If you were going to buy a house in 2-3 years time...

[ENP]

What would you be investing in?

The dilemma between investing in low returns for cash and term deposits against the lure of higher returns in stocks.

 

[Bill M]

I would put it in cash/term deposits. If you asked this question in November 2007 you would still be losing 27% of your investment today 3 and a half years later.

I wouldn't be betting my deposit money on shares. Your choice/gamble of course, all the best.

 

[nulla nulla]

What would you be investing in?

The dilemma between investing in low returns for cash and term deposits against the lure of higher returns in stocks.

I would recommend that you liaise with the bank that you intend to get the home loan from. Start work on your relationship with them as early as you can.

 

[trainspotter]

Put the lot on BLACK 13 and spin the wheel.

 

[So_Cynical]

What would you be investing in?

The dilemma between investing in low returns for cash and term deposits against the lure of higher returns in stocks.

I would be following a low average cost investment plan, buying quality stocks at low points in their price cycle, thus building a portfolio of stocks and a dividend/distribution stream.

Pretty much exactly what i have been doing since Nov 2008

 

[Julia]

What would you be investing in?

The dilemma between investing in low returns for cash and term deposits against the lure of higher returns in stocks.

What is your basis for asserting stocks are going to provide you with higher returns than cash?

 

[medicowallet]

I'll tell you in 2-3 years time.

But I'd have to say, if you need every dollar (ie have zero tolerance for risk), then go the highest interest, most tax effective cash option you can find.

I

 

[Pancakes]

If you were looking at 4+ years you could get a first home saver account:

http://www.membersequitybank.com.au/personal/savings_accounts/first_home_saver.html

 

[VSntchr]

What is your basis for asserting stocks are going to provide you with higher returns than cash?

Stocks have the ABILITY to offer higher returns than a bank account, FACT. I don't see how the post suggests anything otherwise. Doesn't mean that stocks will always offer a higher return...but I'm pretty sure that was implied or else his advice would merely be..."buy stocks".

 

[trainspotter]

Stocks have the ABILITY to offer higher returns than a bank account, FACT. I don't see how the post suggests anything otherwise. Doesn't mean that stocks will always offer a higher return...but I'm pretty sure that was implied or else his advice would merely be..."buy stocks".

EH ??? IF you pick the "right" stocks then YES your post is valid. The area of concern that I see is that "someone" is saving for a deposit on a home. This money is to be used as an instrument to achieve financial freedom/roof over their heads/build a nest/ whatever the reason so I am not sure if buying "stocks" is the answer.

Depends on relegated risk and if in 2 - 3 years time that the end goal is still the same?

Anyhooooooooooo ....... When you walk into the bank of your choice to "borrow" the aforementioned monies to purchase your little piece of Australiana the bank manager is going to ask "SO WHERE DID THE DEPOSIT COME FROM?"

If you say ..... "I sold some shares worth 80k" ... then it is unlikely that it will succeed.

If on the other hand you evidence a saving pattern up to 50k worth of cold hard cash in a bank account over a 3 year period it would be looked at more favourably. That is what they are looking for BTW.

Then again there is always Keno, Blackjack and my favourite the Roulette wheel.

Put it all on black 13.

 

[Tyler Durden]

If you were looking at 4+ years you could get a first home saver account:

http://www.membersequitybank.com.au/personal/savings_accounts/first_home_saver.html

I remember having a look at that and I could be wrong, but the only real benefit seems to be something like you get an additional $900, which for locking in your money for four years isn't really much??

 

[Pancakes]

I remember having a look at that and I could be wrong, but the only real benefit seems to be something like you get an additional $900, which for locking in your money for four years isn't really much??

True.

So the maximum government co-contribution is $935 per year (or 17% or whatever you deposit up to $5,500). So you deposit $5,500 the government will put in $935. You then earn 5.5% or whatever the bank pays you in interest. I wouldn't put any more than $5,500 in per year because you won't get any extra government contributions above that amount. The interest you earn is taxed at a concessional rate of 15% instead of your marginal tax rate and the government contribution is tax free.

You are locked in for 4 years though which sucks if you want to buy soon. Although if you buy a property before the 4 years is up the government will roll the savings into your mortgage after the fourth year.

It's really only good for people who are happy to be locked in for 4 years, but an initial 22.5% return for such low risk is quite good I think.

Edit: Taxed at 15% http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00250962.htm&page=2&H2

Oh and the property you buy has to be your PPOR, so you have to live in it for 6 months or so after you buy it.

It would be interesting to know if you can buy an investment property before the 4 years is up and then still access the savings after 4 years when you purchase your PPOR?

 

[againsthegrain]

Roulette is good, with 50k you could get into a progressive system other wise poker has became very popular lately

 

[Glen48]

House prices will still be going down and no where near the bottom , buy gold silver and keep out of banks because they will crash as well.. CBA has the most to loose due to leanding on over priced houses and I am lead to belive all but ANZ had to borrow money under TARP in 2009 according to Money Morning.

 

[Tyler Durden]

True.

So the maximum government co-contribution is $935 per year (or 17% or whatever you deposit up to $5,500). So you deposit $5,500 the government will put in $935. You then earn 5.5% or whatever the bank pays you in interest. I wouldn't put any more than $5,500 in per year because you won't get any extra government contributions above that amount. The interest you earn is taxed at a concessional rate of 15% instead of your marginal tax rate and the government contribution is tax free.

You are locked in for 4 years though which sucks if you want to buy soon. Although if you buy a property before the 4 years is up the government will roll the savings into your mortgage after the fourth year.

It's really only good for people who are happy to be locked in for 4 years, but an initial 22.5% return for such low risk is quite good I think.

Edit: Taxed at 15% http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/00250962.htm&page=2&H2

Oh and the property you buy has to be your PPOR, so you have to live in it for 6 months or so after you buy it.

It would be interesting to know if you can buy an investment property before the 4 years is up and then still access the savings after 4 years when you purchase your PPOR?

Wow cool thanks, if I could 'like' your post I would

So the co-contribution is $935 per year (assuming $5,500 deposit)? I read it as just a once off thing?

 

[youngone]

True.

So the maximum government co-contribution is $935 per year (or 17% or whatever you deposit up to $5,500). So you deposit $5,500 the government will put in $935. You then earn 5.5% or whatever the bank pays you in interest. I wouldn't put any more than $5,500 in per year because you won't get any extra government contributions above that amount. The interest you earn is taxed at a concessional rate of 15% instead of your marginal tax rate and the government contribution is tax free.
PPOR?

So if i were to put in $1000 per year, for 10 years, do i still gain all the benefits.?

 

[VSntchr]

So if i were to put in $1000 per year, for 10 years, do i still gain all the benefits.?

No. The government contribution is for the first 4 years only. After that only the normal interest rate applies...

 

[Pancakes]

No. The government contribution is for the first 4 years only. After that only the normal interest rate applies...

It's a minimum of 4 years. So if you put $5,500 in each year for 5 years you will get $935 for each of those 5 years. There is a cap of $80,000 though, so once you reach that amount you can't contribute anymore to the account.

 

[Pancakes]

So if i were to put in $1000 per year, for 10 years, do i still gain all the benefits.?

If you put $1,000 in the government contribution is 17% so $170 each year for 10 years. I think...you might want to check with a bank just to make sure

Try this calculator... http://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/first-home-saver-calculator

http://www.moneysmart.gov.au/managi...avings-accounts/first-home-saver-accounts#Are

Are first home saver accounts right for you?
First home saver accounts are good if you know you want to buy your first home in more than 4 years. The account can earn high interest and you get a government bonus to put towards your deposit.

If you think you may want to buy your first home earlier they may not be the best choice for you. Make sure you think hard about your future needs before opening a first home saver account. If, for example, you decide in 3 years that you'd rather move overseas or put the money into a new business, you won't be able to immediately withdraw the money from your account. The money will be transferred to your super and you won't be able to access it until you are 65.

Consider all your savings options. You may prefer opening a different kind of savings account that is more flexible than a first home saver account.

Saving with your partner
First home saver accounts can only be opened by an individual, so if you are saving with a partner you should each open an account. You will only have to wait until one of you reaches the 4-year savings mark to withdraw from both accounts, provided your house is bought in both your names. If you both have accounts, you will also both be eligible for the government contributions.

 

[Julia]

What would you be investing in?

The dilemma between investing in low returns for cash and term deposits against the lure of higher returns in stocks.

Stocks have the ABILITY to offer higher returns than a bank account, FACT. I don't see how the post suggests anything otherwise. Doesn't mean that stocks will always offer a higher return...but I'm pretty sure that was implied or else his advice would merely be..."buy stocks".

1. ENP was not offering 'ADVICE'. He/she was the original poster asking for advice, i.e. he asks "What would you be investing in?"

2. Read his next sentence. It clearly makes the assumption that returns for cash will be lower than those from shares, with no defining qualifications about either asset class.

That's why I asked him to clarify the assumption. Not because I need the answer, but because he probably needs to be clearer about what potential returns can apply to what asset class in light of the funds being intended for home deposit.