I have heard that index funds do quite well and the one I was looking at was S&P500, which is up this year by 14.06%. See, what I was thinking was if I gave myself 5 years to create my down payment account, first 4 years I want to invest in something more aggressive, something yielding high returns, and in the last year protect what I made by putting all of it into CDs. This way I’m not taking as much risk in losing anything in the last year before I buy. I don’t mind taking risks at the early stages of my investments and although I agree that putting all the money in a CD is a safe way to go but I’m looking for something more aggressive.

Imagine this: you get $20,000 in that account after two years, and all of a sudden the economy runs into a recession and the value of your account drops to $10,000 over the next three years. Where will your down payment be then?

Instead, I recommend you put your down payment fund into certificates of deposit (CDs), high yielding money market accounts, or treasury bills. Sure, you won’t earn a whole lot on those deposits, but you certainly will not see a 50% decline in value as you could very well see with the stock market in a given 3 year period.

Be sure to look at what the s&p 500 returned between 2000 and 2002 before you decide how to invest the money you intend to use to achieve one of your most important long term goals.

Ha! Yea, so he does.
Hopefully he’ll catch on though…

“Money Walks only has 100 days left in trying to meet her goal of being debt-free. “