I'd be tempted to put it into REITs. The main thing you want to avoid is having your investment move in the opposite direction to house prices. If the REIT goes down then it's likely that the house you were going to buy has also gone down in price.
Go ahead and compare charts of VTSAX (Total Stock) vs VBILX (Intermediate Bond) vs VGSLX (REITs) from 2000 through today. If you need the money in 5 years you don't want that much risk.
Also it's entirely possible that average real estate values will decline while the housing market in the area the poster is looking to buy goes up.
To defend REITs, yes REITs lost money in 2008 but but you could also buy property cheaper in 2008/2009.
If you're going to cherry pick data then take the case where property prices double in 2016. You would expect REITs to double too (not taking into account the rent that you'd be receiving in the mean time), and you'd still be able to buy your property in five years time.
The same can't be said for uncorrelated assets like bonds/CDs/etc. They suck in highly-inflationary environments.
Also thanks for assuming I was talking about leveraged products. I wasn't.
The most important part of investing is knowing your time horizon--stocks or stocks and bonds are just too risky for any time.hirozion less than 5 years.
On the other hand, if you have no specific plans for that money, and you would just like as much money as possible in 5 years' time, on average you are likely (on past performance) to have more in 5 years if you put it into the stock market than if you put it into a savings account.
(And if you know that in 5 years' time you will desperately need about 100k and have no other way of getting that money, go to a casino or something. Fortunately, that's a rather uncommon situation.)
Finance is complex because there exists a product for any need.
Even if you start index investing at a market top, you’ll probably do well over longer timeframes, but may do poorly in short intervals.
My plan was to invest it with Betterment, because I felt like that was the easiest and cheapest "set and forget" solution. But would there be substantial upside in going directly with a Vanguard fund instead? I'm really new to this and the convenience of a dedicated interface like Wealthfront/Betterment feels valuable to me, but if I'm leaving substantial money on the table doing that I'd rather go to the extra effort of figuring something else out.