Your Survival Guy learned how to be a successful real estate investor from my dad. He taught me that price always matters, but he also understood the magic of time. If you need to pay a higher price to be in the game, you get in the game, especially when you’re young.
When Becky and I were buying our first home, my dad couldn’t believe how much we were paying. But he also realized that when you’re young, you have a better chance of surviving if you happen to pay too much. You have time on your side—and a job—and nothing focuses the mind like a mortgage.
But what if you don’t have time? Price can be a brutal judge of character when it doesn’t go your way.
“When a man places his money on a horse, he does not change a hair of that horse’s make-up; the horse performs the same regardless of whether there is fifty dollars or a king’s ransom riding on his back,” writes Richard Russell in Barron’s on May 18, 1959.
The market doesn’t care whether you’re just starting out, need the money for a grandchild’s education, or need it for your retirement. It doesn’t care about your needs.
Consider all the emotion tied up in the Vanguard Total Stock Market Fund and others mimicking market-cap weighted indices. Most business school graduates still can’t tell you how market cap is calculated—multiply a company’s total shares outstanding by its stock price—or the degree to which price drives this bus.
When it comes to your hard-earned money, you need to understand how much is riding on price and if you have what it takes to benefit from the magic of time. Remember, whether it’s your first house or your last stock, its price doesn’t care who you are.
Action Line: Read my series on why Vanguard is too big, and make sure you understand what you own and why you own it. You can do this.
E.J. Smith - Your Survival Guy
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