~75% in Cash... am I being too cautious?

[Garpal Gumnut]

Are you willing to risk the house deposit, and thus risk not buying a house 12 months from now, in order to have a slightly lower mortgage?

If not, then return of your money is more important than return on that money over the next 12 months and so cash is a sensible place to be keeping it. That would be true even if the interest rate was zero - at least you'll almost certainly get all of it back at face value (though cash isn't totally without risk).

Personally, I'm somewhat risk averse when it comes to houses but not when it comes to investing generally. I own the house outright and could, in theory at least, borrow against it and invest that money into something else. But I will not be doing so, simply because I am not prepared to risk losing the house if something were to go wrong (and if you don't think anything can go wrong, that just means you haven't worked out where the risk is - it will be there somewhere).

To me, a roof over my head is more important than the balance of my other investments. That's a personal choice obviously and others would take a different view.

If you did decide to invest in something else, then investing in something that has a reasonable correlation to house prices would make sense. House prices go up = your investment goes up. If the investment drops then houses should also have dropped in price. Easy to say of course, but such an approach would make sense. In short, that's hedging. It's much the same as someone who is (for example) planning a 3 month trip to the US and Canada a year from now would be wise to consider converting some of their money to US and Canadian $ now. That way, they'll still be able to afford the trip no matter what happens to the value of the Australian Dollar over the next 12 months. Obviously they miss out on the benefits if the AUD rises, but they also miss out on the loss if it falls. If the primary aim is to ensure that they can afford the holiday, then such an approach makes sense. Doing that with housing is harder, but in principle it makes some sense. Hedging.....

I reckon anyone investing in "houses" atm, is a muppet.

It's a bubble.

Cash would be better.

gg

 

[notting]

I think it's been a bubble for a long, long, long, long time.
So it must not have been a long, long, long time ago.
Now I think it isn't fully inflated yet.

The Chinese are buying our inner city pads like it's gold rush 0.2, straight off the plans like in China.
It's unbelievable.
Agents I know are employing at least one Chinese speaking person to do the deals.
It's kind of weird because they don't ever sell them or live in them they just sit there!

The demographic has changed and is hard to read it's a new thing.

I'm just itching to short this share market but apparently the fundies are very happily still buying dips so it's all a bit boring and you never short boring!
But I reckon you could.

 

[qldfrog]

I believe Smurf option is the one to follow if you want to buy soon:
edge.
If really keen in investing in share combine your stock purchase with a matching number of put optyions; will act as a safety,
you pay a premium for the put option but know that whatever happens, you will get your capital back,
if the stockmarket rockets you are in and still a winner, if it crashes your loss is the premium only
and if it wallows at the same price or so you have still the dividend to balance...a bit the put option premium
hope it helps