Please someone explain to me about stock market + inflation
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Anonymous
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We have a lot of cash sitting around. About 400K (in the bank) - 800K (if we get out of some of our short term treasuries). We've been holding as we were looking at buying a second home (vacation home or something to hand down to our kids with rental/AirBnB for next 10 years).
Now my husband and I are trying to figure out whether a home makes sense or dump it slowly back into the market. Here's my thinking, and please tell me how my thinking is flawed, because I'm really trying to think logically and I feel like I'm likely missing something. 1) Stock market "should" go up over the next year because 1) inflation - we're printing so much $$$ and people have no way to spend it all, so they're keeping or adding to the market. I don't think things are so over-priced in the market when we're printing 4-6T dollars. Everything is getting more expensive...so even though stock market is going up, total real value/buying power is not really changing. Thus market is not as much of a "bubble" as some might say. 2) If they raise interest rates, that should cause a correction, maybe 20%? But people will still have a ton of $$ floating around thus, #1 above still stands 3) Some might not like the crazy $ being printed and inflated to hell, so they start looking at other assets outside of the standard stock market options, maybe move $$ over to cryto market. But I don't see a 50% pull out, again maybe 20%. 4) Job market seems to be rebounding. Soon when unemployment $ runs out, more people will flood back into the work force and rebalance the current supply/demand in job market. I don't think we will go into major joblessness within the next couple years. Thus economy should still maintain growth. With the above assumptions, I think it's still a better use of our cash funds to go back into the market vs buying a home unless we can find a great deal in an ideal location. Thoughts? |
Anonymous
| I think you want to do it and you're going to find a way to embrace those assumptions in order to do it. So just do it. |
Anonymous
| No one knows what will happen in the future. Historically, the stock market has been a good bet. |
Anonymous
Actually I don't. I'm just trying to figure out what I'm not considering. |
Anonymous
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In all but the rarest of circumstances a vacation home never makes financial sense. It generally only makes sense when you spend the entire peak season at the home and some of the off peak time and the area is up and coming.
Investment properties are not second homes, they are investments. You can beat the market with real estate, especially if you take out a loan to gain leverage. That said, it is much easier to buy an ETF than it is to manage a property. |
Anonymous
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If you want to make the most money, keep it in the stock market.
If you want to have a vacation home, to use now and to hand off to your kids, buy the vacation home if you can afford it. Both options are valid OP - but don't confuse buying a vacation home as investing in real estate. You might make money, you might lose money, but either way, that's not the point of buying a second home. |
Anonymous
Thanks, that's what I think as well. I don't expect to make a ton of return on it, but I would think in general, stocks would be an easier, low maintenance investment vehicle. Vacation home is nice, but also limiting. |
Anonymous
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I wouldn't keep the money in cash or short-term bonds. I would either get the home or get back in the market.
Personally, buying a second home was the best thing we ever did. But YMMV. |
Anonymous
Appreciate this view. I know I need to make a move soon either way. Parking in cash is not going to fair well with inflation. |