The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: blackjack on October 12, 2013, 09:12:15 AM
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I have 8,000 saved right now, i;m able to save 400-500 a week cash (plan on buying a home next august priced between 150-250k)
thinking if i just should hold off on index fun or put some into index fund and other into down payment then to paying off home
also would this be the best index fund to get ?
https://personal.vanguard.com/us/FundsSnapshot?FundId=0085&FundIntExt=INT
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If you are really set on buying a house in less than a year you'll need that money in low risk and liquid (savings account). An index fund has risk so you stand the chance of losing money or having to pay taxes and not make much money depending on your tax bracket. Your best bet is the savings account.
You'll probably want 20% down payment on the house so you'll need 30k - 50k. With 8k now and 400/week you'll be at ((46 weeks * 400) + 8000) 26.4k. You'll be a bit short of ideal but I'm sure you can work something out to save more or settle for a less expensive house.
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thanx right now i just have all my savings go into my ING account
yeah i may bump up to 600-800 (just work more hours at work) have the option to work 60hrs a week
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Yes, I would definitely just keep it liquid. The best way to buy a house is to be ready with your down payment and able to jump on a great deal the second you see it - so if you have your money in an index fund and it takes a dip, you might not be able to put down the down payment you want. And I would definitely say that being able to put down 20% on a house and not have to pay PMI, ever, is a guaranteed return on your money whereas you may or may not make any money putting it in an index fund!
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just the question i came on here to ask. thanks!
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Historically, stock market performance evens out over a long enough holding period (http://www.andhigherstill.com/2013/04/simulating-investment-returns.html); however, the short-term picture is extremely chaotic:
(https://forum.mrmoneymustache.com/index.php?action=dlattach;topic=9660.0;attach=2050;image)
Many investment advice firms such as The Motley Fool advise avoiding stocks entirely for any money you'll need within the next five years. Though this is a conservative stance, the graph should demonstrate where they're coming from.
Keep in mind that, in purely financial terms, Your House Is A Terrible Investment (http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/). Jim Collins interviewed with Radical Personal Finance (https://archive.org/details/jlcollinsnh-whyyourhouseisaterribleinvestment) on this topic.
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Keep in mind that, in purely financial terms, Your House Is A Terrible Investment (http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/). Jim Collins interviewed with Radical Personal Finance (https://archive.org/details/jlcollinsnh-whyyourhouseisaterribleinvestment) on this topic.
I agree that one should not treat their house as their primary investment vehicle, as so many Americans seem to do, but you've gotta live somewhere. The important thing is not to buy way more house than you need so that you can save the rest of your money.