Soon after the market tumbled a couple hundred points on Wednesday, I posted The Market Is Falling and relayed my concerns about the fact that I am planning to sell off a huge chunk of my stock market index fund next week in order to make the down payment on a new rental property.
Afterwards the market continued to fall, ending at a 21 month low, down 3% from the day before and more than 20% from it's high last fall. As I mentioned in an update to that post, I was "officially freaking out."
But here's another update, an unbelievablely wonderful one that I'm hesitant to even post.
I just talked to my mom and casually (and by casually I mean with obvious mounting frantic-ness) mentioned my concerns/despair about the market. She asked "what, is it down or something?" as though she hasn't been checking it 10 times a day like me. "I haven't seen it this week."
I quickly explained the recent tumble and the fact that it shows no sign of stopping since we're officially in a bear market now and it's all over the news and now the panic is spreading. She helpfully said she had to go because her father was beeping in.
She called me back a few minutes later and said that she mentioned my concerns to her father (my grandfather). He began to give her a lecture about how the market goes through cycles and it's no reason to worry; but then she reminded him that I was planning to sell a chunk of it to buy another property (I had called to discuss the decision with him before officially making it).
"Oh that!" he apparently exclaimed, recalling my plans. According to my mother, he said not to worry, that we aren't going to be selling off anything at a market low and that we'd go about it some other way.
I was appreciative and confused about the "we" terminology he was allegedly using, and I wondered how on earth else we would go about it. Was he saying he'd give me the money instead? I knew he couldn't/wouldn't do that since his tax and estate planning transactions are carefully executed each year. He has almost two dozen children, children-in-law, and grandchildren; he can't just haphazardly give one of them $45,000.
My mom continued and told me that he said they would "sell a bond or something" and lend the cash to the account from which I'll be getting my downpayment. That way when I withdraw funds, I wouldn't have to sell stock to do so. They would then have to be paid back eventually, of course...
My mom didn't care or ask further, she just told me confidently that he said not to worry about it.
Wow. This is an example of what a huge advantage and benefit and blessing it is to have supportive and financially independent relatives. I have heard comments before about my grandparents (both sets) lending money to their children for various endeavors. My mom's dad was the mortgagee on a piece of real estate for my dad for awhile, for instance. My dad's mom pledged a particular stock they own as collateral so her daughter could get a bank loan to open a franchise restaurant.
I never planned to ask for any such assistance, but I am certainly not going to turn it down in this case!
June 27, 2008
The Market's Still Falling - But It's Going to Be OK
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7 comments:
Congratulations - Support of family always comes in handy.
Generally, I think it is a good idea to keep about 25-30% of your portfolio in cash or short term treasuries to (i) tide over the situations like the one you just faced, and more importantly (2) exploit the pricing abberations that happen in a down market. I know a typical counter argument is that you miss out on the earnings by not being fully invested but I think the benefits (financial and emotional) of not being fully invested far outweighs the costs.
I never planned to ask for any such assistance, but I am certainly not going to turn it down in this case!
From your description of monetary assistance in your family, it doesn't seem that the character and self-respect required for turning down is in your genes anyways ..... :) Just kidding!
On a serious note, it's good that they will ask you to pay back. This approach will end up in not completely spoiling you, and perhaps not making you run to them for help (even in an indirect way) whenever you are in trouble.
I agree with nirvana too. Stick to assest allocation and don't over invest in anything (real estate or otherwise), unless you expect your relatives to bail you out everytime ..... And BTW, congratulations ! It's great that things are working out for you.
Anon - I don't believe that turning down assistance from one's family members requires or demonstrates any particular character trait, and I really take offense to your "joke" that because my family members help one another financially that we must inherently lack self-respect.
In this case no one is giving me anything. I have the $45,000 down payment sitting in stocks. My family members have the same amount sitting in bonds/cash. Rather than me selling that at a market low, they might allow me to use their funds and then repay them with my stocks once the market has recovered.
I don't think accepting such a generous and unprovoked offer indicates anything about my character; I think what it does indicate is how my family views our financial resources in a collective way, not in a "what's mine is mine; what's yours is yours" way. All of us view ourselves as having been extraordinarily blessed, and all of us give generously, both to our communities and to one another.
I would never hesitate to help any one of my family members financially, whether it meant giving them a loan, letting them live with me, or flat out giving them money. I would also never hesitate to accept such assistance from them if I ever needed it. That's just how my family is. And I think, if anything, that that demonstrates character and self-respect of the highest order - not a lack thereof.
Right but you have the money sitting in stocks because you saved it? Or did you inherit it, meaning someone else gave it to you?
I like the idea of having family to help out. I'd take my family up on the offer, but that will never happen and has never happened.
I'm lucky they are trying to secure their own retirement and savings and that I don't have to suport them like they supported their parents.
It's just a matter of what is valued more by parents/grandparents, and then one is raised according to that.
I know very precisely how it feels when you know you can easily get money from parents. It's a convenient and easy option, but the decision depends on what is valued more. You have to ask yourself 2 simple questions:
1) If you turn it down, do you think your relatives will be proud of you, or will they think you are stupid.
2) If you turn it down, will you be proud of yourself, or will you think you are stupid.
There are no right or wrong answers, in my opinion.
My dear tp, you have hit the nail on the head. But please be aware that there are people in the world who don't even understand the meaning of the questions .......
Ask yourself this. With lots of Baby Boomers retiring and cashing in their stocks within the next decade or two, what is that going to do to the prices of stocks, when so many stocks are for sale?
Pick good stocks that will weather this. Medical is a good, obvious one.
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