The Down Payment Dilemma

The Down Payment Dilemma

Sara Glaz Aloni

Tzvi and Devora Felder have been married for three years and they live in Eretz Yisrael, where Tzvi learns and Devora works as a bookkeeper for an American company. They’re financially stable and have $60,000 socked away in a bank account, earmarked for a down payment on their first home.  As the clock ticks on their stay in the Holy Land, they also wonder if they should leave their $60,000 in a savings account, where it’s making bupkis — as Tzvi puts it — or is it smarter to invest it?

First, they have to ask themselves: When do we plan on using this money?

The couple anticipates moving back in a year, checking out the different neighborhoods in Lakewood and Monsey, and then buying in an “up and coming” community.  Target date for using down payment: two to three years.

When it comes to finances, this is considered a “short time horizon.”  When the time horizon is short, investing in the stock market is tricky.  Why?  In trying times such as these, there’s a chance that when they need the money, the account value will be the same or less than when they initially invested it.  In other words, a shorter time horizon means less time for the market to recover in the event of a downturn.  So unless the Felders are willing to take a real risk, investing in the stock market will have to go off the table for now.