Perspectives

Ask Stuart Ritter, CFP Part 2

Eder Cortes

How to invest your money for a down payment for a home? Lots of people say cash but what if you are 25 and younger and want to be a little aggressive. 

 How you invest has nothing to do with how old you are.  It has everything to do with the time horizon of your GOAL.  The mix of stocks, bonds, and short-term investments in your portfolio is driven by your goal’s time horizon.  That mix gives you a balance between short-term stability and long-term potential growth (which you need to keep up with price increases over the long term).  With a long time horizon, we believe you should focus on growth (since you can sit tight through the inevitable short-term volatility).  With your short time horizon, you emphasize stability.  The price of the house you want to buy won’t go up all that much in the short-term, so you don’t need growth (or even the slightly higher yields you may be looking at with bonds).  Anything that might have a higher potential return comes with short-term volatility.  In plain English, that means you might end up with less than what you put in when you go to take it out.  So focus on what you need to address your short-term goal – short-term stability…which means cash.

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