Where to start investing with 10k that is supposed to be used for housing in the next 5 years?

With emergency funds set aside and all insurance settled, I have additional 10k (savings) for housing purposes in 5 years time. Should I or where should I invest this 10k? I am also DCA $250 monthly into robo currently.

Discussion (2)

What are your thoughts?

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Zac

01 Apr 2021

Noob at Idiots Invest

For a five-year horizon, just put it in the bank or cash management solutions.

I won't say, "Don't put it into the stock market", but you do have to think about the ramifications of a stock market downturn within this five years and what it's going to do to your housing capital.

One last thing to consider is to invest this $10k. Then start saving for your housing funds for the next five years, starting today. This way, you don't have to worry about what happens to the $10k. Also, five years is plenty of time to save for a house - if you have a reasonable salary.

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thefrugalstudent

01 Apr 2021

Founder at thefrugalstudent.com

Hi Anon,

I too am saving up for a house and personally, I'm not investing any of that money. The reason is that I don't want to take any risks with this sum of money. At times, it does feel bad when I think of how much this money could possibly grow and how that could help towards paying for my future house if I invest it.

But when I think about the possibility that I may not even get to keep my capital if things take a downturn, I believe that I'm making the right decision for myself. It's easy to look back and think about all the profits you could've made if markets do well in the next 5 years. But if they don't, you'll be beating yourself up over why you decided to do it.

Ultimately, I think it comes down to your risk appetite. Consider the worst case scenario, how it will affect your plans, and how you feel about it.

If you end up deciding to invest, perhaps you can consider extremely conservative portfolios (80% bonds 20% equity?) to minimise the risk of losing money while still beating safer alternatives. Personally, I have all of these savings in insurance savings plans earning 1+%, which is good enough for me.

Also, if the house in question is going to be with your significant other, you may want to have a conversation with them about this to see how they feel about this, since it involves their future as well.

Hope this helps & all the best!

Regards,

thefrugalstudent

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