This article originally published in The Northern Daily Leader on 17 September 2011.
Early last year my wife and I experienced two momentous occasions: we found out we were having a baby and we had to buy a new car. Clearly the latter was brought about by the former, for as much as I argued otherwise, it was apparent that fitting a baby capsule to the ute’s passenger seat was not an option. With that began the long process of new car hunting, with nearly its own nine month gestation, and everyone I spoke to during that period had an opinion and some advice: buy something bigger than you need now, it’ll save you in the long run; you can’t go wrong with Japanese cars, they never break down; get something with sliding doors, it’s easier getting the baby out at parking lots; buy second-hand, you know you lose 30% of the value as soon as you pick up a new car don’t you? Everyone had an opinion and no two were alike.
Personally I thought we needed something small, red and fast – all the better to avoid the bad drivers out there. My wife wanted something large and boxy, with forty air-bags and a reversing camera. We ended up with a station-wagon, so you can see how that one played out. In many ways the whole car-buying process reminded me of investing in the stock market – just as many theories and opinions and plenty of free advice if you want it: put all your money in the bank, it’s just a lottery to invest in shares; when the 200 DMA crosses the 50 DMA at the Fibonacci retracement of 68.1%, that’s the signal to sell; invest for the long term, don’t be alarmed by short-term movements; when the moon is in the Seventh House and Jupiter aligns with Mars, that’s the time to buy. See what I mean?
So what should you do? Well here’s more free advice– do whatever makes you feel comfortable. Some people are happy flipping shares every 5 minutes like hot cakes; others believe in the steady accumulation of wealth over the long-term, and can live with short-term volatility. Think about the type of person you are and the investing strategy most suited to your personality. But remember, large and boxy, just like the small, red fast option, gets there in the end, but often with far less excitement (or crashes) along the way.