I’ve saved a nice chunk for a down payment on a house but it’s just sitting in a savings account and not earning much. Since I’m not using any of it for maybe another year, should I be putting some or all of it into stocks?
A: You’re doing everything right so don’t change a thing. Because while saving money in a savings account isn’t the most fun activity (and everyone wishes it would accumulate and grow faster), your time horizon – in investment terms – is actually quite short since it sounds like you want to buy a home within the next 12 months or so. Therefore, that down payment money should not – under any circumstances – be exposed to any kind of market risk. Sure, getting lucky on a “hot stock” might allow you to buy a home a few months sooner, but it could just as easily backfire, devastate your savings, and delay your ultimate goal of home ownership.
The Simply Money Point is that money you need for any sort of financial goal within the next three years should not be in the market. A plain old savings account is fine. Keep doing what you’re doing and don’t overthink the process at this stage. A longer time horizon – such as 5,10, or 20 years – is when a legitimate discussion should be had about balancing risk versus reward.