newbie needs investment help.

[ace7644]

Hi everyone,
First post and I need some advise.  I've got around 30K sitting in a savings account that is currently generating no interest.  This has been dubbed "The house fund" by my wife and I, as we plan on using it for a down payment eventually.  I feel like this money is going to waste in the account and that it could be working for me.  Any advise on what options I have to make this money grow a little would be very much appreciated.  My only requirement would be that I would be able to pull this money relatively quickly at any point in time should the need to move on a house arise.  I'd also like to keep this on the less risky side of investing.
Thanks.

[thedayisbrave]

Hi everyone,
First post and I need some advise.  I've got around 30K sitting in a savings account that is currently generating no interest.  This has been dubbed "The house fund" by my wife and I, as we plan on using it for a down payment eventually.  I feel like this money is going to waste in the account and that it could be working for me.  Any advise on what options I have to make this money grow a little would be very much appreciated.  My only requirement would be that I would be able to pull this money relatively quickly at any point in time should the need to move on a house arise.  I'd also like to keep this on the less risky side of investing.
Thanks.

Nope.  If you plan on using this for a DP in the near future, don't invest it and run the risk of the market declining just as you need to pull it out.  It can be tough to just let it sit, but it's better to be more confident your money will be there when you need it.

[Financial.Velociraptor]

Are you intent on making a large downpayment versus going FHA with 3% down?  That's how I did my home.  Fixed interest rate was very reasonable for the market at the time even after PMI.   And an FHA mortgage is "assumable."  So you can lock in a low fixed rate, and sell the house and mortgage as a package if you move later.  Buyer might be willing to pay more if you can get them a 4% rate in a 6% future rate environment?

There aren't really any "good" no risk, high yield instruments right now - thank the Fed.  If you insist, I'd look into 3 month CDs.  The rate will be low but maybe a little better than the advertised rate if you are securing 30K in a single instrument.

If you are going to keep it a little longer, US Savings Bonds might work.  There is usually a 3 month interest penalty if you sell sooner than 6 months holding period.  The investment is guaranteed though and exchangeable for cash at any FDIC bank.  There may be limits on how much you can put into each series per year...

Personally, I'd be content to just hold cash in a regular savings or MM checking account at today's rates, IF I was going to use the money as DP soon.  Half a percent more over 3-6 months is going to be trivial.

[clarkm04]

It needs to be in a safe place.

My only suggestion would be a Capitol One 360 Savings account or something similar.  We are currently in a era of low interest rates, but there are many places that are offering .75 - 1%, which is better than your zero.

Good luck!

[ace7644]

I may look into some short term CD's in that case but the payout is almost not worth the trouble of going to the bank and setting it up.  We are not going to start seriously looking at houses until we have 50K saved up and are currently putting away around 15k per year, but plan on increasing that in the near future.  So we are probably a year and a half away from our goal maybe a little less if next years tax returns go into the account too.

[FabricStache]

It needs to be in a safe place.

My only suggestion would be a Capitol One 360 Savings account or something similar.  We are currently in a era of low interest rates, but there are many places that are offering .75 - 1%, which is better than your zero.

Good luck!

+1 on the Capitol One 360 or similar.  Mine is paying 0.75% at the moment.

[FLBiker]

I agree with everyone else.  1.5 years isn't enough time to invest in something like index funds.  For my "emergency fund" I use SmartyPig, which is currently paying 1%.  It's slightly less liquid than a money market (it takes like 3-4 days to get it from SP to your bank) but it works for me.  To be honest, I've been toying with getting rid of the whole thing and just leaving it in my .1% interest checking account.

[Mighty-Dollar]

Hi everyone,
First post and I need some advise.  I've got around 30K sitting in a savings account that is currently generating no interest.  This has been dubbed "The house fund" by my wife and I, as we plan on using it for a down payment eventually.  I feel like this money is going to waste in the account and that it could be working for me.  Any advise on what options I have to make this money grow a little would be very much appreciated.  My only requirement would be that I would be able to pull this money relatively quickly at any point in time should the need to move on a house arise.  I'd also like to keep this on the less risky side of investing.
Thanks.

How soon will you be needing this money? That's the most important question. I'm a bit a of a gambler. I'd maybe take half of that money and invest 67% in BND or AGG and 33% in SPY or VOO. Leave the other half in that savings account. No pain, no gain. If you don't take some risk then that money will just sit and lose value due to inflation each year, although inflation is at least running at only about 1% right now. I know what you're thinking... What if the stock market crashes like it did in 2007 - 2009? And to that I say does this look risky to you? http://www.yourinvestmentadvise.com/images/chart-33-67-port.jpg