Can I save for my first home through ETFs?

Hello!

It’s great to hear that you’re planning ahead for your financial future as you approach the completion of your Master’s degree in Computer Science. Considering your goal of buying a house in the next few years and your current savings of $25,000 in a fixed term deposit, you’re right to think carefully about the best place to park your money.

Given your short investment timeframe and the goal of purchasing a home, the key factors to consider are risk and liquidity. Typically, investing in ETFs (Exchange Traded Funds), particularly those that track broad market indexes, is a popular choice for long-term investment due to their potential for good returns and diversification. However, the stock market can be volatile in the short term, and there is a risk that the value of your investment could decrease within a shorter timeframe when you need the funds for your home deposit.

Since your priority seems to be preserving capital while earning some return, and considering your need for liquidity in the near future, you might want to look into lower-risk investment options. These could include high-interest savings accounts, short-term fixed deposits, or conservative fixed-income securities, which generally offer lower returns but also lower risk compared to stocks or ETFs.

It’s also important to consider the impact of fees and taxes. For instance, investing in ETFs might involve brokerage fees, ongoing management fees, and potential capital gains tax if the investment is sold at a profit. These costs can affect the net return on your investment.

In your case, continuing to save aggressively while exploring safe, interest-bearing options that align with your timeframe might be the most prudent approach. This strategy would aim to grow your savings while minimizing risk and ensuring that the funds are accessible when you’re ready to make a home purchase.

At Pearler, we focus on helping investors like you make informed decisions that align with their long-term finan

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You’re correct – investing when you need the money ‘soon’ is typically not a good idea.

There’s a chance that markets go up and you could’ve made great returns, but in general you really don’t want to play around with money you need in the next 5 years. The risk is you then have to delay your home purchase because of the market which would be incredibly frustrating.

I would personally stick with the low risk savings account for a timeframe of 5 years or less. At least the money is guaranteed to be there when you want it :)