Author Topic: Looking for advice on a 5 Year Investment Strategy  (Read 3696 times)

illenvillen

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Looking for advice on a 5 Year Investment Strategy
« on: July 22, 2014, 02:21:15 PM »
I'm starting to save up for a down payment on a house. My track would put me on 5 years to buy one, just by putting the money into a saving account.

However since the money will be sitting around deteriorating I want to start investing it in something so it'll generate some extra income for me. I have 2,500 dollars saved up right now. I plan to put away $400 a month away until 2015, then increase that per month saving by at least $100 every subsequent year (2015: 500/mo, 2016: 600/mo). With this I'll have $4,500 at the end of this year, $26,00 by 2018, and in 5 years I'll have $41,000.

Any advice on how/when/what I should invest this so that I can take it out with relative ease in 5 years, and have made some interest the whole time?

thedayisbrave

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Re: Looking for advice on a 5 Year Investment Strategy
« Reply #1 on: July 22, 2014, 02:46:15 PM »
If you do a search you'll find this topic has been covered a lot.  The general rule of thumb is DON'T invest money that is earmarked for a home downpayment since markets are volatile and your investments could potentially be down when you need to access your funds.

Your best bet would be a high yielding savings account or CD.  Not that exciting, but investing should be done with a long-term time horizon in mind, not when you need access to cash in 5 or so years.

GGNoob

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Re: Looking for advice on a 5 Year Investment Strategy
« Reply #2 on: July 22, 2014, 03:04:39 PM »
If you do a search you'll find this topic has been covered a lot.  The general rule of thumb is DON'T invest money that is earmarked for a home downpayment since markets are volatile and your investments could potentially be down when you need to access your funds.

Your best bet would be a high yielding savings account or CD.  Not that exciting, but investing should be done with a long-term time horizon in mind, not when you need access to cash in 5 or so years.

This is probably the best advice if you need that money no matter what in 5 years. But if you are flexible with when you purchase your house, you could always delay taking the money out if your investments are down.

I invest my taxable and Roth IRAs at Betterment. Using Betterment, you could create a 5-year investment goal and Betterment will suggest an asset allocation and will probably have you adjust that to be more conservative as you get closer to your goal. It looks like Betterment's advice for a 5 year goal is to invest in 39% to 59% stocks and the rest bonds.

Betterment is the direction I'd go, but I'm fine with the extra risk.

illenvillen

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Re: Looking for advice on a 5 Year Investment Strategy
« Reply #3 on: July 24, 2014, 08:28:29 AM »
What about I-bonds or a CD?

milesdividendmd

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Re: Looking for advice on a 5 Year Investment Strategy
« Reply #4 on: July 26, 2014, 01:22:37 AM »

If you do a search you'll find this topic has been covered a lot.  The general rule of thumb is DON'T invest money that is earmarked for a home downpayment since markets are volatile and your investments could potentially be down when you need to access your funds.

Your best bet would be a high yielding savings account or CD.  Not that exciting, but investing should be done with a long-term time horizon in mind, not when you need access to cash in 5 or so years.

This is probably the best advice if you need that money no matter what in 5 years. But if you are flexible with when you purchase your house, you could always delay taking the money out if your investments are down.

I invest my taxable and Roth IRAs at Betterment. Using Betterment, you could create a 5-year investment goal and Betterment will suggest an asset allocation and will probably have you adjust that to be more conservative as you get closer to your goal. It looks like Betterment's advice for a 5 year goal is to invest in 39% to 59% stocks and the rest bonds.

Betterment is the direction I'd go, but I'm fine with the extra risk.

+1

Great product for this sort of saving. Super easy and reasonably priced.





TomTX

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Re: Looking for advice on a 5 Year Investment Strategy
« Reply #5 on: July 26, 2014, 08:31:35 AM »
What about I-bonds or a CD?

CD is fine. I-bonds have a moderate penalty if you cash them before 5 years - so, you could put $5k in an I-bond today. Might be problematic doing next year.

AssetGrinder

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Re: Looking for advice on a 5 Year Investment Strategy
« Reply #6 on: July 28, 2014, 09:49:55 AM »
For such a short period of time 5 years I would stay away from stocks entirely. Either shop around for highest yielding term cash deposits or possibly into target date corporate investment grade bonds.

Playing the equity market doesnt make sense if you are using that money in the next 5 years.

dragoncar

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Re: Looking for advice on a 5 Year Investment Strategy
« Reply #7 on: July 28, 2014, 04:41:43 PM »
How about indexed CDs or roll-your-own equity indexed annuity (I know enough not to suggest a commercial EIA product on this forum!)

edit: rolling your own would probably be like buying a regular CD for the majority and some kind of options strategy for the rest... but I'm not enough of an options guru to provide details.
« Last Edit: July 28, 2014, 04:43:29 PM by dragoncar »