Homeownership remains a top priority in the United States, and for good reason too. But, with economic hardship falling upon many today, millions of hopeful homebuyers are struggling to afford the daunting costs.
Before you begin the home buying process, there needs to be a significant amount of money stored in an account for the down payment, mortgage payments, etc. When it comes to investing, one challenge that many homeowners and investors are facing is where they should store their hard-earned money. Easy accessibility and safety are two factors that are prominent in these times.
Meet In the Middle, Bucket Approach
The volatility of the stock market can either help you, or completely wipe your savings out. While it may seem tempting to double your money with flying small-cap stocks, you also face the risk of losing it all on one bad day. At the same time, you don’t want to store your money into an account that nets you close to nothing in returns. Additionally, your risk tolerance is going to be different of a long-term investor, assuming you’re buying your home within the next year or two. Don’t mix your savings goals in the same investment portfolio. It should spells out bad news.
Separate your investments into different “buckets”. Meaning, your short term capital, ideally your home’s down payment, should be kept in one bucket while your medium and long term goals, like your retirement or child’s college fund, should be in the other. Separating these will allow you to focus on building investment portfolio that best suits your short and long term needs.