skinsfan wrote:I have been reading these forums for a couple years, but this is my first post. I have started saving for down payment on a home and my question is, is it worth investing this money?
My situation: 25 years old. No debt. Emergency fund. Relatively stable employment, with income ~$60k/year. Contribute 10% to roth 401k with 4.5% company match. Currently living in rented apartment.
So I am now taking 12k out of my savings (still leaving a comfortable emergency/sh*t happens fund) and designating it to save for future down payment. I will also be saving $1,000/month for this purpose. My time frame is 4-7 years.
I am looking for opinions on whether I should invest this money or, if not, where to keep it. One idea that I have had is investing this money in a Vanguard LifeStrategy fund like the LifeStrategy Income fund (80% bonds, 20% stocks). Should I be concerned that T-bond interest rates are so low and will likely rise over the next 4-7 years?
I'm in a similar situation, just 3 years ahead of you. I would recommend maxing out I-Bonds first ($10K/year). Hard to beat a guarantee to keep up with inflation (purchasing power) before taxes. Currently yielding more than Total Bond Market.
My long term plan for my family is to have a 80/20 fund like you suggest for ongoing expenses (car, major house repair, land purchase, big vaca) and possibly double as emergency fund. The volatility of that set-up would be very doable for someone with a moderate risk tolerance (50% crash in stocks loses only $1K on $10K saved). Over the long term, the medium bond duration and sprinkling of stocks could help you beat inflation and reduce the opportunity cost of keeping things in low-yielding savings account.