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do I have too much cash?

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  • do I have too much cash?

    32 years old. Saving for down payment for a house in 1-1.5 years. Fairly HCOL area. I'm about 8 months into my first attending job and enjoying it.

    I use Vanguard Prime MM fund for my house down payment. Have about 130K now with savings goal of 200K, which I believe I can hit by July.

    My retirement accounts are about 100K, 100% US stock. I max 403b and governmental 457b. Employer fills up 401a.

    No debt. No kids. Rent an apartment now with my wife.

    I ache to put more money in the stock market in a taxable account. But I shovel everything I've got at the end of the month into the MM account for the house down payment, about 10-20K a month. Would you guys do the same, or invest some of the money in VTSAX?

  • #2
    Short term money needed for a house downpayment should not be invested in stocks, unless you like to gamble and don’t mind if you lose half of your downpayment in a bear market.

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    • #3




      32 years old. Saving for down payment for a house in 1-1.5 years. Fairly HCOL area. I’m about 8 months into my first attending job and enjoying it.

      I use Vanguard Prime MM fund for my house down payment. Have about 130K now with savings goal of 200K, which I believe I can hit by July.

      My retirement accounts are about 100K, 100% US stock. I max 403b and governmental 457b. Employer fills up 401a.

      No debt. No kids. Rent an apartment now with my wife.

      I ache to put more money in the stock market in a taxable account. But I shovel everything I’ve got at the end of the month into the MM account for the house down payment, about 10-20K a month. Would you guys do the same, or invest some of the money in VTSAX?
      Click to expand...


      I'd save for the house with a 20% down payment goal and base my purchase decision/savings timeline on your family situation and projected needs (as well as job desirability).  The more you have for a down payment the more options you'll have for financing.  Also saves you on cash flow later.  If you're putting 10-20k a month into savings I don't think you'll be worrying much down the road either way.

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      • #4
        I realize not to put the downpayment money into stocks since the market may drop in the short term. I guess what I'm asking is if you were in my shoes and you were saving for a house, would you split the left over money at the end of the month and use half to invest and half designated as a downpayment in MM?  Or some other percentage, like 30% invest/70% downpayment. I don't want to miss my prime compounding years saving too much for a downpayment, but houses are expensive here and prices might skyrocket at any time.

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        • #5
          A side question related to the OP.

          Is there any advantage between putting cash (whether its for downpayment or your emergency fund) between a high yield savings account (aka Ally bank at 2.2%) or a Vanguard money market fund? Seems like the two have similar returns/yields?

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          • #6
            About how much do you think your house will cost you?

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            • #7
              Whatever the opportunity cost of saving up a large cash down payment will pale in comparison to the opportunity cost of buying an expensive home in a HCOL area and keeping it for decades. If you've made the decision to buy despite knowing that, it shouldn't phase you to save up the 10% in cash. That's just the beginning!

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              • #8
                When do you plan to buy?  If it is this summer then crank away and get done by july as you said.  If not till next year fill it more slowly and put some into VTSAX.  Also remember that buying a house, especially a first house, double especially a big house, requires more then just a down payment.  There are always things you need to do right away; paint, furniture, decorate, carpets, etc.  The hidden cost of moving.

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                • #9
                  To gnmqi: I selected the Vanguard MM over a savings account because the dividend yield with the Vanguard MM fund will adjust with the interest rate environment. Since I’ve been contributing to it, the yield has risen from 1.8% to 2.5% now. Not sure if savings accounts work the same way, but that was my rationale.

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                  • #10
                    Murphy's law, you put your deposit in stocks and it goes down 10% and you sell out.

                    If you don't use the deposit to buy stocks, then you'll watch stocks increase 10% and think you missed out.

                    I wouldn't invest a deposit in anything risky. But it would be an interesting thought experiment.

                    You might have a marginal positive expected return if you don't sell out after a decline.If you're a weak hand though and likely to sell with a small loss (like 10-20% declines) then you're much more likely to lose.

                    Say you put the 130k in stocks and there was a bear market, and it became work 65k - what would your plan be then ? Would you be able to hold for a further say 2-5 years before being able to offload the stocks at a profit and then save another 200k for the house deposit.

                    There's nothing wrong with gambling as long as you know you're gambling, the odds and you can cope with losses.

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                    • #11
                      What's happens if you don't have enough money but find a house you like?

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                      • #12
                        NB: I would be more worried about a property boom in your area before you buy than missing out on a stockmarket boom with your deposit. Say property appreciates 20% pa for 2 years in your area and you have index funds on your 130k deposit which also appreciated 20%pa for 2 years. You will still be screwed.

                        If stockmarket is flat or declines on deposit investment and the housing you want booms you are doubly screwed.

                        If I was you I would not view myself as having too much cash.

                        I would think of your position as:

                        +130k cash

                        Short 1 house (or -1M house).

                        You actually have a large short house position and your focus should be on how to lay that off with the least cost/risk.

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                        • #13


                          Would you guys do the same, or invest some of the money in VTSAX?
                          Click to expand...


                          it depends on how quickly I want to buy the house.  if you're ok with renting for a little while longer then I would probably go 50/50 MM/VTSAX.  I was more into FIRE so I bought an inexpensive house and put the rest into vanguard funds.  with all the talk of single payer health care I'd race to FIRE but I'm fairly risk averse

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                          • #14




                            About how much do you think your house will cost you?
                            Click to expand...


                            Probably in the 600-800K range. The lower the better for me.




                            What’s happens if you don’t have enough money but find a house you like?
                            Click to expand...


                            Good point. That wouldn't be fun.

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