nhpri wrote:Specifically, my concern right now revolves around how much money NOT to
invest for the long term. I'm currently planning to invest most of it in a
85/15 stock/bond mix. However, there is a possibility that I may want to
buy a house sometime in the next few years, and I'm wondering what to do
about saving for a down payment. Is it a reasonable strategy to invest the
entire sum and take a margin loan against the account if I need to pay for
something like a down payment? Is this even allowed?
You really have two different portfolios, for retirement and for a house. 85/15 is a reasonable allocation for your retirement funds; it is not a reasonable allocation for money you are going to spend in three years. The house down payment should be in something low-risk such as CD's.
If you have almost all your investments in stock, and then you take out a margin loan, you will then have more than 100% of your investments in stock. This is probably not a risk you want to plan to take. A portfolio which was 120% stock would have lost 75% of its value in the 2007-2009 crash; $120,000 in stock and $20,000 borrowed would have become about $46,000 in stock and $21,000 borrowed.