Suggestions for mid term savings/investments?

I know the majority of the discussion in this group is about short
term (emergency savings) or long term (retirement) investing.  Are
there any recommendations for investing on a mid term horizon, maybe 3
to 5 years?  My wife and I both contribute well over matching to our
401ks.  We've maxed out our roth for 2008.  We have 40k which is our
emergency/home improvement/car fund in a high interest savings account
earning 4%.

After reading a few of Jim's posts, I started to wonder if I should
consider moving a ****tion of that money into a moderate mutual fund of
some type.  Something that is relatively low volatility while still
being worthwhile by beating my 4% rate.  The added benefit is it still
being liquid so that I could tap it "just in case".  Would this be a
viable strategy?  If so, are there any funds that I should take a look
at?  I know that Jim was using PRPFX. Also, since the investment would
be held in a non-retirement account, I assume there are some tax
implications in play?

While I understand cds and savings accounts are safe investments, I
feel like I might be leaving some money on the table.  I like the idea
of keeping enough for my actual emergency fund in the safe online
investment while having the op****tunity to earn a little bit more than
the standard short term instruments.  Your advice is appreciated.

Josh

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