Tag: portfolio construction

Worked Example – Saving for a House

In this post we take you through a worked example of how to maximise your investments to get on the property ladder. One to read for first-time home buyers.

To end our series, we thought some worked examples would be helpful.  In this post we cover house savings, next post we cover retirement planning.

Example 1: Saving for a home


Age 25
Starting Investment amount $5,000
Target Investment amount $200,000 in today’s dollars
Cash needs over next 3 years $0
Investment Time Horizon 10 years
Investment Purpose First Home


Peter is 25 and has $5,000 in savings.  By the time he is 35, he would like to buy his own home, either to live in, or as an investment.  He thinks a deposit of $200,000 in today’s dollars will be enough for a 20% deposit on his chosen property.

He will not need to access any cash from the savings in this account in the next few years.  Peter is a risk taker and is comfortable taking on the risk of losing money every 4-5 years, because he really wants to maximise his return. 

Peter decides to invest his money in 80% growth assets, and 20% in defensive assets and selects:

Asset Class Percent Amount Estimated Return
Cash 5% $250 2.50%
Bonds 15% $750 4.00%
Shares 80% $4,000 8.00%
Estimated Weighted Return 7.125% p.a.


To estimate return, Peter uses a lower rate of return than historical rate of returns, due to the current low interest rate environment.  He will revise his estimated returns by asset class each year, based on current economic conditions.

Calculating Target Investment Amounts

In 10 years time, Peter estimates that $200,000 in today’s dollars will be equivalent to $256,000, using an inflation rate of 2.50%.  Therefore the target at the end of 10 years is $256,000.

If his investments earn 7.125% p.a, peter will need to save $1,400 per month to reach his goal at the end of 10 years.

Choosing Investments

Given his small starting investment amount, and relatively small monthly contributions, Peter decides to invest using exchange-traded funds.  He invests in:

  • 5%                          Cash in a high interest savings account

  • 5%                          Government Bond Fund ETF (very low risk)

  • 10%                        Corporate Bond Fund ETF (medium risk)

  • 40%                        ASX 200 ETF (high risk)

  • 40%                        International Stock market ETF (highest risk)

Peter will monitor the performance of his portfolio via his brokerage account, and intends to check the performance monthly and rebalance his portfolio allocation annually.

The information on this website is for general information purposes only. It is not intended as  financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any financial product. Balance Impact does not recommend or endorse products and does not receive remuneration based upon investment or other decisions by our email recipients, publications, newsletter or website users.

Sign Up

Balance Impact 1 Bligh Street Sydney, NSW, 2000 info@balanceimpact.com 02 8226 8596 Balance Impact (ABN 54 608 605 296) is the trading name of Touchstone Capital Pty Ltd, a Corporate Authorised Representative (No.xxxxxx) of SIRA Group Pty Ltd (AFSL: 278423).


Hide ethical news and the sign-up