Where to put money while saving for the next down payment?

Question

Where do you keep your money while saving 20 or30k for the next downpayment? Imagine it would have to be somewhere semi-liquid. I am thinking mutual funds? Other investments?

Nathan Gesner · Answer

Savings account. It needs to be liquid and accessible. You may be saving $30,000 for the next deal when suddenly a deal comes along that only requires $10,000.

Doug Austin · Answer

@Thomas Mehi

I also used a high interest savings account through Ally.  The last year or two I was getting as high as 2.5% interest but that has dropped lately.  It has allowed me to save enough that last week I have an accepted offer on my first property.

Good luck

Account Closed · Answer

I have mine in a savings account.  If you are saving for up for a down payment on your next property, investing in a mutual fund or equities in general open yourself to more risk of loss.  And as others have said, you want the money to be liquid in case a deal, or partnership, comes across you.

My wife and I are saving for our own home by investing in a bond fund that's getting about 3-3.5% interest.  Since this is going for our personal house, we value the lower risk of a bond to not lose money than purchasing an equity based fund where we have higher exposure to losing money.  Additionally, the bond pays a coupon payment every month with that money automatically being reinvested in to the same fund, so we are instantly receiving compounding interest.

Account Closed · Answer

Any brokerage shop like Fidelity, TD, or Schwab will have their own branded bond ETF's or mutual fund.  The one I use for my IRAs is FTBFX.

Sasha Fukuda · Answer

Vanguard (and probably all the big investment companies) have a variety of funds. You can see the list here.

https://investor.vanguard.com/...

I have my money in the short term investment grade bond fund, although when i see how much money stocks and the long term bond funds recently made i wonder if that's a mistake. I have far more money than i can invest in real estate right now.

Thomas Mehi · Answer

@Brian Spies

Where do you get bond funds. The only bonds I know of are long term.

Steve Vaughan · Answer

I use a savings or money market acct mostly and at least for my reserves and opportunity fund. Liquidity and stability are more important than earning a couple extra percent in an exotic way. The opportunity makes the money, not the opportunity fund.

I'll probably get blowback for this, but with money above reserves and dry powder, I buy a couple stocks that are best in class and trade in predictable ranges.  I set auto buys and sells at support and resistance levels.  Been doing it for 4 years and it has enhanced my returns significantly.

In the end there is no magic bullet of safety, liquidity and high yield returns in this rate environment.  Don't sweat earning an extra $80 or whatever per year if it takes a lot of effort.

James Mc Ree · Answer

I use Vanguard's Prime Money Market fund currently paying 1.71%: https://investor.vanguard.com/mutual-funds/profile/overview/vmmxx

I previously used a bond fund and found the price volatility wiped out the interest I earned.  I also used Vanguard's Real Estate Index fund thinking it was a good proxy for investing in real estate while I was building savings to invest directly in Real Estate.  It has a nice dividend as well.  Unfortunately, price volatility hits there too.  It's impossible to predict what will happen with bond, stock or specialized funds like real estate in the short term, so I concluded a stable value fund paying 1.7% or so was good for me for a 3-6 month investment horizon.

Tamara Deering · Answer

I second @Christian Nachtrieb use a high yield savings account, right now I'm using Capital One.  The big thing is you want to earn the most interest, you want it easy to put money in and easy but not too easy to take money out.

Christian Nachtrieb · Answer

Agreed. Find a simple high-yield savings account online. There's a bunch of free ones that offer over 1.75% and easily accessible. I use Wealthfront.

Where to put money while saving for the next down payment?

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