Should we keep our down payment money invested in XBAL?

One or two years is too short of a time period to have the money in any non guaranteed investment. You would be basically betting. It may work at the end since we are still in a bear market, but regardless it is a bit risky.

It is better to find 4 or 5 % CDIC-insured deposit or money market fund and keep the downpayment there.

It’s borderline irresponsible to be invested in the market on such a short term horizon especially when GIC’s are so high.

Just lock in a 5% GIC and call it a day. You’ll thank yourself for not losing it all.

aclarridge wrote: ↑ As mentioned, we have the money intended for our down payment currently invested in XBAL. We intend to buy our first home this year or next. This would represent about a 30% down payment for the homes we want, with an outstanding mortgage balance which would be a bit tight but doable for us to manage at current interest rates.

My wife thinks we should just let it ride until we need it because the job market is good, the economy is doing well, and all signs point to a pretty good year in the markets.

I think we should move it all to a cashable GIC or HISA earning 4% or so in order to avoid the possibility of an unforeseen market correction.

Hope you can help to settle this disagreement! Thanks.

Given your relatively short-term timeframe your risk isn’t so much about interpreting the risks of the signs that you can see, rather, your risk is more so the risks that you’re not seeing.

If something unforeseen or unusual occurs that disrupts things then you probably won’t have time to ride it out which puts your home purchase in jeopardy. What if the crazy wing of the Republican Party won’t raise the US debt ceiling and they start to shut the government down or even worse start to default on their debts. The former will cause market disruptions while the latter would drive market chaos.

What if Russia gets desperate and does something stupid in Europe? Or there’s a crisis with Taiwan? Or COVID kicks it up a couple of notches and we’re back into lockdowns wreaking havoc on supply chains and inflation? Or something else?

Your wife’s assessment is more likely than any of these assessments but time isn’t on your side in the unlikely event that she’s wrong. For the sake of marital bliss maybe you could compromise on something like the following:

Feb 2023 — pull out 25% now and put into cashable GIC
Jun 2023 — pull out another 25% into another cashable
Sep 2023 (a) — pull out 25% again

Sep 2023 (b) — re-evaluate your home-buying timeline. If you’re still 6+ months from the home purchase then start to think about the last exit in the new year, and if you’re less than 6 months then start to think about the last exit before the end of the year.

It depends how serious you are about buying a home in the next year or two, and whether you would be fine with putting off buying a home if the market is down in a year. As well, if you've made any sort of offer, preliminary or otherwise, then, absolutely, XBAL is not appropriate and you should take steps to divest as soon as soon as possible. I'd recommend an ISA, or, if you're with Scotia iTRADE, a BNS Series F ISA. If you have at least 12 months out, you could look at an Equitable Bank non-redeemable GIC paying 5.00%.

Cheers,
Doug

dmehus wrote: ↑ It depends how serious you are about buying a home in the next year or two, and whether you would be fine with putting off buying a home if the market is down in a year. As well, if you've made any sort of offer, preliminary or otherwise, then, absolutely, XBAL is not appropriate and you should take steps to divest as soon as soon as possible. I'd recommend an ISA, or, if you're with Scotia iTRADE, a BNS Series F ISA. If you have at least 12 months out, you could look at an Equitable Bank non-redeemable GIC paying 5.00%.

Cheers,
Doug

EQ down to 4.85%

Thanks for all the replies so far, I really like the idea of the compromise suggested by CanadianLurker as well.

As for the timeline, it is our strong preference to buy this year. If it’s early next year that is undesirable but possible. Later than summer 2024 would be a big fail, we would compromise on the quality or size of the house before we let that happen.

Ultimately I think no matter what we do, we are most at the mercy of the housing market in the one particular school district that we really want to buy in. If there’s a bunch of pent up demand and we are having to participate in bidding wars, we could be screwed anyway.