What's my best choice if I am to save thousands of dollars over the next 6 years?

Question

I am saving my money to one day buy a house. My question is, where is the best place to save the money? I have heard it's better to get something through the bank but I have no idea what my options are.

To the first answer: I am not sure what that means.

I already have almost $2,000 saved in a savings account with my credit union.

Answer 1

Do you want to save or invest? One thing is for sure, you have your time horizon down pat (6 years.) If you just want to save, then a high yield online savings account is the way to go (HSBC, ING Direct, Amtrust, etc.) Also, look into high yield CDs, which can be purchased from those same banks. You may also want to look into a 5 or 6 year savings bond, but you will pay current income tax at withdrawal (meaning whatever tax bracket you're in.) If you want to invest, an index fund is the way to go (Vanguard, Fidelity, or T. Rowe Price.) It is simply a low-cost fund that tracks a certain index such as the S&P 500 or the Dow Jones 30. They have low costs because of the infrequency of trading. They are good for the mid to long term goals. You're basically diversified and set up for some nice returns with index funds. Good luck.

Answer 2

Since you're putting your money away for a relativley short period of time you'll want to avoid high risk investments. Stocks generally appreciate by 10% but it can take a lot of time and may be down at the time you need the money.

You also want to do better than a bank savings account because with inflation, you won't earn enough interest over 6 years to see your money grow.

One idea is a GIC. The money is guaranteed and there is a slightly better return on your investment. The other idea would be to talk to a financial planner who can get you into some money markets or mutual funds.

Answer 3

Forget the bank. No-load growth mutual funds are where you want your money. Yes, there is risk in the stock market, but you are not buying individual stocks. You are buying shares in professionally-managed funds that own stocks of many companies, spreading out the risk, or 'not putting all your eggs in one basket'. Over time, even with market ups and downs like 2007 has seen, the market trend has ALWAYS been up.

Keep this thought in mind: You don't get rich quick. You get rich by investing small amounts of money at regular intervals over long periods of time.

The key to that sentence is 'regular intervals'. Decide how much you can afford to invest each month, and then do it. Don't skip months, even if it looks like the overall market is headed lower. These down periods are always temporary, and they are actually where you are going to see your biggest gains. The principle in investing is 'dollar cost averaging'. Your $100 monthly investment buys you more fund shares when prices are lower and fewer when prices are up. Start with one good 'large cap' (your large, established companies) growth fund and when you get between $5-10K, it's time to think about something called 'asset allocation' and putting money into value funds, 'mid-cap' funds, bond funds, international, etc, to diversify.

There are many good books on the subject of mutual fund investing. Do some searches and start reading. It's your money, so invest the time as well as your cash.

Answer 4

If you heard that the bank offers a product why not go to the bank, sit down with a representative, learn the different products offered and pick one or have the bank suggest a product which is within your means. You may have to go to a regular savings account to start. If you are looking to save thousands your initial stake is important.

Answer 5

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Answer 6

Saving for a long term goal can be accomplished buy systematically saving in a stock mutual fund. Bank savings accounts will not offer you enough growth to outpace taxes and inflation. Please read my profile.

Answer 7

First, I wouldn't invest in a mutual fund. The reason is because the fees are really expensive, when you factor in your returns on the investment and tax involve. The best thing is do your homework and research on 3 stock, that you think will be good to invest in... Yes, stock is risky... But great return if you do your homework right...

Answer 8

Vanguard's Natural Resource Fund. Includes petroleum, minerals, timber etc. My opinion: good growth and inflation-protection. Investing on regular basis through thick and thin best method.