4-5 Year Investment Advice Needed

[crhart2]

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. 

[MDM]

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).

[RWD]

[...] 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.

[crhart2]

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!

[crhart2]

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.

[/quote]

Is it possible to invest in a CD with a roth IRA?  Thanks for the tip!

[crhart2]

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!

[frugal_c]

Why wouldn't you just put these funds against your mortgage right now?

[crhart2]

I can't touch the funds yet.  You have to wait 5 years from when the account was opened.

[crhart2]

Does anyone know if you can use a roth IRA to invest in CDs through Vanguard?