Author Topic: Where to keep down payment for a house  (Read 2399 times)

rmisio

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Where to keep down payment for a house
« on: May 23, 2016, 06:53:11 PM »
I've started to put away for a down payment for a house which I expect will take about 3 years or so. I'm trying to decide the best place to put the money. Obviously, it can't be too volatile, but I'm hoping to do better than a savings account.

Anyhow, I've read this article by MMM:
http://www.mrmoneymustache.com/2011/06/07/where-should-i-invest-my-short-term-stash/

After which, I was pretty content to go with VFSTX. However, the article states that the fund over a 10 year period was giving 4-5% annual returns. The article is a few years old and if I look at the fund now and see it's 3 year average APR, it's 1.73%, which is right around what I could get from a CD.

I suppose one benefit of the fund is that I could more incrementally add to it.

Perhaps, the low 3 year rate is it's floor and it's bound to rebound (wishful thinking)? Then again, it can also do worse.

So, I'm not sure what option to go with. As of now, I've got 25k or so split between US & Intl Vanguard Index funds in a taxable Vanguard brokerage account, which is pretty gosh darn risky.

Any thoughts?

katsiki

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Re: Where to keep down payment for a house
« Reply #1 on: May 23, 2016, 07:15:43 PM »
Check out the prepaid cards paying 5% up to 5K.  You can open multiple.

NetSpend, Brinks, Mango, etc

lthenderson

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Re: Where to keep down payment for a house
« Reply #2 on: May 23, 2016, 07:31:52 PM »
Realize that you are putting your down payment into the stock market when it is near its all time high? Wasn't that many years ago the stock market took a 40% dive in a few months which would turn your 25k down payment into 15k. For three years, I would be content leaving it in a saving account and leaving a little money on the table.

Radagast

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Re: Where to keep down payment for a house
« Reply #3 on: May 23, 2016, 07:40:51 PM »
I am in a similar situation, and am looking for a fund that I can put a similar amount into sometime within the next few months. My leading canidates are various vanguard balanced funds, most likely 30/70 target retirement income fund or the 40/60 balanced fund.

Johnez

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Re: Where to keep down payment for a house
« Reply #4 on: May 23, 2016, 08:11:20 PM »
Check out the prepaid cards paying 5% up to 5K.  You can open multiple.

NetSpend, Brinks, Mango, etc

Only problem I see here is all those transaction requirements. These accts have caps, imagine storing 50 grand. I've been looking for a similar solution, longer timeframe however, kinda hard to get the ideal mix of low risk, low maintenance, and turnkey operation (CD ladders kind of suck there).

zz_marcello

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Re: Where to keep down payment for a house
« Reply #5 on: May 23, 2016, 08:25:29 PM »
The safest bet with still some yield is a fixed 2019 high-grade corporate bond etf with currently ~2% yield:
https://www.ishares.com/us/products/272341/ishares-ibonds-dec-2019-corporate-etf

If you like to mix it with a bit of risk but higher yield you could
put a smaller part into Lending Club notes and only buy 36-month loans.
That should give you 5-7% per year. (with a small risk because this are limited partnership notes)

Another smaller part you could put into a high-yield bond etf with medium term duration like HYG or HYLD.
High yield sector seems to have stabilized ~3 months ago and there are currently some attractive yields to have.

That would give you a combined return of 3-5% depending on your mix.
« Last Edit: May 23, 2016, 08:31:50 PM by zz_marcello »

katsiki

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Re: Where to keep down payment for a house
« Reply #6 on: May 23, 2016, 08:28:34 PM »
Check out the prepaid cards paying 5% up to 5K.  You can open multiple.

NetSpend, Brinks, Mango, etc

Only problem I see here is all those transaction requirements. These accts have caps, imagine storing 50 grand. I've been looking for a similar solution, longer timeframe however, kinda hard to get the ideal mix of low risk, low maintenance, and turnkey operation (CD ladders kind of suck there).

True.  Transaction requirements are pretty minimal and can be easily automated.  A married person could easily sock away $25K.  50K would be tougher.

According to this article (and others), you can have 5 of these Netspend cards (various types) between 2 people: http://thefinancebuff.com/netspend-5-percent-savings-account.html

« Last Edit: May 23, 2016, 08:44:43 PM by katsiki »

Radagast

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Re: Where to keep down payment for a house
« Reply #7 on: May 23, 2016, 09:43:15 PM »
The safest bet with still some yield is a fixed 2019 high-grade corporate bond etf with currently ~2% yield:
https://www.ishares.com/us/products/272341/ishares-ibonds-dec-2019-corporate-etf
Actually that is not a bad idea. I came across those funds recently while browsing Schwab's commission free ETF's. Unfortunately in my case I do not have a fixed year where I know I will need the money.