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When selecting funds to invest my HSA dollars, should I be looking for funds that pay a quarterly/annual dividend, or should I invest my dollars in a growth fund to take advantage of the decades of work I have left until retirement?

What’s your advice on selecting funds for my HSA Investments? I am 28 years old with no student debt, no car payments, I am participating in the company 401(k), participating in the company ESPP, and I am also saving for a down payment on a house. The majority of my money is going to rent, & dinning out with friends twice a week.

I’ve contributed enough to my HSA to cover the out-of-pocket maximum for my health insurance, and now I am looking into selecting funds to invest the extra money. My goal is to contribute the max to my HSA every year since these funds have triple tax savings, and I can use the funds to pay for emergency medical expenses.

When selecting funds to invest my HSA dollars, should I be looking for funds that pay a quarterly/annual dividend, or should I invest my dollars in a growth fund to take advantage of the decades of work I have left until retirement? Should I wait to move the HSA dollars into the funds now, or should I wait until the markets dip?

Banking, Debt, Financial Planning, Retirement, 401(k)
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May 2019

My general advice only knowing your age and your expressed (and awesome) money habits is to grow the heck out of your HSA funds.  As far as waiting until the market dips to invest, its impossible to time the market.  You could be waiting a year or two - and will have missed some upside potential.  Also, as you stated, there are decades of years for growth and deposits so you have time on your side to recover when the market does correct.  A better option than trying to time the market is investing in your HSA at regular intervals - monthly or quarterly to take advantage of different market cycles.  Do always keep in low volatility (cash or something with a bit of interest) enough to cover your deductibles and total out of pocket.  Dollar cost average the rest, i.e. invest at regular intervals.  

One other note, your current financial situation is a reflection of really good money habits! The only item that seems to be missing is an adequate emergency fund which is 3-6 months of essential expenses.  Since you are saving for a home and currently have your savings in your HSA already, you likely already have enough funds to cover emergencies.  My point in suggesting that you also establish an emergency fund in addition to your HSA and savings for a home is eventually that home savings will be used to buy a house. If you dont have other cash, you could need to dip into your HSA for expenses other than those that are health related.  

Hope that helps!

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