Timing the Market Is Tempting! (But You Still Shouldn’t Do It)

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timing the market imageIn true Millennial style, I do everything I can online. That includes paying my bills. Nothing irritates me more than when I have to go and actually send something off in the mail. The horror!

Yes, I can write a check and I know how to buy stamps. But I do appreciate the convenience of working online, and I like knowing my payment will be received almost immediately.

That’s why I prefer making online payments and handle all of my bills this way. Plus, with online setups, there are a lot more bells and whistles to check out when it comes to your accounts.

Take, for instance, our mortgage. I can go online to USAA and not only see at a glance all the information I could possibly want to know about our home loan, but also take a variety of actions in order to manage my account.

One of the coolest features about USAA’s online system is that I have access to some nifty tools — including a Home Value Tracker gadget.

Yes, this is totally addicting.

Of course, it’s unlikely to be 100% accurate and if I wanted to get a precise number I’d probably need a professional home appraisal. But that costs money and since I’m not planning on selling anytime soon, I’m happy to use USAA’s reasonable estimate.

I’m even happier to use it when it tells me that our home value has increased by thirty thousand dollars since we bought two years ago.

And realistically, between the teensy amount of our 30-year mortgage that we’ve paid off in that time, the improvements/updates we’ve made to the house, and what we’re watching comps in our neighborhood sell for, we probably have closer to $50,000-$60,000 worth of equity in our home.

All because of when we bought. Thank you, excellent luck in timing the market.

How Tracking My Home Value Makes Me Want to Keep Timing the Market…

As some of you may know, we scored a ridiculous deal on our home when we bought it — which is the only reason we bought a house when I was 22 and a few months before my spouse and I were actually married.

We didn’t want to miss out on a good opportunity. Or good timing. And we got lucky in this case because we were able to time the market brilliantly.

It’s amazing to me that markets can work this way. When we bought, the housing market was so bad in our area that we not only got a very low price on the home, but the sellers also did additional work on the property per our request after the home inspection and  paid every bit of the closing costs.

They did all this even though they were already underwater on their mortgage. Even the real estate agents made concessions by lowering their fees on the sale.

Talk about a buyer’s market.

Tracking our home value over the last two years has made timing the market in other ways, with other investments, so tempting. I can completely understand why people talk about doing this when buying stocks, bonds, and other assets now that I’ve seen first-hand how exciting it is to get lucky enough to get it right.

But that’s just it. Ultimately, we just got lucky. The stars just so happened to align in such a way that we were in the right place at the right time.

…And Why I’m Ignoring the Temptation to Do So

That’s exactly why I would never purposely attempt to time the market with any other investment. There is no way to accurately predict — 100% of the time — what any market will do next. 

Which is why I say we got lucky with our timing when it came to buying a home. The market could have taken another dive and just like that, we would have been underwater with our own mortgage. And who knows? The market can — and will — plummet again in the future and wipe whatever equity I have today completely away.

I get the temptation to time the market. You’re looking at a huge, easy payoff if you get it right. But that’s the trouble: it’s impossible to get it right time after time after time.

So if you happened to get lucky once, as we did, be thankful for it and then stick with the sensible plan when it comes to your investments: don’t get caught up in timing the market.

Instead, make steady, regular contributions to things like your investment and retirement accounts. If you want to get into real estate, consider other important factors before you start trying to time your purchase.

You know, stuff like… do I actually have a sizeable down payment? Can I afford a monthly payment? If I want to rent this home out, do I have any idea what I’m doing when it comes to rental properties?

We Bought Low — Can We Sell High?

The hope is that we’ve done a fantastic job of buying low. The next step is to sell high.

It’d be awesome to time the market juuuust right again, where I’d see this house sold at a market peak and our ROI turns out to be as good as it could possibly get. Am I going to actively try to do that?

As tempting as that is, no way.

Like I said, we got lucky and I’m happy with the fact that we were able to buy a nicer home in an area we never would have been able to afford had the market not been so depressed. Sure, I’d love to see some sort of return for the money that was put into the house, and I think we will see just that — some sort of return, but not necessarily the greatest return possible.

I can’t time the market on a regular, ongoing basis. Neither can you. And neither can the experts who claim they can.

So my plan is to ignore the market when it comes to my investments, whether that’s in my Roth IRA or in my home. It’s tempting to try timing the market, but logically I know it’s a losing game.

Whatever the market doing this month is going to be insignificant in 40 years, and I’m investing for the long term.

Are you ever tempted to time the market or are you happy to automate investment contributions and ignore the market completely? Have you ever gotten lucky with timing the market?

 

 

20 Responses

  1. Will, First Quarter Finance

    June 11, 2014 3:31 pm

    I’m ALWAYS tempted to time the market but I then remember that excitement is the enemy of a good investor. So I dollar cost average index funds instead.

    I sleep well at night.

    I think the temptation to time the housing market is a much greater one. You can’t really dollar cost average that.

    Reply
    • Kali Hawlk

      June 15, 2014 11:39 am

      Great point, will! Both that excitement is never a good thing for smart investors, and that it is more tempting to time the housing market — but I think that still comes back around to, you just never know what a market will do (or more accurately put, WHEN it’s going to do it).

      Reply
  2. Shannon @ Financially Blonde

    June 12, 2014 8:40 am

    It is always tempting to market time, but when you are talking about a long term investment like a home or a retirement account, it should not even be a factor to cross your mind. If you are talking about a shorter term trading account, then attention to the markets and taking advantage of spikes makes more sense.

    Reply
  3. The Stoic

    June 12, 2014 11:52 am

    Although you attribute most of your good fortune to luck, don’t forget you that you had the foresight to see an opportunity and had obviously arranged your finances in a way that allowed you to take advantage of market inefficiencies.

    “Chance favors the prepared mind.” Louis Pasteur

    Over the past few years many people have made money both in the stock market as well as housing because they were prepared.

    Personally I wouldn’t want to invest much in today’s stock market, but I believe there are plenty of RE investments out there depending on your location.

    Cheers

    Reply
    • Kali Hawlk

      June 15, 2014 11:40 am

      Well, I appreciate you giving me a bit of credit there :) I agree that we were prepared to jump on an opportunity — and lucky that one came along for us to take advantage of. Thanks for sharing your thoughts here!

      Reply
  4. J @ the expat investor

    June 13, 2014 2:04 am

    I’m with you on paying everything electronic, much easier since I work oversea. I have a hard time getting my family to check my mail; got a couple of mail before with late payment because they never told me about it, good thing it never went to collection. As far as the market goes I automated my investment in mostly index funds, but I do have some individual stock and look into buying more individual stock later on.

    Reply
    • Kali Hawlk

      June 15, 2014 11:43 am

      I’m comfortable with index funds myself! Just makes sense for me. I’d be too stressed and emotional to pick individual stocks at this point. As you said, maybe later on.. when I have a bit more wiggle room with my finances.

      Reply
  5. Addison @ Cashville Skyline

    June 13, 2014 11:12 am

    I’ve been working hard over the past couple of years to focus on consistently saving and investing every month. Since I’m only 30, there are still many years to navigate the ups and downs of the market. I’ve tried my best to put on blinders and stay the course.

    Reply
  6. Newlyweds on a Budget

    June 13, 2014 7:03 pm

    I am so jealous. The housing market in our area rebounded ridiculously early. Prices are pretty high again. But we were in no position to buy a house a few years ago. So now we’re just saving our pennies and planning on buying when we’re financially ready to do so–regardless of what the market is doing.

    Reply
    • Kali Hawlk

      June 15, 2014 11:46 am

      I know we got lucky, in that housing prices were already lower (relative to other metropolitan areas) in our area AND the fact that our market took a big hit. If that perfect storm of factors didn’t come in at exactly the right time, we wouldn’t have been able to afford to get into a house so soon. I think it’s smart that you’re aware of your own financial realities and acting accordingly. Not everyone can do that!

      Reply
  7. KK @ Student Debt Survivor

    June 14, 2014 12:02 am

    We bought our condo 2 years ago when the market was pretty low (well as low as the NYC market was going to get in our opinion). We’re very thankful that our place has already appreciated a pretty good amount. We’re debating moving out to the suburbs and renting our current place. We wouldn’t “make” any money renting it out, but the rent would cover the mortgage and taxes in full, and hopefully in a few years the market will go up even more. Even if it doesn’t someone else would be paying the mortgage and eventually it would be paid in full and we’d just be collecting checks (many years from now of course).

    Reply
    • Kali Hawlk

      June 15, 2014 11:48 am

      I can totally relate — we tossed around the idea of keeping our current house when we did move and renting it out, but the more we think about it the more we’re NOT interested in being landlords (even if we hired some sort of property management company). Maybe one day, but definitely not within the next few years!

      Reply
  8. John @ Frugal Rules

    June 16, 2014 8:43 am

    Every time I get tempted to time the market I remember back to my brokerage days and speaking with people on a daily basis who did just that only to have lost thousands of dollars in the process…each year! I do have a very small part of our portfolio that is more speculative, the overwhelming majority is the plain and unexciting index funds. That said, kudos to you for taking on an opportunity and seeing it work out very well. Far too many would see that and let it ride into something else. :)

    Reply
    • Kali Hawlk

      June 18, 2014 6:38 pm

      Thanks John! And thanks for sharing your story and experience.. I would remember the same thing every time I was tempted to time the market, too!

      I think when our net worth reaches a certain level, I’d be more comfortable putting a little money aside for the more exciting stuff. (You’re right, index funds are unexciting.. but right now I certainly prefer my investments that way!) Right now I don’t feel we’re financially established enough to do anything but stick with the tried and true :)

      Reply
  9. Done by Forty

    June 16, 2014 4:21 pm

    Is it weird that I think we’re better able to time the real estate market (e.g. – when it comes to rentals) than I do with the stock market? Am I just being foolish?

    Reply
    • Kali Hawlk

      June 18, 2014 6:36 pm

      I think with experience and knowledge, you probably do have a better, more realistic shot at timing the housing market. But it still makes me nervous and stressed to think about it! I’m much more on board with the “slow and steady” approach to earnings and returns ;)

      Reply

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