As I increase my savings % and max out my tax advantaged accounts (401k, 3x 529s, FSA) as well as my 2x Roth IRAs, I am left with some money left over to do something with beyond my 6 months of expenses emergency fund. The only debt still left on my family's plate is the $150k of our mortgage that we've been paying down fairly aggressively at +$2k to principal monthly which I have decided to put on hold. Reason being is I wanted to have more liquidity with my funds for a potential home move in the next 3 years and so I've shifted from the final debt pay down to more of a taxable investment strategy that still leaves me a bit uneasy because of my macro level diversification strategy.
I am basically set up for 80% stocks (60/40), 10% bonds, 10% REITs using lowest expense ratio index funds available for each component. Now that I’m investing “the rest” into taxable funds, I am currently only investing into VTSAX. Unfortunately, that leaves me vulnerable to market swings should I need the cash for a down payment on a home sometime in the next 3 years. But at the same time, I really don’t want to leave it in cash because it pains me to watch inflation eat away at it and who knows when we’ll actually end up moving.
So I actually have 2 questions:
1. Does it make sense to diversify my taxable holdings separately from my retirement savings since they consider different time periods; maybe more of a 50/50 stock/bond split? This would allow me to somewhat mitigate market swings.
2. Is there a way to buy a house leveraging my existing home or mortgage so that I can just pay that back vs. taking money out of our investment accounts? I would assume it takes a month or two to sell our house once we’ve found one we want to move into, so we’d incur 2 months of interest using this method (if it exists).
