good investment strategies when saving for a first home

whats are some good investment strategies when saving for a first home?

Is the FHSSS really worth it? Are you better off investing in shares? Or should you look at index funds or ETF's?

A. the moment im thinking about going with index funds. not sure on exactly which one though. Any way anyone got any advice on this?

 

I got my first deposit together by saving as much as I could, into a regular savings account.

The second deposit was via shorting tech companies on the stock market.

The third was a combination of the first two.

The fourth was an equity release.

The remainder have all been through savings.

 

The FHSS scheme is likely the most tax effective way to save a deposit, whether or not those funds could get a better return in direct shares, ETF's etc. (post tax) is debatable.
Why not a combination of both?
*No advice*

 

Second Lyndseys comments above. We used the FHSSS and i think its great. People forget about the double-whammy effect of having additional savings locked away that cant be touched, taxed less so you are already saving more than if you invested it after tax, but also as you salary sacrifice it your take home pay really might not be affected that much meaning you dont have to overly sacrifice your current standard of living. It would also depend how much you have saved for a deposit. If you had 100k in shares/etfs and were actively looking to buy a house only to see the market drop and it go down to 80/90k in a week - thats a pretty big psychological toll and will also take you a while to save that up again in cash (i assume).

 

Research an online savings account and set up a regular deduction from your salary. Look where you can cut back and save extra. Also, if possible and you can, get a second job and just smash that extra cash away. My husband and I worked 2 jobs each to save our first deposit and it was hard but worth it. The banks want to see cold, hard, saved cash.
my suggestion would be careful using the stock market/shares to try and get cash that way. Sure, you might make $15,000 but then think about the capital gains tax you’ll need to stump up come tax time. Plus as a response here has says, what if the market drops significantly and you lose lots. It’s soul crushing and very plausible with an up and down market.

Our second deposit for an IP was through equity.

 

I'm kind of already doing that now. currently, I've been taking about $155 per week out. But I want to up it to $275. per week. currently, the account makes about $46 interest (it did make a lot more at one point) which is nothing.

My Idea is to basically keep this going but put 2.5k into VDHG and leave it there for at least 10 years minimum.

 

omg, I forgot I did this. I come up with another idea. Would it be a bad idea if you invested 10k in some ETF's when your end goal is to buy in 5-8 years?

 

With interest rates as low as they are, even the "high interest" savings accounts are paying peanuts. You're going to have to assume a portion of risk by evaluating other investment types. The greater risk profile you're willing to assume, the more you could potentially make by the end of your timeline.

If your timeframe is 5,8 or 10 years away - you've got yourself some room to be illiquid in the shorter term.

Have a look at digital assets - aka cryptocurrencies. This is not going to be a popular opinion on here, as the user base's demographic skews heavily towards the more conservaitve and older crowd (duh property owners - the stereotype of property being an investment vehicle etc); as cryptos have only been around for little more than a decade and are classified high risk. But look at the growth of the poster child Bitcoin, or the top 10 alternate digital coins/tokens by market cap and see their tripple and quadruple digit annual growths. The greatest risk is not in you losing your money, but in you losing your passwords/private keys giving you access to your money.

 

The only way I would do this is to break the 10k up and invest it in 2.5k lots and put part of that in crypto. But to be honest I don't really want to invest in crypto. The only Ideas I have at the moment are to either invest it all in the one ETF or break it up over a series of different ETF's. Or invest in a series if different ETF's as well as put part of the 10k in a solid blue-chip.

Anyone else got some other ideas? Am I even on the right track with this?

If I am.....

Any ETF Ideas?

Solid blue-chip ideas?

To Crypto or to not Crypto? lol

 

FHSSS is that only allowed $30k?
Depending on income that is what I would do for first $30k of deposit. Depending on Super Fund you can put that in an index type fund. Lots of Super funds high growth options have been returning 9 to 10% over past 10 years .

 

I'm pretty sure you can take out whatever you want if you are using it for FHSSS

this is something that I'm considering doing on a salary sacrifice basics but I don't really want to get A lot saved up and then take it out for a house deposit.

I think if I was to do it I would go part:

Part FHSSS

Part investment

And the rest in savings

 

Yep, max you can release is $30K
Contributions capped at $15K per fin year.

 

I would say its a good idea.

5-8 years is a reasonable time frame, and if the absolute worst was to happen with regards to timing then 5-8 years might just mean 7-9 years. Point being that your time frame is flexible enough not to worry.

Your ability to save is what will do the heavy lifting, conisder the investment returns the icing on top... and in that regard dont get too exotic or clever in your investment endevours. An broad based australian ETF such as VAS would be fine (I hold this amongst others).
LICs would be fine too, but in the context of your goals they are all much of a muchness despite everyone having thier own preferences for one or another.

FHSSS sounds like an even better option at face value, but I have not looked into in so can't really comment.

 

Don't forget to keep some cash on hand (money in the bank) for emergencies. Don't get too carried away with great investments that you drain your emergency cash reserves dry.

If you can prevent yourself from lifestyle creep - maintain your current budget for living costs and any increases in your pay from work or any bonuses in future should directly go towards those investments and your house deposit. If extra money is out of sight and out of mind, you won't be tempted to spend it.

 

Would it be worth talking to a Financial Adviser about all of this?

 

Some "financial advisers" can give expensive and "ordinary advice".

Your goal is to save x amount of dollars for a deposit over say 8 years.

Safe put money in bank account and some in FHSSS (tax breaks and 6/8% returns). Very low returns on cash in the bank.

A little more risk ETF like VAS which in the past has returned 8%

More risk LIC

More risk Wentworth Park on Wednesday's

More Risk Bitcoin.

No easy quick safe way to make money.

I saved my first deposit in a bank account. Time again I would do it differently

 

Personally i wouldn't bother (disc: I've never engaged with a FP myself)

Your goal is pretty well defined and straightforward. I doubt the money you would spend on a financial planner would represent value for money for you here.
If you were looking to transact a large sum of money such as the sale of a business leading into retirement for example, then sure.

I'd just worry about the basics which is to save, and invest sensibly.

Putting your efforts into understanding investment options (such as ETFs) and regualr savings would represent better value for money. The likes of the Barefoot Investor and Motivated Money would be good Australian related books to read.
A bit of time googling the like of FHB and FHSSS would benefit too.

 

The return on FHSS amounts invested is 3.02% currently. The actual return made by the super fund isn't used when calculating release amounts. More info at the links below (ATO website):

First Home Super Saver Scheme

Shortfall interest charge (SIC) rates

If you're 5-8 years away from buying and OK with the risk that you may lose some money through share market fluctuations then an ETF sounds fine. I'm buying my first house this year and have used a combination of FHSS and a savings account. Not super exciting, especially when my mates tell me about the thousands their making on the market but I'd prefer the certainty of knowing the amount I'm putting away each week will be available when I'm ready to buy.

 

Ok. so I've come to this conclusion: I'm going to invest in
VAS, VGS and VAP

it will be about $4.5k between the 3.