I'm still researching and pondering this down payment investment. I briefly mentioned putting the down payment money into a stock fund to my husband. He seemed surprised. I did tell him I wasn't sure yet, so I think he just let it be.
If only we could know the future or expect future results based on prior returns...but we can't. I know that if I lock the money into a CD for 15 months I can get 1.50%. Maybe I should be happy with that given interest rates.
I went to Vanguard again to use a tool they have to suggest recommended investments. Including our risk tolerance, investment time frame the tool suggested 60% in the Bond Index, 28% in Total Stock Market Index, and 12% in International Stock Index.
This is slightly different from another recommendation the site gave me another time. I think that time I put in a longer time before withdrawal. Likely three years rather than 2 year or less that I picked this time.
I tend to like the newer suggestion only because only some of the money is put in stocks to take advantage of market appreciation. The rest stays in bonds were it is likely to be more stable while interest rates are this low.
I really am aware that putting money that we need or may want to use in 2 years in the stock market is generally a big no. I can't ever see myself advising anyone else to do that same investment for such a short period of time, but right now all I am doing is pondering my options.
I'm just so frustrated with low interest rates! And I don't want inflation to erode the purchasing power of this money. I'm sure I'm not the only one who is looking for something better.
I appreciate everyone's interest and input in the topic. Feel free to share more ideas and thoughts. will not be deciding anything this week. In fact, I have company coming and a small trip planned and hope to even get out in the yard and enjoy spring this weekend.
More Down Payment Investment Thoughts
April 25th, 2013 at 05:12 pm
April 25th, 2013 at 05:40 pm 1366908017
April 25th, 2013 at 06:02 pm 1366909355
April 25th, 2013 at 06:12 pm 1366909948
I didn't say this in my post, but my gut says to put in the stock fund and take the risk. My logical mind says just leave it in the money market or get a CD. Still plenty to ponder.
April 25th, 2013 at 06:23 pm 1366910611
Before I bought my current house, I was keeping my down payment fund (65k) 70% in cash, 15% in Vanguard Total Stock Market Index, and 15% in Vanguard Total Intl Stock Index. It grew nicely. If the stocks had tanked, I still had the option to put less down and give the stocks time to recover.
April 25th, 2013 at 09:29 pm 1366921790
I will now contradict myself. I do believe in considering the overall market when making investment decisions. I lived in the middle of the tech bubble and the real estate bubble, and it was quite predictable. (Not all the details were predictable, but we were literally considering buying an investment property in 2005 and decided not to based on market fundamentals. This was just our "common sense" conclusion, and a very wise one. You don't have to know nothing about nothing - just have some common sense). All this to say, the stock market right now seems entirely unsustainable and so I Would be really wary to put any short term money in there right now. I would be wary anyway (don't put short term money in stock market!), and I would have said the same thing 6 months ago, but it is what it is. It doesn't mean no one ever gambles and wins. It's just that I like to play better odds.
I like Petunia's answer. The exception is if you are well aware of the risks and you have a Plan B. Petunia had a Plan B. She also got lucky. If you think through the worst case, how you would cope, etc., you would be better off than most people. So, just think it through. I think the decision is less important than the thought put into the decision.
Another option is to consider is buying individual bonds, like Treasury bonds. Check out mymoneyblog, he has had a lot of discussion about buying treasury bonds.
April 25th, 2013 at 09:39 pm 1366922393
I'm completely with you on the low yields. It's so frustrating.
April 26th, 2013 at 01:53 am 1366937600
April 26th, 2013 at 07:57 pm 1367002668
April 26th, 2013 at 10:21 pm 1367011265
April 28th, 2013 at 03:19 am 1367115575
I played around with it for your 2 year time frame, going for the maximum bonus ($500) with "least" amount of savings. For example, if you initially deposited $1,000 and added $525 per month, you'd get $500 in bonuses over 2 years.
And I *think* that each person can have up to 3 of these accounts.
April 28th, 2013 at 04:07 am 1367118467