| Where to invest house down payment fund? |
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Rossyb
New Member
Cash: $ 1.75
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Joined: 09 Mar 2006
Location: Buffalo, NY
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| Where to invest house down payment fund? |
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Hello everyone, I'm 24 years old and I'm in the process of saving up for a down payment on a house. I currently only have ~4k, but will continue to contribute to the account and should have plenty to pay 20% in time for when I'd like to buy (~6-7 years).
Currently I have to money in a vanguard interm term, investment grade bond index fund. Is that an appropriate place to keep this money until I'm ready to join the ranks of home-owners? Is it too risky, not risky enough? I have a relatively high tolerance for risk, but I'm concerned that if I put too much into stocks I might be house hunting during a market low and lose all of my money. So I suppose for this account I'd prefer to error on the side of caution and lose a little bit of growth since it is fairly short term. At the same time, I'd like to grow that money to some degree.
I've had trouble finding information on this, becuase it seems most personal finance sites are primarily concerned with retirement. Since this money will need to be withdrawn all at once, not over the course of 10+ years, the situation is completely different.
Sorry for the long post, I'd appreciate any help you guys can give.
Thanks
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Wed Apr 04, 2007 2:39 pm |
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Enlightened
Member
Cash: $ 2.20
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Joined: 06 Apr 2007
Location: Washington
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Ross,
Why not learn dabble in the stock market?
You can start with little to nothing until you learn the ins and outs of day trading.
E
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Sun Apr 08, 2007 3:28 am |
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oldguy
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Location: arizona
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With a 6 to 7 year time horizon, and the ability to 'wait it out' a year if you hit a market low spot (or a housing high spot) - I would put it in an index fund. Then, when the time is close and the market is above trend, move into an income product for the last 6 to 18 months to preserve the principal.
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Sun Apr 08, 2007 4:44 am |
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Rossyb
New Member
Cash: $ 1.75
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Joined: 09 Mar 2006
Location: Buffalo, NY
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Thanks everyone for your advice. I was pretty sure I was being too conservative, so I'm thinking of rolling the money over into a balanced index fund (~60% stocks, ~40% bonds). Then probably buying into progressively more bonds as the time approaches. Seems like a good balance of risk and return to me, any thoughts? criticisms?
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Tue Apr 24, 2007 8:31 pm |
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efflandt
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Location: Elgin, IL USA
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You are getting some good advice here. Note that bond "funds" can lose money [that happened to me for years when I started my 401(k) and thought bond funds were conservative, but lost 2-3% for years]. So if bonds and money market pay about the same, money market is much safer for the fixed income part.
But you could "gradually" feed some money into stock funds now over a period of months, and gradually move back to cash when getting ready to buy a home. Index funds or ETF's or tax efficient funds can result in more of the capital gains and dividends being considered long term gain, which is taxed at a lower rate than bond or money market interest. So stock funds could come out ahead even if they lagged at the same rate as bonds or money market.
I can't give you recommendations for specific investments because I have been self investing IRA money for less than 2 years and am just catching up to the rate of return of my 401(k) in the past few months (which is better than CD rates the IRA money was earning before that).
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Tue Apr 24, 2007 11:13 pm |
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Case-Face
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Joined: 21 May 2007
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| good post |
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First off: congrats on getting a house! Second: everyone's advice seems to be helpful, so good job for answering this post!
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Wed Jul 11, 2007 5:24 pm |
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austin
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Joined: 29 Jun 2007
Location: Austin
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| houses |
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So this is another thought. I dont know the market you are in. I am down in the Austin real estate market and my knowledge of the Buffalo market is limited.
Sometimes people wait for 5 years until they can buy their dream house. I would look to purchase a small house now and see what your monthly payment would be.
I want to be clear I am not suggesting you buy your dream house now and somehow hope to make the mortgage payment. Or get a mortgage with an arm.
I am just saying if you can find a small house or condo where your monthly payment is similar to your rent. Then you can keep saving at the same rate.
Also in a few years you can choose to sell your place and move into a bigger place. At that time you will have some money saved and hopefully some equity built up in your house.
I want to emphasis again dont move into a place with a mortgage payment you dont feel comfortable with.
4k is not a huge downpayment but in the Austin real estate market I have seen people get a first house with much less.
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Tue Jul 17, 2007 5:05 am |
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letras32
New Member
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Sorry for the long post..
you do not have to say sorry.
You just explained and we answer.
[deleted]
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Sat Aug 04, 2007 1:52 pm |
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more freedom
Full Member
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Joined: 12 Jul 2006
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Have you read creating wealth or nothing down by Robert Allen?
These books might be a good read for your situation.
You can borrow these books from the local library for free
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Sat Aug 18, 2007 3:10 pm |
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