Investing for a house deposit

tebbins

There's nothing stopping you, the issues are:
- how much will you put into this investment, enough to buy the house outright?

- what account will you use? If not an ISA you risk Capital Gains and Income Tax on the dividends
- what fund will you pick and how?
- is this a lump sum you have or are you talking about a regular monthly deposit into the account?
- when will you want to buy this house?
- I sincerely doubt that a mortgage lender will consider your deposit reliable given, if it's in a vanilla 100% global equity tracker fund, it could drop 50% in a month

- what will you do if you end up making a loss over the period up until buying the house?
- what will you do if your investment suffers a significant fall in value while while you are going through the purchase? House purchases can take months, you could apply for a mortgage with a £50k deposit but only have £30-£40k when you get to the transaction date, how will you make up any potential shortfall?

steampowered

This article has a very good explanation of what level of risk you would be taking, if you were to invest in a fund which tracks the stock market.

As you can see, if you were investing for 1 year, you have about a 28% chance of making a loss. If you were investing for 6 years, you have a 10% chance of making a loss.

The question of whether you are better off investing or putting money into a savings account will depend on (1) how long you think it will take you to save up a deposit and (2) how much risk you are willing to take.

https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

Tonys101

If you keep your money in a savings account you get no returns, inflation eats at what you have and and the price of houses can go up

I am not trying to say that investing to get a house deposit is the only way or the best way but I don't feel comfortable putting my money into savings account turning next to nothing on my money.

Thanks for all your input people 

eskbanker

Tonys101 said:

If you keep your money in a savings account you get no returns, inflation eats at what you have and and the price of houses can go up

If you invest your money you might get negative returns, inflation still eats at what you have and the price of houses can still go up....

ColdIron

The effects of inflation over a handful of years is not really significant. The important thing is that you are building up a pot of cash for a deposit, this is how most people do it

Tonys101

True I am just looking for ways to get extra money so I have less to pay if I take out a mortgage. 

ColdIron

Work harder? Change your job? Spend less? Marry well There is no magic wand I'm afraid, we've all been there

Tonys101

Again I never said there was a magic wand I am just looking for ways to make extra money outside of a day job

Hence my I was looking and still am at investing. 

Ebe_Scrooge

Tonys101 said:

Again I never said there was a magic wand I am just looking for ways to make extra money outside of a day job

Hence my I was looking and still am at investing. 

That's a perfectly understandable approach.  The bottom line is, whatever "investment" you choose is going to be a gamble, whichever way you look at it.  You may make a substantial profit, you may make a substantial loss.  It's your call as to whether you feel comfortable risking your hard-earned cash on a gamble, or would you prefer the very small but safe income from an interest-paying savings account.

You've seen these films where city traders are frantically waving their arms shouting "buy, buy" and "sell, sell".  In real life, these guys can make or lose millions in the space of minutes, depending on whether they've read the market rightly or wrongly - and if they screw up massively, they can cause the demise of the bank.  Currency exchange is another one that's used by the big banks - buy a million quid's worth of Euro's or Japanese Yen today, sell them tomorrow, again big money can be made or lost.

grumiofoundation

Tonys101 said:

If you keep your money in a savings account you get no returns, inflation eats at what you have and and the price of houses can go up

I am not trying to say that investing to get a house deposit is the only way or the best way but I don't feel comfortable putting my money into savings account turning next to nothing on my money.

Thanks for all your input people 

Inflation doesn't eat very much over a few years though. 
Over a longer timescale it becomes significant.

You have been told multiple times that investing entails risk and that the timescale of saving impacts the sensibleness of it as an idea. As said above negative returns are a real possibility over the short term. 

So if you are looking to buy in 2 year investing would be very risky.

In 10 years investing would be more sensible.

There is a very good chance that you could build deposit faster via increasing saving rate by reducing unnecessary spends than you can by investing. Have you examined your spending looking for ways to cut it down? - as I said earlier there are almost always ways to save more (whether they are all 'worth' doing is another matter).

Without providing any info on your financial situation, timescales etc (as I posted previously) no one can give anything more than vague advice.