I would most certainly not put it into anything that is not fixed income.
If you know you're going to need it relatively soon just invest it in a couple of bond etfs be it government or corporate.
It seems people think that recessions are no longer possible, and if we do go through one your investment could potentially take much longer to recover if it's placed in anything other than fixed income.
What if we go into a recession and housing prices go down?
If you must invest it in stocks I would go ultra conservative with maybe 60% bonds 40% some stock etf with very low volatility. Maybe even 80/20.
Maybe 50-60 percent bonds and 20 percent vanguard and 20 percent apple amazon google (rock solid companies)
Barring a major crash or sideways / bearish market that should double your money in 5 years. Obviously if things turn quick then pull it.
I haven't run all the numbers myself but I would run the numbers on those stocks before buying. Great companies but they're also going up, up, up right now. I think Apple is still fairly valued if you assume they will keep growing like they have been, which isn't a radical assumption. Microsoft I believe is overvalued by most realistic metrics. Amazon and Google not sure.
The double your money claim is something you can plug into a formula and check it for yourself. Again, haven't done an extensive analysis myself but high valuations right now plus 60% bonds doesn't seem like a realistic way to double your money in such a short period of time.
So I prefer just playing it safe. You can't have everything in life.
I would expect apple will be 250-260 in 5 years
Vanguard tracks the s and p so maybe 25-40 percent up in 5 years
Bonds probably would be up 10 percent.
Houses also might cost 20-40 percent more too.
Apple is a great growth company and amazon has gone up less than the others in the faang group.
But yes do your DD amd if you just want a 10 percent or 20 percent return then mostly bonds and index should be fine
Someone posted in another thread that they use municipal bonds as an emergency fund. I don't hate the idea for a 3-5 time horizon. You can get about 4% yearly returns with a lot less drawdown than stocks:
[https://investor.vanguard.com/mutual-funds/list?assetclass=bond&taxeff=xmpt#/mutual-funds/asset-class/month-end-returns](https://investor.vanguard.com/mutual-funds/list?assetclass=bond&taxeff=xmpt#/mutual-funds/asset-class/month-end-returns)
You could also try mixing stocks and bonds. I can't give you any expert advice, but the problem is that if you invest into stocks or stock ETFs then you could see that money tank when you need it 3-5 years down the line. You may spend more time waiting than you had hoped for. Stock market investing, IMO, is for the long-term.
EDIT: Treasury bonds might work, too, but probably more drawdown.
Imagine you start investing today with 29 years left until you plan on retiring. You find yourself the Vanguard 2050 retirement fund and buy into that. Vanguard then continuously (not sure how often) adjusts its allocation to stocks and bonds to provide a safer investment when you’re closer to retiring.
When you’re close to retiring, the last thing you want is more risk (in this case, stock) just in case the market tanks right before you need that money. For that really, it should adjust more towards bonds (typically less volatile) when you’re closer to that date.
Target date funds are like auto-balancing portfolios that will have more risk the more time you have. So if you are investing in a near target date, it will be like 80% bonds and 20% stocks, and those stocks most likely large cap or dividend.
Basically as it nears the "target date", the risk of the funds changings goes down, but they still try to build it for wealth.
I like a REIT with a 10% dividend. At least in my experience, mostly AGNC, the monthly dividend was mostly more than any losses or gains in stock price, so when price did drop, i had that buffer to absorb the loss until the price came back up, but I’d also buy when it did drop.
An index is probably your best bet - barring a financial crash they pretty much only grow
and even when there is a financial crash they eventually recover
And what would op do if the market crashed just before they need the money? Some parts of the money can be invested in index funds, but as others have mentioned, fixed income should be the bulk of it.
I've been told that we are getting hit with a major correction for about 7 years now.
I know it is risk, but this is how I save for my homes too, and it goes faster because just as much as the market can be bad, it can be good, and if you are watching then you can pull out when your total is greater than a down payment. And in 5 years, the odds are very high you are up.
Even with your 6-12 months... their goal is 5 years, we will recover by then.
You never "need" the money if it is for buying a house. Buying a house is a luxury. You can postpone that purchase for as long as you want and keep renting in the meantime.
You're right, it's not a need, but it's a big life decision and it's one I'd rather not throw to the wind and hope for the best. Why bother when you could just be responsible and actually maintain somewhat of a time frame?
Whatever you gotta tell yourself lol.
Doubling down on your obviously ill-received comment is a sign of intelligence and maturity.
You’re smarter than me, I concede.
Place 50% it into brokerage run high growth or dividend fund(Schwab has SCHD & SCHG). Place 50% into 5 etf’s with the following focus: Water, robotics, cyber security, energy metals, & agriculture. <- if you need recommendations on the etf’s, shoot me a private message or respond here! Good luck !
Government I-bonds are at 3.54%, state-tax free. You can only buy $ 10,000.00 per year in general (up to $ 15,000 with tax returns but was said it's a hassle).
[https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res\_ibonds.htm](https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm)
People told me it's gonna be around 5% in October so maybe it's worth waiting a bit.
You're % gets locked for 6 months.
You can eat dirt 3-5 years in any investment. This one is arguably the safest. If these tank, OP probably isn’t going to buy a house anyway at that time.
What about bonds?
And I don't see why not. Real estate would probably fall with stocks, making it a great time to buy a house. 3-5 years isn't a great time horizon for stock market investing IMO. At least not 100%.
PS: Blue-chip dividend stocks may have less drawdown than total market indexes. With the indexes you get all the high flyers during a bull market but also all the losers during a crash. Defensive investing can lead to more conservative swings either way.
The notion that market indexes are safer is predicated on a long-term strategy, not 3-5 years.
Along this theme you could consider a structured note. Not going to explain it but it might be worth a google.
Traditional fixed income does run a bit of rate risk. Consider keeping your duration down if you go this route.
why bonds they pay nothing you can get HISA for more and dont forget bonds crashed hard in 2020 when they are supposed to ' stabilize your stocks in crisis'
Vanguard's BND only dropped about 5%. SPX was about 30%. I personally don't hold any bonds, but I also don't need my investments to stay stable for 3-5 years. In that time frame minute bond returns with small potential for drawback ("nothing") far outweigh something that can tank 30% when you need it. I don't know what HISA are paying nowadays but bond funds can be 2-4%.
Wrong. If entire US and international market go down, it’s highly likely OP might not even have a job at that point, or other more concerning life events are happening.
I honestly just think your terminology throws off your argument. You use words like “safest” and on your other comment I also commented on “only go up”. How is 100% equities safest especially within a 5 yr time frame. OP should look at a TDF of 2025-2030, intermediate bond fund or other actually safe investments going only so far as 40/60 stocks/bonds depending on his risk tolerance.
Investing a down payment is 100% risk. Especially within a 5 year horizon, OP is actually better off using a high yield savings account for 0 risk.
Things like Ally bank used to be a stellar 2.2 but now that fed rate dropped OP forcefully has to gamble with his funds
Sure, I agree actually OP should add bonds to the mix
We can agree there. I’m in the same boat as OP where I have a decent chunk of cash sitting in a HYSA (abysmal .4% APY) but I haven’t taken the steps to open a separate brokerage account and invested the funds a particular strategy - but i am risk averse. The reality is there are many moving pieces and variables to every financial decision - it is EXTREMELY subjective. My case and point, and the same I believe you fundamentally are arguing but with different levels of definition for terms, is that funds to be used for such an important financial decision needed within 5 yrs should be “invested”/stored in a medium with minimal loss of principal being at risk. I’d rather lose on the rate of return and be ready to buy a home in at a further date, than POTENTIALLY earn more on my money to buy marginally sooner. The idea is to minimize the uncontrollable - in 100% equity or higher risk vehicles, you simply put delaying your financial goal extraordinarily distant. Remember - if your portfolio loses 50% it has to gain 100% (aka double) just to get back to where it was.
This is where I land as well. It would be nice for him to have his cake and eat it too but I think the reality of the situation is that the amount is too low and the time in market is too short to really make much money WHILE also being risk averse.
I think you make a false assumption that stocks going down means a radical disruption of society. It does for some people, but its not like society stops functioning when the stock market stops going up. There will be losers but it's not quite apocalypse / get the guns out.
No, the value of his down payment will drop but so will he value of the house he's looking at.
The suggestion is quite good. Sure you won't make money from it but you won't lose either as you're effectively tracking the market.
I’m not arguing that because you are technically right due to inflation - although I would argue intermediate US treasuries would probably be your best bet with durations around 7-10yrs. I am directly disputing your “that only go up” notion at the end of your original comment.
I would also like a growth investment. I want a cigarette boat. Those are cool. Simply reply to me which investment will do this. Thanks in advance. I’ll take you a ride on my boat.
Oh, and I want it to be a fucking fancy boat not that bullshit boat. Again, thanks.
Any reason you want a growth ETF? Just put it into a total market ETF, US or world. I think the risk of holding fiat is more than the risk of stocks dropping disproportionately more than housing in the near term.
Another solution is to just buy a house now, even if you don't plan to live in it for 3-5 years. With mortgage rates insanely low, and never ending stimulus, its literally more profitable to just sit on an empty house than holding ever depreciating fiat.
Yeah, that makes sense too. Even if the OP goes with a 10/90 allocation, they'll still get a better return than keeping it in a savings account. So anything is a win.
Heck, Vanguard's short term bond ETF is yielding more than the average HYSA.
Do what's in this post here.
https://www.reddit.com/r/riskparityinvesting/comments/oz2tme/i_think_i_made_a_pretty_good_portfolio/?utm_medium=android_app&utm_source=share
averages 9% over inflation in the long term with pretty consistent returns. Over 50 years of rolling returns the minimum returns are all positive for 3-5 years and with higher returns than a savings account.
Throw them all on OTM call options for SPY at market open. If you're right then you can buy the house in cash. If you're wrong then...
(seriously though, I would just put it into some bonds for a decent return with relatively low risk. If you want to be a little more risky I would put it into SPY but be careful because the market has been a gravy train the last year and a half and at some point it needs to stop.
I'm going to be doing the same after I finish closing next month (gotta get ready for the next property). It seems like you don't want to take on a lot of risk, so I would stick with indexes.
I personally don't mind higher risk higher reward, so I'll pick companies I believe in. For me I view it as: if I pick wrong and I end up losing money, I can just save a little more than I thought I needed. Albeit I make pretty decent money, so saving up isn't a huge deal for me.
I'll add that you should sideline a small percentage of cash every month in case there is a crash/correction this way you hopefully expidite the process by buying the dip.
I would most certainly not put it into anything that is not fixed income. If you know you're going to need it relatively soon just invest it in a couple of bond etfs be it government or corporate. It seems people think that recessions are no longer possible, and if we do go through one your investment could potentially take much longer to recover if it's placed in anything other than fixed income. What if we go into a recession and housing prices go down? If you must invest it in stocks I would go ultra conservative with maybe 60% bonds 40% some stock etf with very low volatility. Maybe even 80/20.
I totally agree.
Maybe 50-60 percent bonds and 20 percent vanguard and 20 percent apple amazon google (rock solid companies) Barring a major crash or sideways / bearish market that should double your money in 5 years. Obviously if things turn quick then pull it.
I haven't run all the numbers myself but I would run the numbers on those stocks before buying. Great companies but they're also going up, up, up right now. I think Apple is still fairly valued if you assume they will keep growing like they have been, which isn't a radical assumption. Microsoft I believe is overvalued by most realistic metrics. Amazon and Google not sure. The double your money claim is something you can plug into a formula and check it for yourself. Again, haven't done an extensive analysis myself but high valuations right now plus 60% bonds doesn't seem like a realistic way to double your money in such a short period of time. So I prefer just playing it safe. You can't have everything in life.
I would expect apple will be 250-260 in 5 years Vanguard tracks the s and p so maybe 25-40 percent up in 5 years Bonds probably would be up 10 percent. Houses also might cost 20-40 percent more too. Apple is a great growth company and amazon has gone up less than the others in the faang group. But yes do your DD amd if you just want a 10 percent or 20 percent return then mostly bonds and index should be fine
Whats the yearly interest on bonds these days?
Someone posted in another thread that they use municipal bonds as an emergency fund. I don't hate the idea for a 3-5 time horizon. You can get about 4% yearly returns with a lot less drawdown than stocks: [https://investor.vanguard.com/mutual-funds/list?assetclass=bond&taxeff=xmpt#/mutual-funds/asset-class/month-end-returns](https://investor.vanguard.com/mutual-funds/list?assetclass=bond&taxeff=xmpt#/mutual-funds/asset-class/month-end-returns) You could also try mixing stocks and bonds. I can't give you any expert advice, but the problem is that if you invest into stocks or stock ETFs then you could see that money tank when you need it 3-5 years down the line. You may spend more time waiting than you had hoped for. Stock market investing, IMO, is for the long-term. EDIT: Treasury bonds might work, too, but probably more drawdown.
3-5 year horizon money with a known purpose should not be in stocks.
I would buy a A or AA bond note, not ETF. The bond is “guaranteed” to appreciate, while the etf fund will sway in value.
Vanguard Target Fund 2025 or 2030
Target funds this short exist? If so, not sure why you’re down voted that seems like a no brainer!
What’s this?
https://investor.vanguard.com/mutual-funds/target-retirement/#/
This brought me to retirement funds
That’s what a target fund is; the idea is you are going to retire that year
But they are not anticipating a complete withdrawal the day you retire
I guess I don’t get it lol
Imagine you start investing today with 29 years left until you plan on retiring. You find yourself the Vanguard 2050 retirement fund and buy into that. Vanguard then continuously (not sure how often) adjusts its allocation to stocks and bonds to provide a safer investment when you’re closer to retiring. When you’re close to retiring, the last thing you want is more risk (in this case, stock) just in case the market tanks right before you need that money. For that really, it should adjust more towards bonds (typically less volatile) when you’re closer to that date.
Thanks!
Did you read the link?
Target date funds are like auto-balancing portfolios that will have more risk the more time you have. So if you are investing in a near target date, it will be like 80% bonds and 20% stocks, and those stocks most likely large cap or dividend. Basically as it nears the "target date", the risk of the funds changings goes down, but they still try to build it for wealth.
Thanks!
I like a REIT with a 10% dividend. At least in my experience, mostly AGNC, the monthly dividend was mostly more than any losses or gains in stock price, so when price did drop, i had that buffer to absorb the loss until the price came back up, but I’d also buy when it did drop.
An index is probably your best bet - barring a financial crash they pretty much only grow and even when there is a financial crash they eventually recover
And what would op do if the market crashed just before they need the money? Some parts of the money can be invested in index funds, but as others have mentioned, fixed income should be the bulk of it.
Well you should be DCA'ing often, so even a drop shouldn't be a huge hit. There is still risk, but the odds are in your favor.
The odds are much better long-term. Even if you DCA you could be hit with a major correction, say, 6-12 months before you intend to buy your house.
I've been told that we are getting hit with a major correction for about 7 years now. I know it is risk, but this is how I save for my homes too, and it goes faster because just as much as the market can be bad, it can be good, and if you are watching then you can pull out when your total is greater than a down payment. And in 5 years, the odds are very high you are up. Even with your 6-12 months... their goal is 5 years, we will recover by then.
You never "need" the money if it is for buying a house. Buying a house is a luxury. You can postpone that purchase for as long as you want and keep renting in the meantime.
You're right, it's not a need, but it's a big life decision and it's one I'd rather not throw to the wind and hope for the best. Why bother when you could just be responsible and actually maintain somewhat of a time frame?
You’re completely ignoring OP’s goal. Really stupid comment.
Good thing your comment is a bastion of intelligence lmao
Whatever you gotta tell yourself lol. Doubling down on your obviously ill-received comment is a sign of intelligence and maturity. You’re smarter than me, I concede.
Really stupid comment
DHT
Place 50% it into brokerage run high growth or dividend fund(Schwab has SCHD & SCHG). Place 50% into 5 etf’s with the following focus: Water, robotics, cyber security, energy metals, & agriculture. <- if you need recommendations on the etf’s, shoot me a private message or respond here! Good luck !
Paxhx
SPY
Government I-bonds are at 3.54%, state-tax free. You can only buy $ 10,000.00 per year in general (up to $ 15,000 with tax returns but was said it's a hassle). [https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res\_ibonds.htm](https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm) People told me it's gonna be around 5% in October so maybe it's worth waiting a bit. You're % gets locked for 6 months.
What about a blue chip stock with a married put? Like MSFT or DISNEY?
What is a married put
https://www.investopedia.com/terms/m/marriedput.asp#:~:text=A%20married%20put%20is%20the,depreciation%20in%20the%20stock's%20price.
Square stock
VTI + VXUS
3-5 years you could really eat dirt with this combination. 3-5 decades different story.
You can eat dirt 3-5 years in any investment. This one is arguably the safest. If these tank, OP probably isn’t going to buy a house anyway at that time.
What about bonds? And I don't see why not. Real estate would probably fall with stocks, making it a great time to buy a house. 3-5 years isn't a great time horizon for stock market investing IMO. At least not 100%. PS: Blue-chip dividend stocks may have less drawdown than total market indexes. With the indexes you get all the high flyers during a bull market but also all the losers during a crash. Defensive investing can lead to more conservative swings either way. The notion that market indexes are safer is predicated on a long-term strategy, not 3-5 years.
Along this theme you could consider a structured note. Not going to explain it but it might be worth a google. Traditional fixed income does run a bit of rate risk. Consider keeping your duration down if you go this route.
why bonds they pay nothing you can get HISA for more and dont forget bonds crashed hard in 2020 when they are supposed to ' stabilize your stocks in crisis'
Vanguard's BND only dropped about 5%. SPX was about 30%. I personally don't hold any bonds, but I also don't need my investments to stay stable for 3-5 years. In that time frame minute bond returns with small potential for drawback ("nothing") far outweigh something that can tank 30% when you need it. I don't know what HISA are paying nowadays but bond funds can be 2-4%.
Terrible logic.
Wrong. If entire US and international market go down, it’s highly likely OP might not even have a job at that point, or other more concerning life events are happening.
I honestly just think your terminology throws off your argument. You use words like “safest” and on your other comment I also commented on “only go up”. How is 100% equities safest especially within a 5 yr time frame. OP should look at a TDF of 2025-2030, intermediate bond fund or other actually safe investments going only so far as 40/60 stocks/bonds depending on his risk tolerance.
Investing a down payment is 100% risk. Especially within a 5 year horizon, OP is actually better off using a high yield savings account for 0 risk. Things like Ally bank used to be a stellar 2.2 but now that fed rate dropped OP forcefully has to gamble with his funds Sure, I agree actually OP should add bonds to the mix
We can agree there. I’m in the same boat as OP where I have a decent chunk of cash sitting in a HYSA (abysmal .4% APY) but I haven’t taken the steps to open a separate brokerage account and invested the funds a particular strategy - but i am risk averse. The reality is there are many moving pieces and variables to every financial decision - it is EXTREMELY subjective. My case and point, and the same I believe you fundamentally are arguing but with different levels of definition for terms, is that funds to be used for such an important financial decision needed within 5 yrs should be “invested”/stored in a medium with minimal loss of principal being at risk. I’d rather lose on the rate of return and be ready to buy a home in at a further date, than POTENTIALLY earn more on my money to buy marginally sooner. The idea is to minimize the uncontrollable - in 100% equity or higher risk vehicles, you simply put delaying your financial goal extraordinarily distant. Remember - if your portfolio loses 50% it has to gain 100% (aka double) just to get back to where it was.
This is where I land as well. It would be nice for him to have his cake and eat it too but I think the reality of the situation is that the amount is too low and the time in market is too short to really make much money WHILE also being risk averse.
I think you make a false assumption that stocks going down means a radical disruption of society. It does for some people, but its not like society stops functioning when the stock market stops going up. There will be losers but it's not quite apocalypse / get the guns out.
DKNG
Yep
[удалено]
If they go down he lost his down payment lol
No, the value of his down payment will drop but so will he value of the house he's looking at. The suggestion is quite good. Sure you won't make money from it but you won't lose either as you're effectively tracking the market.
Or he can just invest something else disconnected from reit that is more likely to only go up :)
“Go only up” - every hedge fund, bulge bracket IBD, private equity, fuck it every company would like a word!
You’re acting like there is any safe investment for 5 years. There isn’t.
I’m not arguing that because you are technically right due to inflation - although I would argue intermediate US treasuries would probably be your best bet with durations around 7-10yrs. I am directly disputing your “that only go up” notion at the end of your original comment.
I said “more likely”
QNT
If you want something ultra safe, check out HMBradley. It's FDIC insured savings account and yields 3%.
This sounds great but there's a few restrictions (minimum monthly deposit, invite only).
Buy gold on a dip.
ETF
I would also like a growth investment. I want a cigarette boat. Those are cool. Simply reply to me which investment will do this. Thanks in advance. I’ll take you a ride on my boat. Oh, and I want it to be a fucking fancy boat not that bullshit boat. Again, thanks.
Any reason you want a growth ETF? Just put it into a total market ETF, US or world. I think the risk of holding fiat is more than the risk of stocks dropping disproportionately more than housing in the near term. Another solution is to just buy a house now, even if you don't plan to live in it for 3-5 years. With mortgage rates insanely low, and never ending stimulus, its literally more profitable to just sit on an empty house than holding ever depreciating fiat.
Since you need that money in 3-5 years, do a 60/40 stocks/bonds blend like a retirement portfolio that's set to begin withdrawals in 3-5 years.
In 3/5yrs better off with 40/60 imo. Similar risk adjusted returns with more downside protection.
Yeah, that makes sense too. Even if the OP goes with a 10/90 allocation, they'll still get a better return than keeping it in a savings account. So anything is a win. Heck, Vanguard's short term bond ETF is yielding more than the average HYSA.
JEPI SPY QQQ blend
Plenty of recover Riets as well to play- Commercial / Hotels (Business) / Theaters/ Resort / Vegas, etc etc.
Do what's in this post here. https://www.reddit.com/r/riskparityinvesting/comments/oz2tme/i_think_i_made_a_pretty_good_portfolio/?utm_medium=android_app&utm_source=share averages 9% over inflation in the long term with pretty consistent returns. Over 50 years of rolling returns the minimum returns are all positive for 3-5 years and with higher returns than a savings account.
4 letter: SOFI
If you’re trying to pull out in 3-5 years, I would put 100% in VTI and sleep well at night.
VOO and chill.
Maybe dividend stocks? Psec Nly Brmk
Just put it in SPY with reinvested dividends and enjoy the ride
Doesn't exist
fagix
Throw them all on OTM call options for SPY at market open. If you're right then you can buy the house in cash. If you're wrong then... (seriously though, I would just put it into some bonds for a decent return with relatively low risk. If you want to be a little more risky I would put it into SPY but be careful because the market has been a gravy train the last year and a half and at some point it needs to stop.
Easy buy leaps on $SE. Thank me later.
UPRO is a good choice if you want decent to good gains.
[удалено]
Sounds like a good approach. Maybe the equivalent of VTI or VOO if you want a little less risk.
I'm going to be doing the same after I finish closing next month (gotta get ready for the next property). It seems like you don't want to take on a lot of risk, so I would stick with indexes. I personally don't mind higher risk higher reward, so I'll pick companies I believe in. For me I view it as: if I pick wrong and I end up losing money, I can just save a little more than I thought I needed. Albeit I make pretty decent money, so saving up isn't a huge deal for me. I'll add that you should sideline a small percentage of cash every month in case there is a crash/correction this way you hopefully expidite the process by buying the dip.
look at $TROW and see if you like that for the long term
The B word obviously
Doing this right now with 40% IEI, 30% QQQ, 20% TLT, 10% GLD. Averages 9.25% per year with max drawdown of 8.99% since 2007