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I'm 20 and I'm from Australia, have about $8000 saved up for my mortgage fund, hoping to get a hefty sum for my downpayment when I plan to buy a house in the future.

The $8000~ savings came from my 6 months of work, and now I have invested them all into a US-investment ETF (IVV).

What my plan is to repeat this process every 6 months (earn money, put them all into a different ETF) in the hope that I'll have a healthy diversified portfolio after a few years.

Then after a few years when the time that I'm going to buy a house nears, I'll put the future savings into a high-interest savings account, while keeping the ETFs where they are.

The reason for my plan is this :

  1. Every 6 months so I can earn a good amount and buy an ETF in one trade - less brokerage fees;
  2. I chose ETFs because they don't require as much monitoring as stocks do;
  3. And because they are generally less volatile than stocks

Before this, my other option was just to keep all my money in a high-interest savings account to go for zero risk but I figured I'm young and can go with a little amount of risk.

What can you advise me to do to improve/change my plans? Are there any flaws that you can see? Any possible improvements?

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    what is the next ETF you will put your money into? what is your plan when the market turns against you? when your lot of $8000 is $5500 – CQM Dec 3 '14 at 4:28
  • @CQM - Next ETF I plan is Australian Shares. After that, I'm not quite sure yet. I'm going to set a cutoff for my losses but I haven't set that yet, and I'm not sure what a good percentage is for me to set right now. – Mark Gabriel Dec 3 '14 at 4:30
  • The ETF you mention tracks the S&P. This is not "a little amount of risk". If you had been in this in 2008, you would have lost ~37%. When are you planning to buy a house? For long term investors, the S&P 500 is a good choice. But, if you want to use that money in 3 years, it might not all be there. – Degustaf Dec 4 '14 at 21:49
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Its a pretty good plan, good work.

Why are you doing ETFs? Could you just do mutual funds and receive the same benefits without the brokerage costs? That is available here in the US, I am unsure about "down under". This way if you have an extra $100 or so (subject to minimum investments) you can throw it in the fund without invoking brokerage fees.

In doing some research it looks like Fidelity offers iShares ETFs commission free, so you could stick with ETFs and invoke no fees for trading.

Secondly as the time for home purchase approaches you may want to do an interim switch to funds with a low beta, or low volatility. Say two or three years out, do the switch, then 6 months out switch to a savings account.

Third you mentioned that you will switch to a high yield savings account. If you keep up this kind of behavior the interest on 6 months of savings just won't matter. It will be a "drop in the bucket" of your total net worth. Right now $500 or so (100K for 6 months at 1%) might matter, but by then convenience might be more important. You may opt to stick it at your local bank.

Keep up the good work.

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    I believe Fidelity has a $25k minimum to start investing with them. As for mutual funds, they incur bigger management fees per annum that paying for a $15 brokerage ($30 including exit) would be cheaper in the long run. Plus the added benefit of the convenience due to the trade account being directly connected to my savings account since they are offered by the same bank. In Australia, high interest savings accounts offer up to 3.73% p.a. :D – Mark Gabriel Dec 3 '14 at 16:11
  • @MarkGabriel - if you want to use the cheapest brokerage in Australia try CMC Markets with brokerage starting at $11 per trade. – Victor Dec 4 '14 at 0:29

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