Vanguard low risk funds for home down payment?

[davidw]

Hi,

Are there any very low-risk funds from Vanguard that you'd recommend for holding money intended for a down payment on a home for a year or so?

Or is it better to just keep it as 'cash' (the Vanguard settlement fund)?

It's around 100K, if that makes any difference (I know I can get slightly better rates in some Vanguard funds with that, for instance).

My goals are to 1) not lose any of the money if the markets take a turn for the worse and 2) maybe keep up with inflation a bit more than the 'cash' fund.

[RobertFromTX]

Here's the tools:
https://portfoliocharts.com/portfolio/my-portfolio/

Put in a portfolio mix then go to the "Target Accuracy" table and put in $100,000 with investing timeline of 1 year. You will see a Minimum/ Average / Max of that portfolio after 1 year based on data since about the 1970's.

Even a portfolio of 100% short-term treasuries could lose you 5% in a year.

If it were me, I'd leave it in the settlement fund or some bank money market account. 1 year is just too short.

[Kl285528]

look at CD's, or high yield savings accounts?

[mckaylabaloney]

IMO the best way to get safe returns on a significant amount of money over a short period of time is doing multiple bank account bonuses. It's pretty easy to make, say, $500 for parking $15,000 at a particular bank for a few months. It requires some work and organization, but if you're willing to split up and move around your $100k for a year (or a little less, as you may want to stop a few months before applying for mortgages), you should be able to make a few thousand dollars, no problem.

Ordinarily the best source for current offers is Doctor of Credit. It looks like their bank account bonuses page is down right now, but hopefully that's a temporary situation: https://www.doctorofcredit.com/best-bank-account-bonuses/

You can also check out this thread for more info: https://forum.mrmoneymustache.com/share-your-badassity/bank-account-churning-how-to-make-$1600-in-a-year-by-being-organized/

Edit: tried to fix the thread link but I can't figure it out (?), just copy and paste the whole thing for a working link

[MustacheAndaHalf]

My goals are to 1) not lose any of the money if the markets take a turn for the worse and 2) maybe keep up with inflation a bit more than the 'cash' fund.

How flexible are you on the date for buying a house?  Your stock allocation could suffer a correction, and overall you might no longer have enough for a down payment.  If you can wait 1-2 years for a recovery, you can take more stock risk.

For example, Vanguard LifeStrategy Income is 80% bonds and 20% stocks.
https://investor.vanguard.com/mutual-funds/profile/portfolio/vasix

But if you invest 20% in Vanguard Total Stock and 80% in Vanguard Total Bond, you'll have a slightly lower expense ratio.  The less flexible you are on the purchase date, the less risk you need to take.

[davidw]

My goals are to 1) not lose any of the money if the markets take a turn for the worse and 2) maybe keep up with inflation a bit more than the 'cash' fund.

How flexible are you on the date for buying a house?  Your stock allocation could suffer a correction, and overall you might no longer have enough for a down payment.  If you can wait 1-2 years for a recovery, you can take more stock risk.

For example, Vanguard LifeStrategy Income is 80% bonds and 20% stocks.
https://investor.vanguard.com/mutual-funds/profile/portfolio/vasix

But if you invest 20% in Vanguard Total Stock and 80% in Vanguard Total Bond, you'll have a slightly lower expense ratio.  The less flexible you are on the purchase date, the less risk you need to take.

I definitely do not want stocks; that's too risky. Ideally, I'd like something that basically tracks inflation - that's my only real worry about keeping the money as a cash equivalent. Otherwise I'm certainly on team 'risk averse' rather than 'trying to maximize returns'. I definitely want to avoid short term losses if at all possible.

[MustacheAndaHalf]

I'm certainly on team 'risk averse' rather than 'trying to maximize returns'. I definitely want to avoid short term losses if at all possible.

Stocks and bonds both can have short term losses.  You can't even buy a treasury bond fund, because as yields rise those funds take losses.

You could invest in bank CDs, or buy individual treasury bonds that are due before you need the house deposit.

[Dicey]

IMO the best way to get safe returns on a significant amount of money over a short period of time is doing multiple bank account bonuses. It's pretty easy to make, say, $500 for parking $15,000 at a particular bank for a few months. It requires some work and organization, but if you're willing to split up and move around your $100k for a year (or a little less, as you may want to stop a few months before applying for mortgages), you should be able to make a few thousand dollars, no problem.

Ordinarily the best source for current offers is Doctor of Credit. It looks like their bank account bonuses page is down right now, but hopefully that's a temporary situation: https://www.doctorofcredit.com/best-bank-account-bonuses/

You can also check out this thread for more info: https://forum.mrmoneymustache.com/share-your-badassity/bank-account-churning-how-to-make-$1600-in-a-year-by-being-organized/

This, especially if your company will let you do multiple Direct Deposits and you're good with details.

[getmoneyeatpizza]

I'm in a similar situation although, I currently own a house and have equity so I'm exploring investing my deposit and using a HELOC.

+1 for Bank account bonuses and if your employer lets you change your direct deposit then you are golden.

There a citi bank $700 deal now for a 50k deposit that doesn't require direct deposit I may do if this HELOC doesn't work.

[Radagast]

I agree with

IMO the best way to get safe returns on a significant amount of money over a short period of time is doing multiple bank account bonuses. It's pretty easy to make, say, $500 for parking $15,000 at a particular bank for a few months. It requires some work and organization, but if you're willing to split up and move around your $100k for a year (or a little less, as you may want to stop a few months before applying for mortgages), you should be able to make a few thousand dollars, no problem.

Ordinarily the best source for current offers is Doctor of Credit. It looks like their bank account bonuses page is down right now, but hopefully that's a temporary situation: https://www.doctorofcredit.com/best-bank-account-bonuses/

You can also check out this thread for more info: https://forum.mrmoneymustache.com/share-your-badassity/bank-account-churning-how-to-make-$1600-in-a-year-by-being-organized/

and

My goals are to 1) not lose any of the money if the markets take a turn for the worse and 2) maybe keep up with inflation a bit more than the 'cash' fund.

How flexible are you on the date for buying a house?  Your stock allocation could suffer a correction, and overall you might no longer have enough for a down payment.  If you can wait 1-2 years for a recovery, you can take more stock risk.

For example, Vanguard LifeStrategy Income is 80% bonds and 20% stocks.
https://investor.vanguard.com/mutual-funds/profile/portfolio/vasix

But if you invest 20% in Vanguard Total Stock and 80% in Vanguard Total Bond, you'll have a slightly lower expense ratio.  The less flexible you are on the purchase date, the less risk you need to take.

If your goal is to buy a house instead of avoid losing money, I would observe that the odds of real estate prices gaining 25% in the next year are at least as high as a balanced fund such as VTINX losing 25% in the next year, but VTINX will probably better track inflation and real estate prices than cash will.