[Fundguy1]

48% success rate. You forget green.

[jmg]

Originally Posted by Fundguy1

48% success rate. You forget green.

That is why I fail.

[Mingwan]

Originally Posted by Fundguy1

48% success rate. You forget green.

Precisely why I don't gamble! Haha.

[WarrENDeatH]

I think I'm going to throw it into savings. Quarterly interest (albeit, not a lot) and the ability to consistently add to it. CD just doesn't seem like it would be worth the time. I don't know stocks (my old man does, but 60 hour work weeks would make me question anything).


I am a gambling man too. I'll have to stay away from casinos (my venture was always sports though).

[Maynard]

Isn't it more like a 45% success rate and a 95% payout? House always wins, Wall Street or Vegas.

[stevenc]

Money for a house should not be risked in the stock market. Likely the stock market will tank in the next few years and that will be the exact time you need your money.

Throw it in a CD. Earn 1.5% and continue to save for the house. The house is likely the best investment you can make.

[David70]

Originally Posted by jmg

One piece of advice: If you have the means, the mortgage should only be in either you or your wife's names, not both. That way, if the market takes a dump, you can always take a hit and default your upside down home, leaving the other person's credit intact for a purchase of another home in a buyer's market. What does that mean? You can take advantage of the market even if you are getting raped. This tactic has literally saved me $150k in depreciation of a condo into a $250k appreciation on a new home in 4 years. $400k positive swing in 4 years while people were upside down on their mortgages? And property value is still climbing despite the pre-bubble houses just now recovering? I'd say mitigating risk paid off.

He lives in Cincinnati (as I do), if they are putting a significant amount of money down, there is no chance of huge swings one way or the other that will put him upside down significantly. I am also assuming he isn't talking about the investment being $5k.

People like to talk about the upsides of living in "hot" markets but there are some huge benefits of living is a market where housing prices are reasonable and the prices remain pretty stable.

Your possible "$400k swing" in values doesn't apply unless he is talking about buying one of the most expensive houses available.

[Hawkeye]

Originally Posted by Mingwan

Bet it all on black. 50% success rate with a 100% yield. Could change things for you....

Originally Posted by jmg

No, no no. RED is where it's at. 50% success rate, 100% yield.

What about green?

edit: Damn fundguy beat me to it...

I would personally do a high yield checking account, few hoops to jump but full liquidity and decent return on at least a little money ($30k-60k)

[Browntrash]

It's not much but ally has high yield savings accounts I believe it's 1.15% now

[kprocivic]

I wouldn't even bother. keep it where it is or open a savings at chase with a coupon for 15k 300 bucks for six months.

[IllSic_Design]

Originally Posted by Browntrash

It's not much but ally has high yield savings accounts I believe it's 1.15% now

Yeah I'd just go with high yield savings, better than nothing/traditional saving account. Ally is good yield wise, but I use capital one 360 which is decent(.75%?) but has a lot more ATM's/branches available.

[GATORB8]

I assume you have your 401k maxed to the match? As long as you're vested, the match should easily exceed the penalty for withdrawal (or you can take a loan against it for your down payment).

If you're not buying for the long term, you can go for a 5% down loan and sell points to get your out of pocket down well below that. Probably would still need to evidence the cash for approval, though.

[Fundguy1]

Originally Posted by stevenc

Money for a house should not be risked in the stock market. Likely the stock market will tank in the next few years and that will be the exact time you need your money.

Throw it in a CD. Earn 1.5% and continue to save for the house. The house is likely the best investment you can make.

Correct except for the last statement. On average home prices appreciate 5% annually long term. This means a $11,900 3/2 average home in the 1950s is $250k today. The same money in the stock market averaging standard stock returns same time frame would be $12 milion today. Real estate is more timing and location. The market is time in not timing. But that said you wouldn't have thrown all that rent away for nothing so there's that on your primary home.

[David70]

If your goal is to maximize returns you would buy the house you need and nothing more and then invest the rest.

Choice between a $200k house/invest $100k or a $300k house and the person with the cheaper house normally wins long term. Part of this comes from the fact that you pay taxes on the house value every year (regardless of depreciation/appreciation in value) and the rest in the better returns available from the stock market (which you only pay taxes on the overall appreciation/dividends and most it when you sell it).

[Fundguy1]

Buying the house isnt a good strategy to grow wealth. Bit it is a good strategy to stop money outflows in the form of rent. This is how they make economic sense.

[shadow191]

Keep in mind that when people buy houses, there is the advantage of forced savings as well as leverage. People are usually really bad at saving money. House payments are a form of savings as the principal gets paid down. Also when you buy a house with a mortgage, you are leveraging your money. Houses typically don't appreciate as much as stocks unless you live in a hot market but you can't buy stocks with the same borrowing terms as you can a house. Sure you can buy on margin, but you can't borrow nearly as much.

A $100K house can be bought with $10K down or less. If that house goes to $120K in a few years, the owner has roughly doubled their money (of course you have to subtract out interest costs, taxes, etc). It's all in the leverage.

Not saying that houses are a great strategy to gain wealth. But for most people, it's just about the only real wealth they have. In theory yes you are better off playing the markets and so on but that isn't reality for most.

[Fundguy1]

What people should be doing is taking advantage of IRAs and 401k etc as much as possible. A talk with an advisor should help with these. Remember your retirement savings gas to last till you die. People think their time frame is grow to retirement then switch to income. But many live 30+ years past retirement. If they aren't still growing their money in retirement, it may run out. Then you're new catch phrase is welcome to Wal-Mart.

[mbanks21]

Originally Posted by Fundguy1

What people should be doing is taking advantage of IRAs and 401k etc as much as possible. A talk with an advisor should help with these. Remember your retirement savings gas to last till you die. People think their time frame is grow to retirement then switch to income. But many live 30+ years past retirement. If they aren't still growing their money in retirement, it may run out. Then you're new catch phrase is welcome to Wal-Mart.

Hell yes. I get 75% 401k matching. $13k of free money a year

[bimmer456]

Originally Posted by mbanks21

Hell yes. I get 75% 401k matching. $13k of free money a year

I get free money, no need to contribute something like 5% of my income without matching. I would put it in a Roth 401k so it's tax free with anything you contribute. You're limited to $18k a year I believe unless it's catch up contribution. You can do an IRA which is limited to $5K a year, then just invest in a non-retirement account beyond that, where the income is taxable when you sell your shares. The IRA and non-retirement account let you buy whatever you want vs. being limited to the mutual funds offered through your employers' plan. It may be due to 401k rules that are supposed to limit risk.

[mbanks21]

Originally Posted by bimmer456

I get free money, no need to contribute something like 5% of my income without matching. I would put it in a Roth 401k so it's tax free with anything you contribute. You're limited to $18k a year I believe unless it's catch up contribution. You can do an IRA which is limited to $5K a year, then just invest in a non-retirement account beyond that, where the income is taxable when you sell your shares. The IRA and non-retirement account let you buy whatever you want vs. being limited to the mutual funds offered through your employers' plan. It may be due to 401k rules that are supposed to limit risk.

My employer 401k plan has about 30 fund options including index funds. I could really care less as the matching is better than anything out there.

[Hawkeye]

Originally Posted by mbanks21

My employer 401k plan has about 30 fund options including index funds. I could really care less as the matching is better than anything out there.

You can say that again, I would love to have that kind of a match. Mine is 5% of base salary so I would have to make more $$ to get a bigger match.

[shadow191]

Many 401(k)'s allow Roth contributions as well now - at least most of the bigger plans do. Also, many of them allow after-tax contributions as well to get around the $18K limit without also needing to be 50+ (catch up). Some even allow for self directed brokerage options now to give employees more choice in investments.

There is really no way someone could get enough additional return outside the 401(k) to forego the company match. Even a bad match is usually 50% of what you put in up to some limit.The investment choices in the plan would have to be awful to take away that advantage.

And Roth isn't tax free. You've already paid the taxes on your contributions and you just avoid on the gains. Before-tax contributions can make sense as well if you're in a really high tax bracket right now - it all depends.

Originally Posted by bimmer456

I get free money, no need to contribute something like 5% of my income without matching. I would put it in a Roth 401k so it's tax free with anything you contribute. You're limited to $18k a year I believe unless it's catch up contribution. You can do an IRA which is limited to $5K a year, then just invest in a non-retirement account beyond that, where the income is taxable when you sell your shares. The IRA and non-retirement account let you buy whatever you want vs. being limited to the mutual funds offered through your employers' plan. It may be due to 401k rules that are supposed to limit risk.