Kdtyjb

I'm looking to buy a house, but lacking in the capital to make an adequate down payment on said house. My lease expires in a year from now, so I am looking to build up my capital through investment banking - our first real attempt at investments in our lifetime.

Next month I will be able to open up an investment account through my bank with an initial $500 payment and $50 monthly payment into the account, which will build up $1100 from my savings alone.

I'm looking for growth in my investment, but I'm not looking to take such a big risk that I could stand to lose all $1100.

What type of investment should I make for this type of savings goal?

Note: $50 a month would be coming out of our current savings total, leaving $300 aside to build up regular savings (which we need - our current savings are only at $500!)

Generally speaking you want to layer your financial life.

First you want to have an emergency fund with enough money set aside to comfortably absorb emergency expenses and give you a financial buffer if you find yourself unemployed. Your emergency fund should be stored in a guaranteed account.

Above that you have some sort of longer term specific goal savings accounts. Depending on your investment horizon you may want to apply some risk here but really, you probably just want to keep it somewhere safe. A 10% market gain in this account might be nice, but a 30% decline would be horrible.

Once you have these layers established you may want to start investing some amount in to more risky assets. This is something you do when time is on your side.

If you have a one year investment horizon, the stock market is really not the place for this money. If I were you I'd keep this money in a safe high-yield savings account. Don't be lured by the high long-term average returns of the stock market, because this is not a long term investment for you.

What type of investment is best suited for a 1-year investment on a down payment?

Do not invest the money you need in 12 months. That is because investments involve risk, and risk is what you should avoid at all costs.

If you are in the US (and probably Canada), open a savings account with an online bank such as (alphabetically) Ally; Capital One 360; Synchrony and many others.

which will build up $1100 from my savings alone.

Note: $50 a month would be coming out of our current savings total, leaving $300 aside to build up regular savings (which we need - our current savings are only at $500!)

Even $1100 is way, way, way short of what you'd need for a decent DP (down payment).

For example, 5% of US$200,000 is $10,000 and just about every regular on this site would recommend a 20% DP

There are internet bank accounts that link to a local checking account that pay about the same rate as a three-month Treasury Bill.

There are 6-month duration corporate bond ETF's that pay more than the three-month Treasury rate.

And there are Treasury Direct accounts that allow Treasury security investments with no fees or expenses. Non-hedge-fund investors are presently going as long as two-year durations but shorter durations are available.

But buying a house in the future might involve a worry about interest rates going up while waiting. An interest rate rise can be hedged with a sell-side 10-year Treasury future. The contract size is $100,000 and the minimum margin deposit is about $1300 per contract.

First of all congratulations on starting to save!

If you are not willing to lose the money and you want to withdraw it a certain amount of time, then I would recommend a high interest savings account. If you commit to one year you can get a better rate, but you lose the flexibility to withdraw it early. Best 1 Year offers

If you want to take more risk I would go with one of the free investment brokers such as Robinhood. There you can start investing in stocks and ETF's commission free. But there is a certain risk to lose all you money. I you choose to invest e.g. in the S&P500 which represents the biggest 500 companies listed on the stock marked in the US, the chances that you lose all your money are pretty low, but the chances that your money will be worth less than today are rather high.

At the risk of being off topic, have you considered non direct financial investments?

Physical investments, like the comment about the leaf blower and rake, require time but produce a semi-stable option if you are willing to accept the full scope of what you're doing.

I personally have invested in various pieces of equipment that allow me to generate a relatively healthy passive income that easily meets and far exceeds the goals you have outlined here. Obviously I won't disclose what they are because I don't want to create competition for myself, but the basic idea is enabling yourself to provide a good or service that other people would gladly pay you for.

Not all of this has to be intensely time consuming or costly. If you have $1100, and you were willing to risk $500, plus invest some time setting things up, you could easily generate a few hundred a week off of simple nightly tasks like pushing a few buttons, stuffing a few envelopes, and stashing away all the funds so you can adequately and accurately calculate and pay the necessary taxes on the venture. In the US, that's whatever your tax bracket is, plus the self employment tax.

This answer is meaningless without some kind of guidance, so here's the nutshell that is not what I am doing, but I have proved this concept for others who thus far have never taken on the challenge.

I can sew. Goody, right? I also have kids. I found that I needed some things for the kids when they were babies that were either not commercially available, or they were absurd in price, or bland in design. So I made them myself. I made many. I gave them out at baby showers and people loved them. I sold them on ebay for a while and they sold without flaw. Little baby blankets, pillow covers, crib liners, etc. Each one taking some 15 minutes to make, cost about $7 to produce, sell for $30. All said, $15 profit on each item. Taxes slaughter that number down to about $10. 20 units a week I didn't need. Set it aside and invest in the next thing to waste my time with and eventually retire the more complicated things.

You may not sew, but the example is still valid. You can invest your funds into a passive hobby based on observed needs or trends. I did this exact one myself and it made money, but I don't feel like sewing pillow covers and blankets. I moved to other products and most of them now require almost no attention and costs are down to pennies per unit. Some cost zero and are just pure profit.

I put all this money aside and put a down payment on a house, same as your goal. It may not be the investing you were looking for, or what this site is trying to help people with, but it is what I did and it worked for me. It is still working for me now.

Good luck.

Currently, as of 3/5/2019 E*Trade offers a Premium Savings Account at 2.10% APY.

This account should meet your 'investment' needs. In order to avoid a $10 monthly fee, an average daily balance of $1,000 is required.