# Saving up for first home deposit



## ENP (24 July 2011)

I have all my savings in bank accounts and term deposits for my first home which I intend to buy in 2 years or so. Safe, low returns, dependable. 

Although, every now and then I desperately want to put some of it into stocks. Main reason being it is a bit more exciting and there is the potential of higher returns. It feels like I'm wasting all the info I've learnt about the markets over the past few years and it's not going to good use sitting in term deposits. 

How do you all resist the temptation in this scenario if you have personally come across something similar in the past?

It's quite frustrating.


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## tech/a (24 July 2011)

Understand how to manage risk and your concerns will be diminished.

If it was me Id use say 50% of it with a 20% draw down safety net and start trading.

So 20K use 10K risk 2K
if you lose your 2k then you know you haven't mastered the trading discipline and you have only lost 10% of your nest egg.
If you return 30% in a year you've done very well.

Without knowing your capital base Id be trading minimum $3k parcels and be using fixed fractional position sizing ---- risk 2-3% each trade (of capital base).

Dont forget you'll be taxed 50% of your profits so keep records of everything from books to data to software to brokerage. (Unless you hold for 12 mths + then its 25%)

Finally Id go for it.
Fortunes aren't created sitting waiting for 30% interest rates!


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## danbradster (24 July 2011)

tech/a said:


> Understand how to manage risk and your concerns will be diminished.
> 
> If it was me Id use say 50% of it with a 20% draw down safety net and start trading.
> 
> ...




Correction: you'd be taxed at your marginal tax rate, or only half for holding over a year.

As for me, I intend to buy a house in a year or two but have all of my money in shares plus 25% leverage.  I am pretty confident in my holdings outperforming the ASX.  If it turns out my investment fell rather than rose I would likely just rent for a while longer...delaying is not too big of a deal to me.


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## Liar's Poker (24 July 2011)

danbradster said:


> Correction: you'd be taxed at your marginal tax rate, or only half for holding over a year.




I think you misread what tech/a wrote. You get taxed (have to pay your marginal tax rate) *on* 50% of your profits, unless you hold for over 12 months - then it is marginal tax rate on 25% of your profits.

-Liar-


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## Tyler Durden (24 July 2011)

Liar's Poker said:


> I think you misread what tech/a wrote. You get taxed (have to pay your marginal tax rate) *on* 50% of your profits, unless you hold for over 12 months - then it is marginal tax rate on 25% of your profits.
> 
> -Liar-




Really? I always thought your entire profits were taxed, unless you held them for more than 12 months, in which case only 50% of your profits is taxed??


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## NewOrder (24 July 2011)

Tyler Durden said:


> Really? I always thought your entire profits were taxed, unless you held them for more than 12 months, in which case only 50% of your profits is taxed??




This. CGT is payable on 100% of the nett profit for assets sold within 12 months of ownership. For assets held for 12 months or more you are taxed on 50% of the nett profits.

I am not sure about shares or other asset classes but with property, ownership is considered to be on the date the contract has been signed.


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## cynic (24 July 2011)

ENP said:


> I have all my savings in bank accounts and term deposits for my first home which I intend to buy in 2 years or so. Safe, low returns, dependable.
> 
> Although, every now and then I desperately want to put some of it into stocks. Main reason being it is a bit more exciting and there is the potential of higher returns. It feels like I'm wasting all the info I've learnt about the markets over the past few years and it's not going to good use sitting in term deposits.
> 
> ...




I think that what you are doing is quite reasonable. The info that you've learnt won't go to waste because the stockmarket will still be waiting for you after you buy your first home. Normally when advising my friends regarding saving towards home ownership I warn them to avoid the more volatile investment vehicles (ie. stocks, sharemarket derivatives etc.).

I would caution anyone investing in stocks, to be wary of their emotional disposition. Emotions such as fear and anger (frustration etc.) can make one extremely vulnerable and lead to inappropriate trading decisions when engaging the market. One doesn't have to be an automaton, devoid of all emotion, to profit from the market (although such qualities can help). A high level of awareness of one's emotional state combined with the strategy/skill to curtail any potentially adverse effects, are essential components of my trading philosophy.

BTW I bought my first home in the Autumn of 1988. A relative tried to persuade me to invest in managed funds via a financial planner during the previous winter. Fortunately, I desisted and kept my savings in bank deposits. Can you imagine what may have happened to my house deposit if I'd invested my savings in the market during the previous year?

All the best with whatever you decide. I hope all goes well for you.


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## skc (24 July 2011)

tech/a said:


> Understand how to manage risk and your concerns will be diminished.
> 
> If it was me Id use say 50% of it with a 20% draw down safety net and start trading.




Sounds like a decent balance. Consult the other half and let them hold the keys to releasing the funds, if you don't trust yourself with leaving the other 50% untouched or when you hit your drawdown limit.



Liar's Poker said:


> I think you misread what tech/a wrote. You get taxed (have to pay your marginal tax rate) *on* 50% of your profits, unless you hold for over 12 months - then it is marginal tax rate on 25% of your profits.
> 
> -Liar-




Which country are you trading from 

(Don't need to answer it's rhetorical )


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## Liar's Poker (24 July 2011)

Tyler Durden said:


> Really? I always thought your entire profits were taxed, unless you held them for more than 12 months, in which case only 50% of your profits is taxed??




Yep, you're right.

Don't know what I was posting - really have to stop drinking, or maybe learning about Islamic finance and brady bonds has messed me up...

Apologies all - see 'New Order' post above for correct description. 

-Liar-


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## Liar's Poker (25 July 2011)

skc said:


> Which country are you trading from




Denmark at the moment


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## Tyler Durden (25 July 2011)

Liar's Poker said:


> Yep, you're right.
> 
> Don't know what I was posting - really have to stop drinking, or maybe learning about Islamic finance and brady bonds has messed me up...
> 
> ...




Damnit, I was hoping there'd been a change in laws I didn't know about, so I can sell some shares now to lock in the profit.


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## tech/a (25 July 2011)

I meant 50 % as that's my tax rate.
Of all profit.


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## danbradster (25 July 2011)

tech/a said:


> I meant 50 % as that's my tax rate.
> Of all profit.




The maximum marginal tax rate in AU is 45% for income over $180,000.


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## tech/a (25 July 2011)

Unfortunately thats me.


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## skc (25 July 2011)

tech/a said:


> Unfortunately thats me.




Really? I thought you would have enough structure to pay no more than 30% tax.

I knew a guy who has net worth well into 8 figures and he qualified for the $900 stimulus...


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## tech/a (25 July 2011)

Tax rate and Tax payed after the Accountants have played with it all are 2 different things ---as you know.

Point is just take tax into consideration.


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## Tyler Durden (25 July 2011)

skc said:


> Really? I thought you would have enough structure to pay no more than 30% tax.
> 
> I knew a guy who has net worth well into 8 figures and he qualified for the $900 stimulus...




Truly amazing.


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## ENP (27 July 2011)

The thread has gone a bit off track with tax rates.

Back to the original question, how did you resist the temptation to get into stocks whilst saving for a first home?


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## village idiot (27 July 2011)

ENP said:


> Back to the original question, how did you resist the temptation to get into stocks whilst saving for a first home?




not hanging around stock forums where everyone else *is* into stocks?...


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## ck13488 (27 July 2011)

ENP said:


> Back to the original question, how did you resist the temptation to get into stocks whilst saving for a first home?




Lurking/learning on here to know that I don't know enough to risk it in shares


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