Saturday, May 2, 2009

Monkeys pick bottoms!

What do I do now ...
Do you live in a tree? If the answer is no – then you probably don’t spend most of your time picking bottoms. If you don’t live in a tree but still spend most of your time picking bottoms – there may be a problem.

The problem is that we cannot predict the future. It is a fashionable habit to predict but ultimately it is just talk. Talk that can lead us to make irrational or bad decisions.

Financial decisions usually merit some due diligence to get the best possible deal. But in the search for the best possible deal we can get stuck trying to time the market. When is the best time to get back in the market, should I refinance now or wait for rates to fall to below 4%, maybe if I wait another 6 months house prices will fall another 50% …

Finding a good price is always important but it should be considered within the context of the overall situation. The overall situation may merit consideration of other factors like affordability, financial status, need and long-term implications. Do you buy something just because it is on sale or do you buy something because you need it? Is the stress of waiting and evaluating worth the miniscule advantage you may derive if the price drops another percentage point? Will mortgage rates drop much further – probably not? Will mortgage rates go up – probably yes? Will the market in the short term go up – who knows? Will the market in the long term go up – probably yes but contingent of various other factors?

Do your due diligence, understand the overall situation and make price one component of the overall financial decision. When you risk everything for the sake of picking bottoms – it becomes monkey business!

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