A few weeks ago, I got an email from a reader named Dave:
What I love about this example is that people, even “experts,” will resolutely insist they can time the market. “I think we’re looking at a bottom in the second half of 2009,” many economists said a few moths ago. Those predictions have quietly faded away. Same for housing prices.
Look, nobody can predict what’s going to happen in the short-term. But to buy a house to try to time the market is just dumb. First of all, your house probably isn’t a good investment. Second, you buy a house when you can (1) afford it and (2) when there’s a clear reason to buy it (e.g., a family).
Finally, investing based on the emotional manipulation of “buy now or you’ll miss out on amazing deals” is almost always a bad idea. Long-term investing is slow, boring, and profitable — not sexy and exciting. If you want excitement, go to Disneyland.
Below is an excerpt from my book on The Myth of Financial Expertise (Chapter 6), which comes out on March 23rd. In just a couple pages, you’ll see:
- Why, despite everyone saying to pull out from the market, if you’re not consistently investing, you face severe financial consequences when the market pulls back up. (If you don’t believe the market will ever recover, however…I guess you’re behaving rationally.)
- Why professional tasters can’t tell the difference between wines (though everyone thinks they can)
- Why financial salespeople get really mad when I talk about how they can’t effectively beat the market