Bank or invest for 4 years

Hi Bronwyn,

Personally I don’t think it’s a great idea to invest money in the market for a timeframe or less than 5 years. So 3 years doesn’t pass the test for me.

Especially when, as you’ve pointed out, the money is actually needed during that timeframe. It would be frustrating and potentially heartbreaking to have the market fall when you need the money most, just for some extra upside.

Others may see it differently, but I don’t think it’s worth it in scenarios like that, especially when high interest savings accounts are paying decent rates.

All the best

Hello! It’s great to see you’re thinking strategically about your financial future and considering both long-term investments and your near-term goal of buying property.

Given your situation, where you have a significant deposit saved and a clear timeline for when you’ll need the funds, it’s important to weigh the potential risks and rewards of investing that money in the market versus keeping it in a safer, more liquid form like a high-interest savings account.

Since you plan to use the deposit for a property purchase in about 3 years, the primary consideration should be the risk associated with different types of investments. Generally, investing in the stock market is better suited for longer-term goals due to the volatility and potential for short-term losses. The stock market can offer higher returns but comes with higher risk, especially in the short term. Given your timeline, there’s a real risk that if the market takes a downturn, your investment might not have enough time to recover before you need to access the funds.

Keeping your deposit in a high-interest savings account, as it currently is, provides a stable and predictable return with very low risk. The 5% interest rate you mentioned is quite competitive and offers a guaranteed return without the risk of losing principal, which is crucial when you know you’ll need the money in a relatively short timeframe.

For your long-term investment plans, starting to invest smaller amounts monthly is a wise strategy. This approach, known as dollar-cost averaging, can help reduce the impact of volatility by spreading out the purchase of assets over time. It’s particularly effective for building wealth over a period of decades, as it allows you to take advantage of market dips and grow your investment gradually.

In summary, for your short-term goal of buying property in three years, keeping your deposit in a high-interest savings account is likely the safest and most prudent option. For your long-term investment goals, r

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