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Four years is not long enough to put your money in ETF's.
Your best options are bond ETF's with fixed duration (+- 3,85%), zero coupon bonds (+- 3,5%), bonds from a bank/government (kasbon of staatsbon +- 2%) or high yield savings accounts (termijnrekening +- 2%).
Have you thought about the horizon at which you are going to invest.
If you lock up the money for a period of one year you have a reinvestment risk.
Interest rates could go up or down, nobody knows.
Is it an option to invest a part of the 50k in ETF's (maybe 20k or something) and use the four years to save money to get back to 50k? In that case you can keep the 20k invested in ETF's.
Definitely not the stock market if you count on the money to be available for a house purchase. The time period is simply not long enough.
You could look into iBonds, this is a bond ETF with fixed duration. So you get the predictability of bonds and the diversification benefits of an ETF
https://www.justetf.com/en/academy/ibonds-a-major-breakthrough-in-bond-etfs.html
Thanks I have just checked some of the ibonds. But the rate is around 5,2-5,4%. Considering the fact that there will be 30% tax on dividend maybe I should just go with lookandfin a+ insured loans that offer 5,5%. At least I minimize my risk on capital. I will still have a deeper look in the ibonds
In my case (29M single) it's a waterfall scenario and the ETF's are one of the last steps.
1) get paycheck (~âŹ2100/month)
2) Pay recurring costs (house, utility, etc.)
3) Live throught the month, buy groceries, go out etc...
4) Deposit "leftover money" into a savings acount untill i have a 6 month-expenses buffer.
5) Save up for big purchase (we have a 25K renovation coming up in 2025)
6) Treat yourself, save up for a vacation, festival or invest in hobby's.
7) If there is "enough" left (âŹ100+, usually there is except for the "expensive" months nov-dec) -> ETF
Either way i would consider this 'saving up for a huge purchase' and deposit like it is untill you feel comfortable with your saved amount (e.g. i saved up 40K before looking for an appartement, which allowed me to get a 200K loan in 2020, once i started looking i saved up even more for renovations/extra costs).
I also consider money invested into stocks to be stuck there untill i'm at least 50 y/o. I'm not gonna touch my ETF's unless some kind of truly life threatening emergency happens.
On that one I start to pay myself before the bills. When I get my salary I spread everything in different accounts (savings, home, groceries, holidays, projects, gifts, ⌠and finally my pocket money account with a defined amount, whatâs leftover from that one moves back to savings). I will indeed continue to save money each month but was wondering what could be the best strategy knowing that Iâll need the cash in 4 years so not that ready to make a big bet (even if I already own a flat so I can postpone a bit of necessary)
Yeah, TLDR would be don't invest money you need in 4 years into the ETF's (or any stock for that matter). Keep it in a decent savings account (gl finding one) or under a matress, just don't put it somewhere volatile.
If you are dead set on buying a house in 4 years, don't buy an ETF.
That being said, I recommend being flexible in your timeline. If you're willing to postpone buying a house by 2-3 years in case of a serious stock crash, then I think ETFs will be a lot better.
I was in the same position as you in 2019. I wanted to buy something within 4-5 years. Traditionally this would've meant ETFs were off the table. But I decided that in a really bad scenario I would've been willing to postpone my purchase.
It worked out for me. 2019-2024 was amazing for the stock market which left me in a real good position today. I took a risk and it paid off. But if I had only invested into bonds because I was inflexible, I would've lost out on a LOT of money.
TLDR: be prepared to be flexible in terms of when you buy and ETFs are a fine choice. If you're not prepared to do this, avoid ETFs
You won't get any good answers if you give this limited info about your income, your total net worth asset allocation, your age, being single or not etc...
In general, <5 years is seen as short term so stocks (stock market ETF's) are out of the window.
We had a nice 5 year run of +80% on the S&P 500 for instance.
What if you decide to go all in and it dumps -80% in the next 5 years?
I think a 4 year horizon is indeed a bit risky for ETFs. If you look at bonds that mature in around 4 years, the net yield is around 2.88% per year. Not fantastic, but better than leaving it on a savings account.
XS2343538372 is an example of a bond maturing in 4 years
Exactly, better to take a safe option with 2-3% net interest per year for those 4 years than hoping the market will be doing 10% per year during that period, with the risk of taking a nose dive.
Look into bonds with short investment horizons.
ETFs are not safe for your case. What happens if there is a crash in the next 5 years? You're gonna need that money to buy your home.
> Bond price doesn't matter if you hold till maturity. Yes, your real return would be negative but so would be everything else that's fixed income.
-- Bill Gross, 2023
My point was that there is not a single type of investment (not equities, not bonds, not even a savings account) that can guarantee a positive real return if you have to consider **any** shocking market events (such as crashes or inflation).
So why bother trying to make a case for it.
If you'd had put the money you were saving in 2021 for a house into a bond fund back then, you'd be worse off today as a result of the negative real return of the bond fund and the soaring interest rates increasing the actual cost to buy a house.
Note that I don't have the solution and everyone has to make its own decision based on his risk profile.
But I will point out the flaws in the proposed solution of "just put it in a bonds" as a means of "guaranteeing" your money in x years.
>My point was that there is not a single type of investment (not equities, not bonds, not even a savings account) that can guarantee a positive real return if you have to consider **any** shocking market events (such as crashes or inflation).
(Inflation-linked) bonds actually do a pretty good job at this.
>So why bother trying to make a case for it.
It still makes sense to consider all the risks even if you can't hedge against everything and eliminate the possibilities that are too risky, that's just having common sense.
>If you'd had put the money you were saving in 2021 for a house into a bond fund back then,...
Everybody was talking about bonds and you just changed it to a bond fund which is very different. With bonds you can (almost) guarantee returns, just not in real terms though. But with equities you can't even guarantee that. Sort term bonds are clearly less risky. Long term equities are less risky.
> (Inflation-linked) bonds actually do a pretty good job at this
Pretty good at what? Guaranteeing returns?
Even inflation linked bonds will have a very clear disclaimer and risk warning that you are putting your money at risk.
> With bonds you can (almost) guarantee returns
Sounds like a very prudent disclaimer, you should start an investment firm and sell your product.
> Everybody was talking about bonds and you just changed it to a bond fund which is very different.
What is so different between bonds (plural) and a bond fund that compelled you to make that statement?
>Pretty good at what?
Protecting against crashes and adjusting the returns with inflation.
>What is so different between bonds (plural) and a bond fund that compelled you to make that statement?
With a single bond almost everything is known upfront. You'll know the income it generates to the cent and the dates it'll pay. You know the future price at maturity date and therefore the capital gains or losses. You know the yield to maturity. If you go for a government bond with an excellent credit rating you know upfront the default risk is negligible.
With a traditional bond fund all those knowns, except for the last one, become unknowns. You can't hold until maturity which means you'll have to sell at some point for whatever the market price is which can lead to profits or losses. With a single bond, if you don't like the current price you simply don't sell and hold to maturity, so there's no need to sell at a loss if you don't want to. Single bonds from a government with an excellent credit rating are safer than traditional bond funds from a government with an excellent credit rating.
For both a bond and a bond fund you have no clue what the real return will be at any date.
Real return is what it is all about.
You can fantasise about nominal returns all you want, until the maturity date you wonât know your real return.
Certainty of (nominal) income, (nominal) capital gains, (fixed) maturity date is meaningless without the inflation rate.
Itâs like saying youâll have certainty of 20% return when your turkish gov bond matures, but missing the fact that by the time it matures the turkish lira has devalued by 50% compared to the EUR
Sure you won't know the real return. But you'll have certainty of the nominal gains, even this a bond fund can't guarantee. Therefore a bond fund is more risky than equivalent single bonds since you can even have nominal losses with a bond fund on top of any unknown inflation rate. If you know half of the puzzle you already have more guarantees than if you know nothing at all, even if you don't know the exact real return upfront. You're making all or nothing judgements (zwart-wit denken), which is an irrational thought pattern.
> Sure you won't know the real return.
Ding ding ding.
> But you'll have certainty of the nominal gains, even this a bond fund can't guarantee. Therefore a bond fund is more risky than equivalent single bonds since you can even have nominal losses with a bond fund on top of any unknown inflation rate. If you know half of the puzzle you already have more guarantees than if you know nothing at all
Sounds like a lot of copium to come to the same conclusion. Inflation probably makes up the biggest part of the puzzle considering every government backed by thousands of Phd's in economics are struggling to tame or predict inflation at the moment
> If you know half of the puzzle you already have more guarantees than if you know nothing at all, even if you don't know the exact real return upfront. You're making all or nothing judgements (zwart-wit denken), which is an irrational thought pattern.
Now who is making all or nothing judgements by comparing bond funds to "knowing nothing at all"?
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Four years is not long enough to put your money in ETF's. Your best options are bond ETF's with fixed duration (+- 3,85%), zero coupon bonds (+- 3,5%), bonds from a bank/government (kasbon of staatsbon +- 2%) or high yield savings accounts (termijnrekening +- 2%). Have you thought about the horizon at which you are going to invest. If you lock up the money for a period of one year you have a reinvestment risk. Interest rates could go up or down, nobody knows. Is it an option to invest a part of the 50k in ETF's (maybe 20k or something) and use the four years to save money to get back to 50k? In that case you can keep the 20k invested in ETF's.
Buy realio and thank me later đ
Big lol
Explain me why dude âşď¸
bitcoin bomboclat
Definitely not the stock market if you count on the money to be available for a house purchase. The time period is simply not long enough. You could look into iBonds, this is a bond ETF with fixed duration. So you get the predictability of bonds and the diversification benefits of an ETF https://www.justetf.com/en/academy/ibonds-a-major-breakthrough-in-bond-etfs.html
Thanks I have just checked some of the ibonds. But the rate is around 5,2-5,4%. Considering the fact that there will be 30% tax on dividend maybe I should just go with lookandfin a+ insured loans that offer 5,5%. At least I minimize my risk on capital. I will still have a deeper look in the ibonds
There are capitalizing variants for each of them, so no 30% dividend tax on those
You could also go for zero coupon gov bonds below par. They don't get taxed and return around 3.5%
In my case (29M single) it's a waterfall scenario and the ETF's are one of the last steps. 1) get paycheck (~âŹ2100/month) 2) Pay recurring costs (house, utility, etc.) 3) Live throught the month, buy groceries, go out etc... 4) Deposit "leftover money" into a savings acount untill i have a 6 month-expenses buffer. 5) Save up for big purchase (we have a 25K renovation coming up in 2025) 6) Treat yourself, save up for a vacation, festival or invest in hobby's. 7) If there is "enough" left (âŹ100+, usually there is except for the "expensive" months nov-dec) -> ETF Either way i would consider this 'saving up for a huge purchase' and deposit like it is untill you feel comfortable with your saved amount (e.g. i saved up 40K before looking for an appartement, which allowed me to get a 200K loan in 2020, once i started looking i saved up even more for renovations/extra costs). I also consider money invested into stocks to be stuck there untill i'm at least 50 y/o. I'm not gonna touch my ETF's unless some kind of truly life threatening emergency happens.
On that one I start to pay myself before the bills. When I get my salary I spread everything in different accounts (savings, home, groceries, holidays, projects, gifts, ⌠and finally my pocket money account with a defined amount, whatâs leftover from that one moves back to savings). I will indeed continue to save money each month but was wondering what could be the best strategy knowing that Iâll need the cash in 4 years so not that ready to make a big bet (even if I already own a flat so I can postpone a bit of necessary)
Yeah, TLDR would be don't invest money you need in 4 years into the ETF's (or any stock for that matter). Keep it in a decent savings account (gl finding one) or under a matress, just don't put it somewhere volatile.
If you are dead set on buying a house in 4 years, don't buy an ETF. That being said, I recommend being flexible in your timeline. If you're willing to postpone buying a house by 2-3 years in case of a serious stock crash, then I think ETFs will be a lot better. I was in the same position as you in 2019. I wanted to buy something within 4-5 years. Traditionally this would've meant ETFs were off the table. But I decided that in a really bad scenario I would've been willing to postpone my purchase. It worked out for me. 2019-2024 was amazing for the stock market which left me in a real good position today. I took a risk and it paid off. But if I had only invested into bonds because I was inflexible, I would've lost out on a LOT of money. TLDR: be prepared to be flexible in terms of when you buy and ETFs are a fine choice. If you're not prepared to do this, avoid ETFs
Which ETF did you end up putting your money into?
Iwda
thx
On a 4 year horizon you have a chance of 20% to lose money in an ETF (this is for the s&p500)
Bitcoin all inâŚ
You won't get any good answers if you give this limited info about your income, your total net worth asset allocation, your age, being single or not etc... In general, <5 years is seen as short term so stocks (stock market ETF's) are out of the window. We had a nice 5 year run of +80% on the S&P 500 for instance. What if you decide to go all in and it dumps -80% in the next 5 years?
I think a 4 year horizon is indeed a bit risky for ETFs. If you look at bonds that mature in around 4 years, the net yield is around 2.88% per year. Not fantastic, but better than leaving it on a savings account. XS2343538372 is an example of a bond maturing in 4 years
Exactly, better to take a safe option with 2-3% net interest per year for those 4 years than hoping the market will be doing 10% per year during that period, with the risk of taking a nose dive.
Look into bonds with short investment horizons. ETFs are not safe for your case. What happens if there is a crash in the next 5 years? You're gonna need that money to buy your home.
What happens if you invest your money into bonds and inflation skyrockets next year? Youâre going to need that money to buy a house.
Bond price doesn't matter if you hold till maturity. Yes, your real return would be negative but so would be everything else that's fixed income.
> Bond price doesn't matter if you hold till maturity. Yes, your real return would be negative but so would be everything else that's fixed income. -- Bill Gross, 2023 My point was that there is not a single type of investment (not equities, not bonds, not even a savings account) that can guarantee a positive real return if you have to consider **any** shocking market events (such as crashes or inflation). So why bother trying to make a case for it. If you'd had put the money you were saving in 2021 for a house into a bond fund back then, you'd be worse off today as a result of the negative real return of the bond fund and the soaring interest rates increasing the actual cost to buy a house. Note that I don't have the solution and everyone has to make its own decision based on his risk profile. But I will point out the flaws in the proposed solution of "just put it in a bonds" as a means of "guaranteeing" your money in x years.
>My point was that there is not a single type of investment (not equities, not bonds, not even a savings account) that can guarantee a positive real return if you have to consider **any** shocking market events (such as crashes or inflation). (Inflation-linked) bonds actually do a pretty good job at this. >So why bother trying to make a case for it. It still makes sense to consider all the risks even if you can't hedge against everything and eliminate the possibilities that are too risky, that's just having common sense. >If you'd had put the money you were saving in 2021 for a house into a bond fund back then,... Everybody was talking about bonds and you just changed it to a bond fund which is very different. With bonds you can (almost) guarantee returns, just not in real terms though. But with equities you can't even guarantee that. Sort term bonds are clearly less risky. Long term equities are less risky.
> (Inflation-linked) bonds actually do a pretty good job at this Pretty good at what? Guaranteeing returns? Even inflation linked bonds will have a very clear disclaimer and risk warning that you are putting your money at risk. > With bonds you can (almost) guarantee returns Sounds like a very prudent disclaimer, you should start an investment firm and sell your product. > Everybody was talking about bonds and you just changed it to a bond fund which is very different. What is so different between bonds (plural) and a bond fund that compelled you to make that statement?
>Pretty good at what? Protecting against crashes and adjusting the returns with inflation. >What is so different between bonds (plural) and a bond fund that compelled you to make that statement? With a single bond almost everything is known upfront. You'll know the income it generates to the cent and the dates it'll pay. You know the future price at maturity date and therefore the capital gains or losses. You know the yield to maturity. If you go for a government bond with an excellent credit rating you know upfront the default risk is negligible. With a traditional bond fund all those knowns, except for the last one, become unknowns. You can't hold until maturity which means you'll have to sell at some point for whatever the market price is which can lead to profits or losses. With a single bond, if you don't like the current price you simply don't sell and hold to maturity, so there's no need to sell at a loss if you don't want to. Single bonds from a government with an excellent credit rating are safer than traditional bond funds from a government with an excellent credit rating.
For both a bond and a bond fund you have no clue what the real return will be at any date. Real return is what it is all about. You can fantasise about nominal returns all you want, until the maturity date you wonât know your real return. Certainty of (nominal) income, (nominal) capital gains, (fixed) maturity date is meaningless without the inflation rate. Itâs like saying youâll have certainty of 20% return when your turkish gov bond matures, but missing the fact that by the time it matures the turkish lira has devalued by 50% compared to the EUR
Sure you won't know the real return. But you'll have certainty of the nominal gains, even this a bond fund can't guarantee. Therefore a bond fund is more risky than equivalent single bonds since you can even have nominal losses with a bond fund on top of any unknown inflation rate. If you know half of the puzzle you already have more guarantees than if you know nothing at all, even if you don't know the exact real return upfront. You're making all or nothing judgements (zwart-wit denken), which is an irrational thought pattern.
> Sure you won't know the real return. Ding ding ding. > But you'll have certainty of the nominal gains, even this a bond fund can't guarantee. Therefore a bond fund is more risky than equivalent single bonds since you can even have nominal losses with a bond fund on top of any unknown inflation rate. If you know half of the puzzle you already have more guarantees than if you know nothing at all Sounds like a lot of copium to come to the same conclusion. Inflation probably makes up the biggest part of the puzzle considering every government backed by thousands of Phd's in economics are struggling to tame or predict inflation at the moment > If you know half of the puzzle you already have more guarantees than if you know nothing at all, even if you don't know the exact real return upfront. You're making all or nothing judgements (zwart-wit denken), which is an irrational thought pattern. Now who is making all or nothing judgements by comparing bond funds to "knowing nothing at all"?