it saves me about 9% on state income tax, plus the yield’s a bit better than a money market.
Chandler said:
I think it’s a good move! I’m in NJ, so it saves me about 9% on state income tax, plus the yield’s a bit better than a money market.
I’m in California, so that state tax break would help a lot here too.
It’s basically at the risk-free rate. If you’re in a state with a decent income tax, that’s an advantage since it’s state tax-exempt. If not, you could look into BOXX. It doesn’t have taxable distributions, so you don’t get taxed until you sell. If you hold it over a year, you’d only pay long-term capital gains, though it’s slightly riskier than SGOV.
@Jory
Just a note: BOXX is a bit more risky compared to SGOV. I use it myself, but only because it suits my situation.
Hale said:
@Jory
Just a note: BOXX is a bit more risky compared to SGOV. I use it myself, but only because it suits my situation.
True, BOXX has a different structure. It’s set up to avoid distributions so there won’t be taxable events unless you sell, which can be beneficial if held long-term. It uses custom baskets of options, but for someone just looking for something simple and super low-risk, SGOV might be easier to stick with.
@Jory
Can you expand on their approach with avoiding distributions?
Monroe said:
@Jory
Can you expand on their approach with avoiding distributions?
They used to use single stock options, but now they use index options to make it more tax-efficient. That change makes it more secure against IRS issues down the road. Essentially, it’s set up so they reinvest everything internally without paying distributions to investors, which is why there’s no tax unless you sell.
@Jory
Thanks! That explains it. Seems like a smart way to avoid unnecessary distributions.
Feels like a good call. You get T-bill-like returns and it’s state-tax free. Good choice.
That’s what I’m doing too.
Galen said:
That’s what I’m doing too.
Same here.
Agreed. I’m moving cash from my HYSA to SGOV as well.
Yep, it’s a safe option.
If you’re really going for zero risk, compare to CDs or munis in your state. Depending on your tax situation, one might work out better. But if you don’t need the cash for a few years, you could go a little higher risk with a 20/80 mix of equities and credit, or even investment-grade bonds.
Seems like a smart move. If you don’t need the funds soon, you could definitely look at SGOV. How long until you’re planning to buy?
Ellery said:
Seems like a smart move. If you don’t need the funds soon, you could definitely look at SGOV. How long until you’re planning to buy?
In about 3-4 years.
Ellery said:
Seems like a smart move. If you don’t need the funds soon, you could definitely look at SGOV. How long until you’re planning to buy?
In about 3-4 years.
Perfect. SGOV should be a good fit for that timeframe.