re: What to do with $250K

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It’s where I invest. I don’t manage this Fund. The fund pays 10%.

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Maybe I’m confused about the investment, and their website isn’t clear on what it may be.

But if it’s essentially serving as a lender, as a quick example, assuming monthly compounding interest, a loan with a 10% interest rate would result in an annual percentage yield of 5.50% on a 1 year loan, 5.12% for a 3 year loan, and 4.98% on a 5 year loan, with the return decreasing as the length increases. And that’s assuming it’s not paid off early or defaulted, and Garmax doesn’t take any of the return either, all of which would decrease the return.

In order to get 10% return, then the rates would have to be much higher than 10%, with low default rates, few extra principal payments, and no fees. The P2P lending groups like Prosper and Lending Club, have much higher overall rates, but the returns are more likely 5% to 7%.

And like those P2P groups, the returns are probably taxed as ordinary income, and in his case, some of it would be in either the 12% bracket or the 22% bracket, whereas long term capital gains would be 0% and 15% respectively for the same gains.