Saving for a home down payment can feel challenging, given current real estate prices. Using the right assets can help give your balance a lift.

When you actually need the money is the “biggest driving factor,” said Ryan Dennehy, principal and financial advisor at California Financial Advisors in San Ramon, California. The firm ranked No. 13 on the 2024 CNBC FA 100 list.

“Do you need the money six months from now, or do you need the money six years from now?” he said.

That timing matters because financial advisors generally recommend keeping money for short-term goals out of the market. There can be more flexibility for intermediate-term goals of three to five years, but it’s still wise to prioritize protecting your balance. After all, you don’t want a bad day in the market to impact your ability to put in an offer on a home.

But that doesn’t mean your down payment funds need to sit in a basic savings account, either.

Here’s how to figure out how much money you might need, and some of the options for safely growing your balance:

Understanding how much money you might need can help you better gauge your timeline and the appropriate assets for your down payment.

As of the second quarter of the year, the median sales price of U.S. homes is $412,300, according to the U.S. Census via the Federal Reserve. That is down from $426,800 in the first quarter, and from the peak-high of $442,600 in the fourth quarter of 2022, the Fed reports.

So, for example, if a homebuyer is looking to put a 20% down payment on a $400,000 house, they might need to save about $80,000, said certified financial planner Shaun Williams, private wealth advisor and partner at Paragon Capital Management in Denver. The firm ranks No. 38 on the FA 100.

Of course, a 20% down payment may be traditional, but it’s not mandatory. Some loans require as little as 5%, 3% or no down payment at all. Down payment assistance programs can also cover some of the tab.

In 2023, the average down payment was around 15%, with first-time buyers typically putting down closer to 8% and repeat buyers putting down around 19%, according to the National Association of Realtors.

Just be aware that if you put down less than 20%, the lender may require you to buy private mortgage insurance. PMI can cost anywhere from 0.5% to 1.5% of the loan amount per year, depending on factors like your credit score and down payment, according to The Mortgage Reports.

Here are some options that advisors say are worth considering, depending on when you hope to buy a home, how much you already have saved and how accessible you need the cash to be:

A certificate of deposit lets you “lock in” a fixed interest rate for a period of time, Dennehy said. You can buy a CD through a bank or a brokerage account. 

Term lengths for CDs can span from months to years. The annual percentage yield will depend on factors like the interest rate at the time, the term of the CD and the size of deposits.

If you need to access the funds before the CD matures, a bank may charge a penalty wiping out some of the interest earned, Dennehy said. Some banks offer penalty-free CD options, too.

With brokered CDs, there’s often no penalty charge for early withdrawal, but you are subject to whatever the CD is valued at on the secondary market, he said. You may also face sales fees.

As of Oct. 23, the top 1% one-year CDs earn around 5.22% APY while the national average rate is 3.81%, per DepositAccounts.com.

Backed by the U.S. government, Treasury bills are an asset that give you a guaranteed return, with terms that can range from four to 52 weeks. The asset could be less liquid, depending on where you purchase.

T-bills currently have yields well above 4%.

You can purchase a short-term or a long-term Treasury depending on your goal timeline, said Dennehy.

Treasury interest is subject to federal taxes, but not state or local income tax. Stacked against CD rates, Treasurys can offer a “comparable rate with less of a tax impact,” said CFP Jeffrey Hanson, a partner at Traphagen Financial Group in Oradell, New Jersey. The firm ranks No. 9 on the FA 100.

3. High-yield savings accounts

A high-yield savings account earns a higher-than-average interest rate compared with traditional savings accounts, helping your money grow faster.

The top 1% average for high-yield accounts is 4.64% as of Oct. 23, per DepositAccounts.com. To compare, the national average for savings accounts is 0.50%.

Their ease of access makes a HYSA especially suitable as you get close to starting your home search.

“High-yield savings accounts [are] great if you’re going to be buying in the next year,” Williams said.

4. Money market funds

A money market fund generally has a slightly higher yield than a HYSA, said Dennehy. Some of the highest-yielding retail money market funds are nearly 5% as of Oct. 23, according to Crane Data.

But a HYSA is typically insured by the Federal Deposit Insurance Corp. A money market fund is not, said Dennehy.

Still, money market funds are considered low risk and are intended not to lose value, according to Vanguard. They may be eligible for $500,000 coverage under the Securities Investor Protection Corp., or SIPC, when held in a bank account, Vanguard notes.

New technologies have given people access to more information and new tools to manage their money.

Robo-advisors can build and rebalance portfolios based on customer preferences. However, automation doesn’t factor in people’s emotional needs.

Experts say adding behavioral science to investing knowledge can help financial advisors get better results for their clients. 

Advisors are increasing their use of artificial intelligence tools for more rote tasks, such as research, scheduling and even stock picking.

That change is one of the drivers that has more investment advisors focused on behavioral science to understand how and why people make the financial decisions they do. Behavioral economics combines the study of economics and the study of psychology to understand how people make financial decisions.

“For too long as a profession, we have been taught that we should be ignoring emotions,” said certified financial planner Tim Maurer, chief advisory officer at SignatureFD, which has offices in Atlanta and Charlotte, North Carolina. “We better be more astute students of our clients’ behavior and emotion so we can better understand how to point that emotion in the right direction.”

Instead of a quantitative approach to managing a mix of stocks, bonds and other assets, Maurer suggests a qualitative approach that uncovers the person’s purpose behind the portfolio.

“We’re focusing our planning on the actual human felt needs that our clients have, rather than the tools and techniques that we might utilize in order to help them achieve their goals,” Maurer said Wednesday during a session at CNBC’s FA Summit.

“The best investment is not necessarily the one that shows the highest long-term rate of return, it’s the investment that our clients can stick with,” said Maurer, who is also a member of the CNBC Financial Advisor Council.

Keeping emotions in check can help guide people through rocky financial markets and help them, as famed investor Warren Buffett once notably said, “Be fearful when others are greedy and to be greedy only when others are fearful.”

While AI can help with finding different ways of explaining financial strategies, it can’t connect with people.

“You can give great advice and people won’t take it. So the creative problem-solving comes in being vulnerable and being able to communicate that in a way that’s going to speak to them,” said Sam G. Huszczo, a CFP and founder of SGH Wealth Management near Detroit. “There’s no AI that’s doing that for you.” 

Financial advisors can use behavioral science to understand people’s emotions and help guide them to make better decisions, but it’s not therapy. 

“Financial therapy is looking at a situation that is intractable, where somebody cannot get past a particular financial behavior,” Maurer said. “And then they’re working with a therapist that has a specifically financial bent, to go back in time and determine what was it in my past that may have generated this particular behavior.”

Financial therapy digs deeper into issues that may be keeping people from reaching their financial goals.

“The financial therapist can peel back the layers so that folks can be more comfortable with their relationship with money and better understand why they’re making the decisions with money that they are and work towards their goals that way,” said Ashley Agnew, president of the Financial Therapy Association.

For example, Agnew says she worked with a client who had in his financial plan to sell his family business to fund his retirement, but he kept derailing deals to make the sale. To understand why, in therapy sessions they dug deep into his feelings about the sale. He revealed that the business was the only thing his father had praised and they unpacked his feelings from there to help him move forward.   

“It makes a little bit more sense once you get to that,” said Agnew, who is also a director at Centerpoint Advisors in Needham, Massachusetts.

Financial therapists will often refer clients to licensed mental health counselors if the issues, such as abuse, get too far beyond the finances.

Some investors may worry about market volatility ahead, given a contentious presidential race, lingering inflation, sinking consumer sentiment and uncertainty over Federal Reserve interest rate cuts.

Financial analyst Tom Lee has a more optimistic outlook.

“Since Covid, companies went through a huge stress test, and they showed that they are really good at adjusting to inflation shocks, supply shocks, economy shutdown,” said Lee, managing partner and head of research at Fundstrat Global Advisors.

He spoke on Wednesday at the CNBC Financial Advisors Summit.

As a result, he said: “We think the earnings power is much better than people realized.”

Even as inflation cools, many companies will benefit, Lee said. (Higher prices are usually considered a good thing for businesses.)

“A lot of companies have an inverse correlation to inflation,” he said. “A great example is technology is inversely correlated to inflation, so their margins actually go up if inflation is falling.”

As for concerns that the Federal Reserve could trigger a recession if it lowers interest rates prematurely? Lee doesn’t see that happening.

“We’ve been more optimistic that they’re going to achieve their idea of a soft landing,” he said.

Lee said his firm has studied what drives innovation cycles in America. In the two biggest previous periods — in the 1940s and 1950s, and then again in the 1990s — there was a global labor shortage.

“There was a lot of pressure on either wages or ways to innovate to produce more output,” Lee said.

“We’ve gone into a period of structural deficit of prime force labor, which is going to last until 2045, which means another tech cycle, I think, is underway.”

Lee estimates that the worker shortage will leave companies with an extra $3 trillion a year that they would have otherwise spent on wages.

“To us, this is really early stages for the amount of money that will be spent on generative AI,” said Lee, pointing to profits already seen by companies like Nvidia.

Another reason Lee sees a rosy time ahead for stocks: Over the next 20 years, millennials are set to inherit as much as $90 trillion from the baby boomer generation, by some estimates.

“[It’s] one of the largest wealth transfers ever in history, it’s more net worth than the entire net worth of China,” Lee said.

The so-called great wealth transfer could lead certain stocks to rise dramatically, he said.

“Many surveys we saw even five years ago showed young people trust technology companies more than governments, which means they’re going to support tech and innovation,” Lee said.

Despite all-time highs for stocks, clients are often best sticking to their long-term strategies,  said Douglas Boneparth, a certified financial planner, president and founder of Bone Fide Wealth, a wealth management firm based in New York City.

“Disciplined investors have been rewarded throughout 2023 and into 2024,” said Boneparth,  a member of the CNBC Financial Advisor Council.

That not only means not selling in a panic during inevitable dips, but also keeping some assets at a healthy distance from the market even during the good times.

“I remind our clients that maintaining a robust cash reserve is important to help navigate volatility, protect against emergencies [and to] take advantage of any opportunities,” Boneparth said.

The S&P 500 climbed to yet another record close on Tuesday.

The index, which tracks the performance of about 500 of the largest U.S. company stocks, has jumped 53% since inflation peaked in 2022, experts noted during the CNBC Financial Advisor Summit on Wednesday.

While that may prompt fears that a pullback is on the horizon, stocks may have more room to run.

“I absolutely feel better about equities than I have since … the financial crisis,” said Savita Subramanian, head of U.S. equity strategy and quantitative strategy at Bank of America.

Today, companies have adapted to a high inflation environment while workers are seeing positive real wage growth, Subramanian said. Admittedly, there are drawbacks including the wealth divide, income gap and protectionist inklings in the U.S.

“But I don’t necessarily think those are negative for the market,” Subramanian said. “I think those are actually very positive for the S&P 500.”

The strong runup may prompt even financial advisors to be fearful about allocating fresh capital, said Tim Seymour, founder and chief investment officer at Seymour Asset Management.

Many investors are tempted to stay in cash because “they just feel comfortable there,” according to Courtney Garcia, a certified financial planner and senior wealth advisor at Payne Capital Management.

But while up to 5% guaranteed returns on cash may feel great, it is not necessarily keeping pace with inflation, said Garcia. That’s a caution she explains to clients, she said.

Investors still may find new opportunities to invest in stocks, experts said during a session at the summit.

In 10 years or less, S&P 500 index companies will likely become more efficient and labor light, due to the effects of generative artificial intelligence, Subramanian said.

“Generative AI is a game changer,” Subramanian said. “And what that can do for industries is profound.”

Call centers have already been disrupted by AI, and other areas such as financial services, legal services and Hollywood still stand to benefit, she said.

In the 1980s and 1990s, a similar productivity and efficiency story played out with the personal computer revolution, which prompted more automation across industries.

Some companies will be poised to figure out how to use generative AI tools correctly first, which will lead their margins to expand and boost their overall multiples, according to Subramanian.

“What you want to do is figure out which management teams are going to harness the strength and the power of a lot of these new tools and do it first and do it well,” Subramanian said.

The “Magnificent Seven” companies — Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta Platforms — will continue to dominate in terms of growth, Seymour said.

But opportunities in health care, industrials, energy and utilities are cheap. International exposure should not be ignored, he said.

Each of the companies in the Magnificent Seven has different drivers, advantages and threats, Subramanian noted. That is how investors should be thinking about the entire S&P 500, she said.

 “Where we are today is a real stock pickers’ market,” Subramanian said.

The U.S. stock market has been swooning. But there are risks that threaten to put a lid on the euphoria.

The three “primary” risks are Federal Reserve policy, a surprise recession and lower-than-expected results on companies’ earnings, David Rosenberg, founder and president of economic consulting firm Rosenberg Research & Associates, said Wednesday at CNBC’s Financial Advisor Summit.

The S&P 500 and tech-heavy Nasdaq closed at record highs on Tuesday. The U.S. stock indexes are up about 11% each so far in 2024, as of about 3 p.m. ET on Wednesday.

Nvidia, an artificial intelligence chip maker, has played a big role in driving the stock market higher, market analysts said at the FA Summit.

The company, a “poster child for generative AI writ large,” was “singlehandedly responsible for the last leg of this bull market,” Rosenberg said. It’s up 90% in 2024 alone, as of about 3 p.m. ET on Wednesday.

Nvidia is “certainly a poster child” for stock market sentiment waxing more positive, Brandon Yarckin, COO of Universa Investments, said at the FA Summit.

Nvidia reports quarterly earnings results after the market close on Wednesday.

Disappointing results could send the stock market lower, Rosenberg said. It would be similar to what happened around the dot-com craze in 2000, when missed earnings results by Cisco ended the tech mania, he added.

Also, Fed policymakers have raised interest rates to their highest level in two decades to rein in high inflation. It’s unclear when the Fed may start to lower borrowing costs; many market forecasters expect them to do so at least once by the end of the year.

High interest rates have pushed up earnings investors can get on cash and money market funds, where they can get perhaps a 5% return, for example, Rosenberg said. Keeping rates higher for longer gives cash and money market funds an advantage relative to stocks on a risk-reward basis, he said.

Additionally, the U.S. economy has remained strong amid high borrowing costs and as inflation has fallen gradually. That has led many forecasters to predict the economy is en route to a “soft landing.”

If a recession that nobody sees coming were to occur, it would be a “big surprise” that threatens the stock market, Rosenberg said.

Surprise and uncertainty — both economic and geopolitical — are two things investors hate most, Carla Harris, senior client advisor at Morgan Stanley, said at the FA Summit.

Yet, long-term investors should resist the temptation to jump ship if and when the market teeters, experts said.

The wealthiest and most successful investors “stay in the markets longer,” said Raj Dhanda, a partner and global head of wealth management at Ares Management Corporation.

The stock market has yet to price in a potential outcome in the presidential election, a rematch between President Joe Biden and former President Donald Trump.

In general, election years are not great for the stock market leading up to voting day, David Woo, CEO of research firm Unbound, said Wednesday in a session during CNBC’s Financial Advisor Summit.

But this year is an exception, Woo explained.

“This year we’re up 12% so far. This is the best-performing year for the S&P 500 [in] an election year since [the] 1980 election,” Woo said.

Looking back to 1928, the S&P 500 returned an average 7.5% in presidential election years, versus an average 8% in non-election years, according to a March analysis from J.P. Morgan Private Bank.

“Given this is going down in history as probably the most consequential and contentious election in the U.S. in 100 years, it’s kind of difficult to believe that the market is trading with the election in mind,” Woo said.

While domestic issues are usually determinative in presidential elections, the coming race will likely be focused on international issues, said Woo.

Both candidates will enter office with a budget deficit of $1 trillion, meaning “whoever is going to be the next president is going to be facing a real serious constraint,” said Woo. “When it comes to fiscal policy, frankly speaking, I don’t think there will be a huge difference.”

Instead, the differentiator will depend on the candidate’s stance on foreign policy, he said.

Defense spending might increase under a Biden administration, signaling a potential boost for defense stocks, Woo said.

Meanwhile, emerging markets “may be more bullish” under a Trump administration, he said.

“I think Trump is going to come back with a more transactional approach in dealing with American adversaries,” said Woo, who believes the Republican candidate us going to revisit the Phase 1 Trade agreement between China and Russia as the “starting point” of any negotiation deal between the U.S. and China.

Elsewhere, energy stocks might benefit under Biden more so than Trump.

“Everybody thinks Donald Trump is going to be bullish for energy … that’s completely untrue,” Woo said.

“It was actually not until Biden became president and energy stocks soared because geopolitical risks went through the roof,” he said.

Meanwhile, all polls are pointing toward a Trump reelection, Steve Kornacki, National Political Correspondent at NBC News and MSNBC, said during the summit.

“Donald Trump in the average is leading Biden by 1.1 points nationally,” he said, as Trump has made gains among Hispanic and African American voters, as well as younger, nonwhite voters.

“That accounts for why Donald Trump is polling better now than he did four years ago,” he said.

Historically, potential election outcomes have a minimal impact on financial market performance in the medium and long term, according to an analysis by investment strategists at U.S. Bank Wealth Management. They studied market data from the past 75 years and identified patterns that repeated themselves during election cycles. 

Yet delays in verifying an election winner have negatively affected riskier asset classes in prior races, according to the analysis.

“The stock market does not like uncertainty whatsoever,” said Douglas A. Boneparth, a certified financial planner, president and founder of Bone Fide Wealth, a wealth management firm based in New York City.

If things are delayed and there’s not a “clear-cut winner,” that uncertainty can lead to market volatility, he said. “But it’s very hard to predict what the market is going to do based on simply who’s going to get elected.” 

Overall, the stock market has done well under both presidents, said Boneparth: “No one’s crying over how well the market has done in either administration.” 

“As financial advisors, we don’t really make decisions around politics, let alone who’s going to be elected president,” said Boneparth, a member of the CNBC Financial Advisor Council.

Therefore, it’s in your best interest to stick to your long-term strategy, said Boneparth.

“If you’re making any changes specifically because of one candidate or the other, you’re probably going to make a mistake,” he said. “If you’re going to let this disrupt your long-term strategy, what else are you going to let disrupt your long-term strategy?”