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I live in Los Angeles, and housing prices re redic!!
I plan on buying a home in roughly 5 years or so...
I have about 26k in an emergency fund thats earning .8% in a interest savings account...
should i move some funds into a mutual fund and let it sit since i wont be doing much with the money anyways?
please advise on how else i can generate money for a down payment on a home...
thanks!
investing is volatile and you may not grow that money but shrink it over only 5 years.
Thats a good idea. As he said the market is volatile. Statistically the 1-10 year period is where your most likely to lose money in mutual funds so I would also advise against it.
Besides bonds you can also put it in a 5 year CD. Exactly the same as having a savings account except you get a much higher rate. I have some money in one with a 2.15% APR. No penalty besides previous 6 months interest if you decide to withdraw it early. And they only charge that penalty on the amount you withdraw early not your entire deposit.
Bonds are good ideas but that too can lose money. I would go with CD. It's guaranteed. But you will only get 2% but I am OK with it since your goal is to buy your home.
Consider FFRHX, the Fidelity Floating Rate High Income Fund. Note that it has a 1% penalty if held less than 60 days. It will give you better returns than short term CDs, plus floating rate bank loans are good for those concerned with rising interest rates driving down other bond fund prices. Price is trending stable with a yield right near 3%.
Thanks for the replies , i have a Roth IRA with two mutual funds and they have performed very well, Fbiox and fscsx...
That's the only reason I am considering mutual funds because bonds doesn't sound to appealing as far as the return
Consider FFRHX, the Fidelity Floating Rate High Income Fund. Note that it has a 1% penalty if held less than 60 days. It will give you better returns than short term CDs, plus floating rate bank loans are good for those concerned with rising interest rates driving down other bond fund prices. Price is trending stable with a yield right near 3%.
if things get nasty again ffrhx can take a nasty tumble. I would have never thought it would fall that much but last down turn it fell almost 17%.....
it is not as conservative as it appears. it really is a short term junk bond fund
Last edited by mathjak107; 03-12-2014 at 12:56 PM..
You cannot depend on past performance to predict future returns. FBIOX is a sector mutual fund and is expected to be much more volatile than a diversified one.
A safe option is to put it in short/intermediate term bonds (perhaps tax exempt). Even that can lose money, but expected to be less than a stock fund.
Since you have a 5 year timeframe to buy a house, I would recommend putting this in a FDIC backed CD which is almost guaranteed.
Put $5,500 for 2013's Roth IRA and put $5,500 in 2014 Roth IRA. Repeat that in 2015, 2016, and 2017. You can take them out (all $27,500) in five years totally tax and penalty free. However, whatever gains you have, they can't be taken out.
he still has to preserve the money and can't do much with it. there will be no more than a few bucks interest , hardly worth the trouble . short term bond funds are running less than 1% a year and anything else may beat up his principal in such a short time frame.
Last edited by mathjak107; 03-14-2014 at 02:50 AM..
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