Worth Investing $10k Short Term?

Okay, so here's where I'm at and what I'm trying to decide. I'm currently saving to buy a condo in the next 2-5 years, I was hoping to do it sooner then that but b/c I just started grad school that's taking away from how much I can save up each year (paying for it out of pocket b/c I don't want student loans) and that has forced me to push back my estimate on when I'd like to buy. Because this is pretty much everything I'm saving right now I don't want to risk putting all of it into the market at first but I'm willing to try with about a third of what I have so far ($10-$15k). Is it worth it to put this into the market (mix of mutual funds and/or index funds, mixing domestic and international) for an average of maybe 3 years? As I see it, there's the potential for a larger return then what I can get in a savings account (5.05% @ etrade) and the earnings could be taxed as capital gains instead of income, however there's also the cost of investing it (I would be going with a discount firm such as Vanguard to minimize cost, and would be sure to take overall costs it consideration when deciding on which funds to go with) and then the obvious risks that it's not FDIC insured, and the investments can go down in value leaving me with less money then I started with.

All things considered, I think I'm still willing to try it with $10-$15k but wanted to check with you all in the Finance Ground forum b/c you all are more knowledgeable about this stuff then me. So is it worth it to invest a smaller amount like that for about 3 years, or does the risk of it going down (or not making as much as a savings account) overshadow the potential benefits? If it was for longer I would go for it without much hesitation, but because it is for only about 3 years I'm not sure if it's still worth it.

Any help or suggestions you all could give me would be greatly appreciated.

Also, when I said "this is pretty much everything I'm saving right now" I just want to clarify before anyone jumps on me over this, that I do take part in my company's 401(k) plan, I'm looking at opening up a Roth IRA (and regularly contributing to it), and I do put a few more bucks away each month on the side "just in case". So it's not like everything I'm saving goes towards this goal of buying a place, but it is the overwhelming majority of my monthly savings. And lastly, yes all my savings are in a savings account, so it's not like this cash has just been sitting in a checking account, or under a mattress, not gathering interest while I've been saving it and trying to decide what to do.

Thanks for your help, sicko

Oh, and sorry about the long winded post, but I wanted to include as much information as I thought you all might need

No one but you can determine your risk tolerance.

Personally, I'd put the money in a Vanguard money market because I'd
want it handy in case some need comes up while in grad school. 3 years
is a pretty short period for me.

Yeah, I'm pretty much willing to take the risk on about a third of what I have saved up (the $10-$15k in question); and I'm willing to add to it each month. If something major came up I'm still saving a bit on the side for anything like that, and if worse came to worst I still have the other 2/3rds to draw from if I need it.

My only real question is will the actual return after fees and taxes be enough to justify putting it into the market, or should I just keep it in a savings account. I'm not asking htis from a risk perspective but more from the, will only $10-$15k generate enough (assuming it generates anything) or will it still be so little (say differences of under $1000) that it wasn't worth pulling it out of the savings account for it.

If I was saving it more long term I'd put it in the market and let it do it's thing, but b/c it's such a short duration (about 3 years) I'm really not sure if it's worth it so I figured I'd ask.

And I realize that it obviously depends on what the return on the various funds are, obviously if something hit a miraculous 18% return it would've been worth it, but I don't think that's realistic. I'm just trying to have it end up as more then if i left it in a savings account at 5% (and I realize there is a risk involved that it might actually go down and end up being less then what it started out, but as mentioned I'm willing to take that risk)

Check out an Exchange Traded Fund...they operate like an index fund, but are traded like a stock (reducing the fees etc.)

I like RSP right now...you can set up an etrade account and buy your shares.

(I'm assuming you don;t have any credit card debt...if you do and it is at a normal APR you would pay that off first more than likely. I am guessing you don't, but it is amazing how many people have "savings" that they keep making 4% on and then debt which they are paying 12% on.)

You are talking about investing in a very short period - 2 years. The growth of the US economy is sluggish 1.3% last quarter and the fed just decided to the federal funds rate where it is.

If you were to invest in this market for such a short period are taking on a lot of risk. Investing is about increasing your expected return for a given level of risk. For me, such a short period of time there is too much risk involved to go into the market if you plan to use the money to buy a place.

Sure, you might make out and make a few bucks. You can get lucky and it might be worthwhile to invest but it isn't something I would do.

Think of it this way even though it isn't the greatest analogy. Say the odds are 60% chance you will make 8% and 40% chance you will lose 10%. For me, I wouldn't risk to enter this game even though expected returns are postive in my favor if I know I going to spend that money in 2 or 3 years. It isn't worth the risk of losing money when I 100% sure I can make around 5% for that period.