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Saving for downpayment

Posted: Sun Jul 23, 2017 1:25 pm
by Ace77
Looking to save around $60k over the next 2 years or so and have $10k to get started. I max out retirement accounts, HSA, and all that. I want to send excess money each month into an account to save for this. Trying to determine what that account will be. I was considering the 1.15% savings account at Ally Bank. I'd prefer something at Vanguard since that's where just about all of my money is at. Is there any other account/instrument out there (Vanguard or otherwise) that's better than Ally that I can start with $10k and contribute money to each month?

Not really looking at equities given the short time horizon, and figure CD's are out because I want to continually add money each month.

Thank you for any suggestions!
Andy

Re: Saving for downpayment

Posted: Sun Jul 23, 2017 1:41 pm
by aristotelian
You are pretty much looking at Prime MM, which is about 1%, or Vanguard Short Term Corporate Bond (VCSH), which yields about 2% but entails some risk. For 2+ year horizon I wouldn't hesitate to do VCSH, but some might. I Bonds are also a good choice but you are limited to $10K and they are not redeemable for a year, plus you would have to go outside Vanguard.

Re: Saving for downpayment

Posted: Sun Jul 23, 2017 1:43 pm
by PFInterest
i dont get why it matters to have a separate account at ally?
would also be ok with a short term bond fund. you might lose some, and pay more in taxes.

Re: Saving for downpayment

Posted: Sun Jul 23, 2017 2:11 pm
by Ace77
PFInterest wrote:i dont get why it matters to have a separate account at ally?
It doesn't, it's just if there was something basically equivalent I could get at Vanguard I'd just prefer it since I have multiple different accounts at Vanguard and can manage them a little more conveniently. But I'd have zero hesitation about opening a separate account with Ally, so just looking for opinions if there are things out there I'm not aware of. Thanks for the reply.

Re: Saving for downpayment

Posted: Sun Jul 23, 2017 2:39 pm
by mega317
There are a million choices and plenty of ways to (slightly) top 1.15% if you add (slightly) more risk. Lots of short-term bond funds like VCSH mentioned above that will get you an extra <=1% with some mild principle risk. A 5 year CD could beat 1.15%, even with the early withdrawal penalty, if you hold it long enough (I think the math is 11 months at Ally currently). I think 1 year treasuries are ahead of 1.15% and state-tax free.

It depends on your need to stretch for more, risk tolerance to losing some principle, certainty of your time frame, and especially on your values, but ultimately doesn't matter. It seems like you value simplicity so I'd probably just use Prime Money Market at Vanguard. In my opinion it satisfies your criterion of "basically equivalent" although it's important to understand FDIC insurance.