Personal Investments • How to save for property AND retirement

Interesting, thanks. I did my first bit of research about buying a property. It turns out I need to have 20-30% down payment. Which is luckily just the amount I have right now. I played out a few scenarios of securing the down payment and saving for retirement (putting the whole down payment away and starting monthly investing in Vanguard LifeStrategy with 0€. Or putting away just about half of the down payment, starting the Vanguard LifeStrategy with the other half and then topping up both accounts 50/50. It turns out splitting it gives me 35% more return on the LifeStrategy.

So my question changes slightly: How do I park my downpayment money as safely as reasonably possible for 5-15 years, without it needing to do anything but beat inflation? I would have thought I could just put it into Vanguard VAGE / iShares EUNA and take out the money whenever I need it? You say "duration under 3 years", I thought using an ETF would let me sell anytime?

Unfortunately, it is not that simple.

You state your immediate goal is now safety of your cash. Then forget investing any money in stocks and/or bonds because both can lose money. You need to be comfortable with what it is you are buying.

Inflation is dynamic with periods of low inflation/high inflation/spikes etc. Sure, central banks aim and manage for a range and provide forecasts, but really nobody can tell you what inflation will be over the next 15 years.

So, you need to make a choice - Safety vs Inflation. Whilst not fun over the short-term, inflation is a bigger problem for cash over the long term.

Presumably your money is already parked in a German Bank/Financial institution you feel you can trust (safety and accessible). If not happy with the current interest rate, look elsewhere for a better one with favourable terms. You can only do you best and reassess with your timeline.

In the US we would use High Yield Savings Accounts, Money Market funds and CD’s. Do an internet search to compare if similar products available in Germany, and the different pros and cons.

If the German government offers some type of saving bond that returns the amount you invested and provides an interest rate linked to inflation, whilst safe as backed by the government. That might be a better option for holding cash for longer periods.

In the US a popular option are IBonds. Do an internet search to compare if similar products available in Germany.

All the best.

Statistics: Posted by RedCabin — Sun Jan 07, 2024 4:26 am — Replies 7 — Views 1349

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