The Risks of Timing the Market

To me, a house is a home, not an investment.

Case in point: My mother’s residence in Placerville, Calif. She died in December 2008, at the very depths of the Great Recession. My friends told me to hold on to the house and rent it out as an investment until the market improved.

 

Three thousand miles away in Washington, D.C., I did not want to deal with repairs and complaining tenants. Neither did my sister, who lived a mountain range away in Nevada.

 

I put the house on the market as-is and sold it for a measly $200,000 to someone who paid in cash.  I visited the house a year later and was amazed at all of the work the new owner had put into it.

 

After another four years, I looked on Zillow out of curiosity to see how much the house appreciated when the economy rebounded. I was amazed to see that it had been sold for $180,000, a $20,000 loss. How did that happen? I’m guessing the sewage system my dad installed did not meet code.

 

Then there was a friend in California who realized before everyone else that houses were overpriced  in the mid-2000s and the market was going to tank. She sold her house at a great price and moved to an apartment. But within three years, housing was still booming and she decided she was wrong.

 

Tired of apartments, she bought another house. Then CRASH. She had been right in the first place, but wrong in her timing.

 

In stocks, as well as housing, I have tried not to time the market. The mantra at the Kiplinger Editors, when I worked there, was “Buy good stocks and hang onto them.” (Of course, you know what the good stocks are.)

 

Several pitfalls I can recall:

 

—So many people I know unloaded stocks at the bottom of the market in 2008. They missed the great recovery that followed.

—I made my broker dump stocks tied to the Dow-Jones average in the 1980s because I didn’t want to trade in dinosaurs like U.S. Steel and Conrail. But others did quite well. Newer companies were a lot more volatile and risky. If I had it to do over again, I would have put my money in Vanguard’s fund tied to stock averages with limited broker fees, if any.

—If a broker you don’t know well tries to sell you something, look out. I thought Mortgage Investors of Washington sounded good in 1971, but the company tanked because of poor management.

—Avoid hunches. After I saw the musical “Annie,” I thought it would make a hit movie. I was right, but my Columbia Pictures investment soured for other reasons.

—Dividends aren’t everything. I never forgave my grandfather for selling his Walt Disney stock in 1953 before the creation of Disneyland and Disney’s TV show. They didn’t pay enough, he told me.

—Leave investing to the experts. By picking my own stocks, I was really competing with mutual fund experts who knew more about them than I did. My investments in a Morgan Stanley private fund may not double or triple the market, but I don’t have to worry about them.

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When Pickett and I went to visit my daughter’s family near Blacksburg, granddaughter Aria got quite ill with the flu. So it was decided that we octogenarians should return home but bring the healthy Bryce, age 7, with us.

 

What a delight! As I was tracking my blood pressure, we shared a good laugh over a joke. The reading was the lowest I have had in a long time.

 

Bryce often focuses on my age of 82 more than I would like. But he said, “I am glad you have made it this far so I can be with you,”. Awww. I answered, “I promise to attend your high school graduation in 2035.”