Can We Talk about the Market for a Minute?
My sidebar counters are all wrong, I’m afraid. What was once $41K in savings toward the down-payment fund, though I’ve only added to it over the past few weeks, has gone down.
The latest low is $10K less, at $31K or so.
A $10K drop from $41K is, obviously, a 25% loss. I. hate. this. economy.
So I have some questions, and I’d really appreciate your feedback:
1. Should I start putting away money into a different source? I mean, sure, a savings account barely makes up for inflation, but it would, at least, be increasing, if ever so slightly. I wouldn’t be kissing away $25 of every $100.
2. If you think I should keep investing, waiting for things to turn around, how do you suggest I motivate myself to do so? How do you suggest I tell myself to buy more shares of a good company that will use my money and take it away, in lieu of, say, going and getting a brand-new outfit?
3. Does anyone have any good economic news? I’m serious. Please!?
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8 Responses to “Can We Talk about the Market for a Minute?”
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1. If you are planning to use the down-payment fund within a few years, it makes more sense to keep the money as cash. You may earn less, but you do not have the risk of losing money (which is what is happening now). A good place to put this money is a high-yield savings account, such as at ING.
2. Look at graphs of market indices after economic downturns — eventually the markets go back up. If you are young and are saving for retirement, you have plenty of time to recover the losses.
If you are planning on buying a house in five years or less, I would recommend putting the money somewhere safe like a high yield savings account, money market account/fund or CDs. The money is sure to be there when you need it.
But if you looking to buy in 10 or so years, I would keep it in the market. I’m a fan low cost index funds or ETFs. I would put 70-80% in something that tracks the total stock market and 20-30% in a bond fund just to keep things simple. Of course, you would go with whatever asset allocation is most comfortable for you.
I think the market will come around in the next several months and you’ll be pleased to see your balances rebound and go beyond what you had before: after all, if you’ve kept investing, you’ve been “buying low”. If you’re swinging back toward planning a downpayment soon (rather than buying outright in a few years), the above notes are a good idea.
Did you ask for Good News? How about this: do you believe there is a future in which men and women trade things to fulfill their needs, and creative people invent new things? If so, don’t worry– those two activities account for all of the growth of the market over time. If not, well, money probably won’t help much anyway, will it?
GG, do these other comments help reassure you? What is your gut (your intuition) telling you?
This is all good advice. It would probably help if I had a more specific timetable–I’ll buy in “five years” or something. I don’t know, though. I just know that I would like to pay for as much of the house, upfront, as possible.
FGS: As always, you are the voice of reason, and you echo the same things my dad has been telling me. I think my biggest issue is that I am impatient. SO IMPATIENT!
Jennifer Lynn: I think my gut says to wait it out. Houses will still be out there, right?
I had always imagined myself investing in property, but lately with all the problems in the market I have been thinking about maybe investing in some artowrk instead. If course that’s a serious long-term investment that takes a lot of upfront cash and a good eye (and some advice from those in the know). I don’t know if this is something I’ll actually do but just something I’ve been thinking about.
Hmmm… I’m not sure artwork is as liquid as a money-market fund. Even if this was a long-term investment, you’d have to know a lot about artwork and really like seeing your money hanging on your wall until then…
If you’re not sure when you’re going to use this money ask yourself this:
What sort of life do you see yourself living at age _____(your current age plus five years)?
If you want a more settled life (a ring on your finger? children? a stable job?), you’ll probably be wanting to buy a house around then.
If you’re thinking “I wanna be a foreign-correspondant!” (or something like that) then your timetable to buy a house may be beyond five years.
There’s something about an age that brings home my goals for me (I’ll be 30 in five years- 30!).
Also, I know the temptation of the down-turned market (when in recent memory has LA seen starter houses under $500K?), but the reality is we don’t have our downpayment together, yet. It stays in our CDs and money-market accounts at ING until then. We will, in the next few years, have enough and there will still be a deal on a house that is perfect for us at that time.
Until then, it doesn’t make sense for us…
Here’s one way to look at it: Stocks are selling at a HUGE discount. I mean this is end-of-year sales mixed with holiday specials-type sale. So put your money into this sale (I recommend index funds), which can actually make you money instead of buying more clothes.
It’s all mental of course, so this may or may not work.