Short term investing

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ooo
Posts: 6
Joined: Sun Oct 07, 2018 2:59 pm

Short term investing

Post by ooo » Sun Oct 07, 2018 3:26 pm

Hi,

I have about $130k sitting in a 1.85% APY savings account. I plan on using this towards a downpayment in ~1 year. My tolerance for risk is high--I can withstand losing a large portion of that money (and delaying the purchase). I have been contemplating dumping all of it in a brokerage account into something like VOOG, with the intention of pulling it out in no less than a year to avoid short-term capital gains tax.

I'm new to investing in a taxable account so I'm unsure if it's unwise to be holding securities for only a year.

Thanks!

JoeRetire
Posts: 1645
Joined: Tue Jan 16, 2018 2:44 pm

Re: Short term investing

Post by JoeRetire » Sun Oct 07, 2018 4:52 pm

ooo wrote:
Sun Oct 07, 2018 3:26 pm
I have about $130k sitting in a 1.85% APY savings account. I plan on using this towards a downpayment in ~1 year. My tolerance for risk is high--I can withstand losing a large portion of that money (and delaying the purchase).
Why was it sitting in a savings account?

ThePrince
Posts: 357
Joined: Sun Aug 20, 2017 9:15 pm
Location: U.S.A.

Re: Short term investing

Post by ThePrince » Sun Oct 07, 2018 4:55 pm

If the intention is for this money to constitute an emergency fund, take a look at Betterment’s Safety Net Portfolio.

Flyer24
Posts: 373
Joined: Sun Apr 08, 2018 4:21 pm

Re: Short term investing

Post by Flyer24 » Sun Oct 07, 2018 5:42 pm

Anything less than 5 years should not be in the stock market. I would just put the money in a CD or treasuries.

Fallible
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Re: Short term investing

Post by Fallible » Sun Oct 07, 2018 6:19 pm

ooo wrote:
Sun Oct 07, 2018 3:26 pm
Hi,
I have about $130k sitting in a 1.85% APY savings account. I plan on using this towards a downpayment in ~1 year. My tolerance for risk is high--I can withstand losing a large portion of that money (and delaying the purchase). I have been contemplating dumping all of it in a brokerage account into something like VOOG, with the intention of pulling it out in no less than a year to avoid short-term capital gains tax.

I'm new to investing in a taxable account so I'm unsure if it's unwise to be holding securities for only a year.
Thanks!
Yes, it's unwise to hold securities for a year because you don't know what the market will do and if it drops or crashes and the rebound, also an unknown, is long, you won't have time to recover losses, which could be larger than you expect. How long can you put off that down payment?
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RickBoglehead
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Joined: Wed Feb 14, 2018 9:10 am

Re: Short term investing

Post by RickBoglehead » Sun Oct 07, 2018 7:20 pm

OP says he's ok with a downturn. Market is up 7% YTD. Crazy to not invest.

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Short term investing

Post by livesoft » Sun Oct 07, 2018 7:35 pm

If the investment drops in value before the year is over, then the OP can still sell it and harvest the loss and get a tax break.
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justsomeguy2018
Posts: 52
Joined: Wed Oct 03, 2018 8:11 pm

Re: Short term investing

Post by justsomeguy2018 » Sun Oct 07, 2018 8:06 pm

ooo wrote:
Sun Oct 07, 2018 3:26 pm
Hi,

I have about $130k sitting in a 1.85% APY savings account. I plan on using this towards a downpayment in ~1 year. My tolerance for risk is high--I can withstand losing a large portion of that money (and delaying the purchase). I have been contemplating dumping all of it in a brokerage account into something like VOOG, with the intention of pulling it out in no less than a year to avoid short-term capital gains tax.

I'm new to investing in a taxable account so I'm unsure if it's unwise to be holding securities for only a year.

Thanks!
Sounds risky - what if there's a downturn and it takes 5 years for the market to get back to its current peak? You want to wait 5 years to buy your house? Also in a downturn housing prices may decline, meaning you could buy a house for cheaper if the money isn't all tied up in the market.

Letting it all ride with a 1-yr time horizon sounds pretty risky to me.

You might be better off buying a 1-yr CD at 2.10% interest.

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