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hey guys you're me host Brian Preston mr. beau handsome back with another episode of ask the money guy that's right you guys have financial questions we've got your financial answers go out your favorite social use the hashtag ask the money guy or go to our website money guy.com and asks a question right there it's Brian Preston the Buddy Guy so Brian today's question is one a coach from Melissa Tony asked to remain anonymous but he had a great question he's thinking about buying a house when he finishes up some things that he's currently working on he's thinking he might buy a house in the next four to eight years that sort of his time frame and this is his question I'm going to make the decision to purchase a house what's the best way for me to save up for a down payment should I be socking away money in cash or should I be investing those dollars that is a great question and here's the temptation I'm gonna just go ahead and lay it out there cuz we all think it we see that the stock market makes money eight out of ten years historical right and you're like whoa man okay I've saved this much money but if I've got a 10% growth factor on that I could I could afford maybe a nicer house or my monthly payment would be less this would be so much easier if I invested the money and made some money that is the temptation but the problem is is that yes it is true the financial markets do great eight out of ten years but what if you're buying that house in that two out of ten years at 20% of the time it could be catastrophic for your financial life so what we recommend to people is that look you have to break this into what's short term money what's long term money anything that is less than five years now this is the weird thing about this anonymous listener he said four to eight years so I'm gonna have an answer for him in a second but I want to break out let's just go with the black and white answers first when you're under five years that short term money the easy answer is without a doubt that should be liquid probably in something like a cash account or a money market and you can do those with the high interest FDIC insured online banks that are paying over two percent using around a quarter percent right now you can go on bank rate.com to see the best fdic-insured money market accounts that are out there so that's for your short-term money so if you're thinking about buying a house inside of the next five years and you will need the downpayment inside of the next five years cash is the answer long-term meaning that five years and greater now you can start thinking about this is that this is a decision that I should probably have a diversified portfolio that can maybe help me not only have some liquidity but also allow me to tap into that eight out of ten year growth opportunity of investing so that's why we sell anybody it doesn't that just be a house it could be if you're saving up for an engagement ring or some big purchase like a big trip or something like that stuff this short-term liquid but long-term can definitely be invested now our listeners go here then go well it's simple I knew that so it's probably gonna come somewhere in between cuz he said he was four to eight years if you have a question mark like that I still think it comes down to you have to figure out is it short term long term but you can now start saying I'm going to do diversified investment but I'm going to lean the needle towards where if it's four or if it's eight years if you think it's truly eight years go with a fold invested portfolio that's diversified so you have some that liquidity if you think it's going to be four years but you're just not quite sure maybe you're going to have 80% of it in cash and then you might have 20% that you invest because you're leaning closer towards the cash but you know that it's long term enough that you probably want to put a little of that money to work now there's a huge benefit when you work this kind of strategy whether you have you're sitting on a lump sum maybe you just sold a business or you got an inheritance or someone gives you some money you may even want to think about if you do have that longer term time horizon you may want a dollar cost average those dollars in because there's a beautiful benefit that happens when your dollar cost averaging sure if the market goes up every dollar that you already invested is making more and more and more if the markets going down you're actually buying in at lower and lower levels but the beautiful thing is is say that you do want to buy that house at the absolute worst time bottom of the market if you've been consistently dollar-cost average the money you put in last month has it lost that much and the money you put in two months ago hasn't lost that much and three months ago so you're naturally buying yourself down it's a great way to toe the line rather than saying okay well I'm all investing all cash you put a plan in place and let you systematically work into that system and we've done it we've done whole shows on this so if you're interested in lump sum versus dollar cost averaging we've done shows but I can tell you just giving you the Cliff Notes version ten months is about how long you want to do a cut dollar cost averaging strategy but when it comes back to do you invest the money or do you have it just sitting in cash it all comes down to what's your time frame for making that decision try to find the balance that works in between those things don't get greedy make sure you're balancing out that fear and greed so that you money's there when you actually need it from making these big life-changing decisions and purchases that's right if you guys have a financial question if you're curious about something in your personal situation feel free to reach out to us go to money guide com asked us a question or go to your favorite social use the hashtag ask the money guy and we'll answer your question right here in the Tesla I'm your host Brian Preston mr. beau handsome keep those questions coming