The best piece of financial advice I've ever received
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The best bit of financial advice I’ve received over the last few years came from my wife, not known for her financial sophistication but, it transpires, blessed with a shrewdness I can’t match. Much against my better judgement, she insisted we bought a house two years ago when I wanted to sell up and rent, convinced, along with virtually everybody else in the financial world, that the market was about to crash.
That decision has probably contributed more to our household wealth over the last two years than anything I have managed. And when I see the anxiety suffered by various friends who did sell up and rent, I look at Dilly with renewed gratitude. I draw two lessons from this episode.
The first is the lunacy of treating your home as a tradeable investment. For most of us, our home is so central to our peace of mind, why gamble with it? The second lesson is that, when it comes to property, it is absurd to try to second-guess short-term fluctuations in the market – no matter how wild you think those may be. We all need a roof over our head until the day we die, so the correct timescale to appraise an investment in a home for somebody in their 20s or 30s looking to move up the housing ladder is 40 or 50 years. Short of the return of the Black Death, it is hard to see prices falling over that time.
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The answer is to invest in the property market as soon as possible and remain fully invested. If you think the market may be overpriced, then diversify by delaying your move and investing more in the stockmarket. But sell out altogether and cut your weighting to zero? Never.
Simon Nixon is executive editor of Breakingviews.com
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