Quote:
Originally Posted by disneysteve
What is your timeline? If it is less than 5 years, I'd do a high yield money market or CD. If it is more than 5 years, I'd probably put a portion, maybe 20-30%, into the market in a broad based index fund like a Total Stock Market index.
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Same question here- how long will it take you to accumulate down payment?
If less than 2 years, do cash, CDs and money markets.
If 3-5 years, I might consider taking on more risk because you have some compounding which will help (if you get a 15% annual return in those 5 years, your downpayment could double).
If 5-10- years I would clearly take on some more risk, because with a 7% annual return, your down payment could double.
If greater than 10 years, I would definitely have a plan which accounted for higher returns and inflation.
If you are investing money in stocks, my guideline is no more than 10% in stocks for every year out (so 2 years out is 20% equities, 3 years 30%, 7 years 70%, 10 years would be where I might consider 100% equities). Going more conservative than the 10% guideline is where I would think it is prudent (meaning maybe it's only 7% per year and not 10%).
If I had to pick three mutual funds to consider for this it would be
PRPFX (25-30% stocks, very moderate risk)
RPSIX (15% stocks, 85% bonds, lowest volatility)
Vanguard Wellesley (40% stocks-60% bonds- highest risk of the three).