The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: crhart2 on December 09, 2019, 06:16:37 PM
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My wife and I plan to move to a better quality (more expensive) home in about 4-5 years and want to avoid getting a new mortgage if at all possible. Can anyone recommend any relatively conservative investments for such a short time period? Ideally something with a diversified portfolio and through Vanguard.
I'm already considering a Vanguard target retirement fund. However, my concern is that it will not be conservative enough to do a sudden, complete withdrawl. From what I've seen, the target reitrement funds stop the stock/bond ratio at 20/80%. I see the risk of the 20% stocks as minimal when you're withdrawling a small % amount relative to the total balance over multiple years (actual case during retirement), but more risky when you're withdrawling the whole amount at once. I think I'd drop it down to 10/90% stock/bonds, but don't know if that's possible.
Appreciate the help and feedback.
**Special note that the investment type in this case is a roth IRA, but I will have to use some taxable accounts in the near future.
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I think I'd drop it down to 10/90% stock/bonds, but don't know if that's possible.
It is if, for example, you buy 10% Vanguard Total Stock Market Index Fund (VTSAX) and 90% Vanguard Total Bond Market Fund (VBTLX).
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[...] want to avoid getting a new mortgage if at all possible.
Why? Rates are cheap now (no guarantee they still will be in 4-5 years though) and it's typically better to keep funds invested, especially if you would be withdrawing from a tax-advantaged account like a Roth IRA.
Can anyone recommend any relatively conservative investments for such a short time period? Ideally something with a diversified portfolio and through Vanguard.
The usual recommendation for short time frames is savings accounts or CDs. You can break 2% with CDs easily. This is probably preferable to short term bonds right now. Intermediate term bonds will yield a little higher but could fluctuate too.
I'm already considering a Vanguard target retirement fund.
Target funds, while convenient, have slightly higher fees than choosing the individual funds yourself.
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I think I'd drop it down to 10/90% stock/bonds, but don't know if that's possible.
It is if, for example, you buy 10% Vanguard Total Stock Market Index Fund (VTSAX) and 90% Vanguard Total Bond Market Fund (VBTLX).
I knew there had to be something simple. Thanks a bunch!
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The usual recommendation for short time frames is savings accounts or CDs. You can break 2% with CDs easily. This is probably preferable to short term bonds right now. Intermediate term bonds will yield a little higher but could fluctuate too.
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Is it possible to invest in a CD with a roth IRA? Thanks for the tip!
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Also, we're paying down the mortgage because we simply can't stand debt. That combined with a toddler and unstable market conditions for my industry have lead us down a very conservative path. I know we could make more money by investing instead, but paying off debt is a relief. However, we'll be much more confident investors in the future I'm sure!
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Why wouldn't you just put these funds against your mortgage right now?
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I can't touch the funds yet. You have to wait 5 years from when the account was opened.
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Does anyone know if you can use a roth IRA to invest in CDs through Vanguard?