How to invest down payment fund?

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Topic Author
GrandDesigns
Posts: 83
Joined: Sat Jan 10, 2015 5:40 pm

How to invest down payment fund?

Post by GrandDesigns »

I need to investment money I want to use in hopefully 5 years or so for a down payment on a house. Because of that, I don't want to chase the lure of high stock market returns and get burned by a seriously down market. So how should I invest this money? Bonds, CDs, or something else? Should I put a sliver into stocks? And if so what bonds? Should I buy municipal bonds in my non-tax advantaged accounts?

As a note, my retirement investments are all in great shape thanks to this forum, so I won't mention them.

The kind of money I need to invest is:
$50,000 cash (non-tax advantaged)
$2,000/mo into Roth IRA through post-tax 401(k) backdoor
$50k to $75k in stock vesting later this year (god willing it holds its value, and yes I'll be selling it immediately)

Thanks!
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BolderBoy
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Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: How to invest down payment fund?

Post by BolderBoy »

Common BH wisdom is that you do not risk money that is needed within 5 years, so FDIC insured products are best.

If you simply cannot abide the low return environment of the safe products, then maybe consider a low risk bond fund, probably a tax-exempt bond fund since this is non-retirement money. Stocks are really out of the question here.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Topic Author
GrandDesigns
Posts: 83
Joined: Sat Jan 10, 2015 5:40 pm

Re: How to invest down payment fund?

Post by GrandDesigns »

BolderBoy wrote:Common BH wisdom is that you do not risk money that is needed within 5 years, so FDIC insured products are best.

If you simply cannot abide the low return environment of the safe products, then maybe consider a low risk bond fund, probably a tax-exempt bond fund since this is non-retirement money. Stocks are really out of the question here.
Thanks, that's what I suspected. Is my best bet to find the best CD rate possible in my timeline and go put the money into it? The other, unanswerable question, is if I am saving too much for a down payment, but that depends on where I buy a house, and mortgage rates, so I imagine it's best to play it safe now and then invest any unneeded money once the house is bought.
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