The safest investments while you're saving for a downpayment?

4 Replies

If you're just keeping your money in a traditional bank account then it's losing value but if you invest in the stock market theres always a chance it goes down and even if you do make money you might have to pay short term capital gains taxes which is nasty.

What do you guy think about this video on the safest investments for keeping your cash while you're saving for a downpayment?

Did you post a link to a video? I don't see any link or video.

I like investing in the stock market (that could get me shot around here), but yes, there is definitely risk involved. How badly and how quickly do you need the money? I think that should really determine how you proceed.

If you expect to save up enough money over the next 6 months, so the returns you may get from the stock market may not be worth the risk. But on the other hand, maybe you're saving at a fast enough clip that you could take a hit in the stock market and only be delayed a couple of months.

If you think it will take you 6 years to save up enough, you can weather a market correction much better over that longer horizon. But again, on the other hand, if it takes that long to save up the money, should you put it in a "risky" investment?

Good luck with your decision!

@Shane Hummus   You could consider a whole life policy and fund it to maximum allowed before it is considered a modified endowment contract.  I suggest you read this book: "Becoming Your Own Banker" by Nelson Nash.  Also, "What Would the Rockefellers Do" by Garrett Gunderson.  A lot of financial planners and CPAs hate whole life policies, but they do not understand these concepts.  It gives you tax free growth, without having to worry about the stock market, and you can borrow from your policy to fund your real estate deals.

Originally posted by @Bob Norton :

@Shane Hummus   You could consider a whole life policy and fund it to maximum allowed before it is considered a modified endowment contract.  I suggest you read this book: "Becoming Your Own Banker" by Nelson Nash.  Also, "What Would the Rockefellers Do" by Garrett Gunderson.  A lot of financial planners and CPAs hate whole life policies, but they do not understand these concepts.  It gives you tax free growth, without having to worry about the stock market, and you can borrow from your policy to fund your real estate deals.

Bob - I agree with your first sentence: the policy should be funded right up to the MEC Limit. The problem is that the policies offered by IBC practitioners are NOT funded right up to the max. They are over-funded, but they leave plenty of room for the client to add paid up additions later. 

This results in a higher death benefit and higher commissions for the agent. 

Shane - A properly-designed, overfunded policy will result in cash value of about 85% relative to the premium. So you would take a haircut on every dollar you stuff into a policy. But that cash value will earn 6%-ish returns with principal protection. So in a few years time, you will certainly have more than you would had you stuck the money in CDs. And if you opted for a stock market approach instead, you could either find yourself with much more or much less if the market tanked. The market is not a good place for money needed in a short time.