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Potential buyers arrive at an open house in the Strathcona neighbourhood of Vancouver on April 6, 2014.Rafal Gerszak/The Globe and Mail

Here's a model portfolio for people investing money they'll use to buy a house in the next few years:

Stocks: 0 per cent
Bonds: 0 per cent
Cash: 100 per cent

You can't afford to take any risks with money you'll need in the near to medium term for a major expense like buying a home. Save it, don't invest it. Use a high interest savings account that is covered by Canada Deposit Insurance Corp. or credit union deposit insurance, and forget about stocks and bonds. You'll make only a token rate of return on this money, but the risk of loss is pretty much nil.

Expensive house prices put pressure on aspiring first-time buyers to get aggressive in building their down payment. The minimum 5-per-cent down payment can seem like a moving target in a hot market where prices rise from month to month. Generally speaking, stocks are a dangerous place to put money unless you can wait at least five years for good and bad years to average into something worthwhile. This is all the more true today, with stocks on a two-year winning streak that will at some point give way to a pullback.

Bonds are just as off limits as stocks for people building a house down payment over the next few years. Bonds are less risky than stocks in that the worst-case loss wouldn't be nearly as bad. Remember, Canadian stocks lost one-third of their value in 2008. Bonds issued by governments and blue chip companies don't have as much down side, but they could nevertheless lose significant value if interest rates make sustained moves higher. You could find that just as you're ready to pull the trigger on a house purchase, your bond fund has taken a dip below what you invested initially.

High interest accounts will pay you between 1 and 1.9 per cent, with lower-end rates offered by the big banks and higher-end rates coming from online banks and credit unions. Some banks are offering teaser rates above these levels for tax-free savings accounts, which are the ideal vehicle for home down payment saving because there's no tax on your interest income. A lot of people think registered retirement savings plans are a better home-saving vehicle because of the federal Home Buyers' Plan, which allows tax-free RRSP withdrawals of up to $25,000 per person for home purchases. Read here for my take on why TFSAs beat RRSPs for aspiring home buyers.