A Personal Anecdote Part 1: Why our CEO invested $1m at market highs
But for the last few years that is exactly what I have been doing.
I was finally forced to face each of my pet shortcomings when our long-term tenant bought their own place and decided to move out. I tried to outsource the problem to the real estate agent, but he made it worse. “Have you thought about selling?”, he asked.
That got us thinking. He told me the market was hot, there was no better time to sell and that I would get top dollar. Which of course he would. We were tempted, but that meant we would have to face two even harder questions: Do we really sell and if we do, what do we do with the money?
After discussing it, we instructed the agent to do an off-market sale. If the market was so hot, why advertise? It also meant we would only pay his commission if he sold our place. We also asked the tenant if she would be amenable to some open house viewings during her final weeks. She agreed, which was fortunate, especially as she had really nice furniture.
In no time at all, we had a good offer.
Our final decision was one the analysts at Intelligent Investor use to help them decide whether to sell a stock: imagine you don’t own it but had spare cash and no other investments. Is this the stock you would buy? In the case of our investment property, the answer was ‘no’. We decided to sell.
Then we needed to decide what to do with the money. We sat down and went through our options. With diversification in mind and a long investment time frame, we didn’t want to be on the sidelines in cash.
To us, it didn’t matter that the All Ords was breaking new highs and the property market had moved even higher. We knew that trying to time the market rarely works and we were investing for the next 20 years. We were going to put our money to work somewhere. We just didn’t know where.
These two articles helped us decide, so I recommend reading these if you have the time.
https://www.investsmart.com.au/investment-news/investor-psychology-series-chapter-4-the-human-psyche-and-diversification/149186
Here are the links to the rest of the series
https://www.investsmart.com.au/investment-news/a-personal-anecdote-part-2-how-did-i-invest-keeping-it-simple/149966
https://www.investsmart.com.au/investment-news/a-personal-anecdote-part-3-where-my-wife-and-i-invest-1m-and-why/149973
https://www.investsmart.com.au/investment-news/why-our-ceo-is-investing-1m-at-the-top-of-the-market/149967
https://www.investsmart.com.au/investment-news/qanda-from-ceo-invests-1m-series/150003
Frequently Asked Questions about this Article…
The CEO decided to sell their investment property because they realized that if they didn't already own it, they wouldn't choose to buy it with spare cash. This decision was influenced by the hot market conditions and the advice of their real estate agent.
Before selling their property, the CEO considered the hot market conditions, the potential to get top dollar, and the advice from their real estate agent. They also evaluated whether they would buy the property if they didn't already own it.
The CEO opted for an off-market sale to avoid advertising costs and only pay the agent's commission if the property was sold. They also coordinated with their tenant to allow open house viewings during her final weeks.
After selling the property, the CEO focused on diversification and a long-term investment strategy. They were not concerned about market highs and aimed to invest for the next 20 years, avoiding staying in cash.
The CEO chose not to time the market because they believed that trying to time the market rarely works. Instead, they focused on a long-term investment strategy, considering the next 20 years.
The CEO used articles from InvestSmart, specifically 'Paul's Insights: Shares Hit New Highs, But Time, Not Timing, Matters' and 'Investor Psychology Series Chapter 4: The Human Psyche and Diversification,' to guide their investment decision.
The CEO's tenant agreed to allow open house viewings during her final weeks, which was beneficial for the sale process, especially since she had nice furniture that presented the property well.
The CEO was not deterred by market highs, such as the All Ords breaking new records or the property market's rise. They focused on a long-term investment strategy rather than short-term market fluctuations.
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