Is it better to do nothing or just something?

I’ve been looking for a house for over four months now and the market is in a weird place. House prices are still very inflated, people are waiting for interest rates to fall, but it looks like the top might be in? I’ve been seeing a number of homes sitting for much longer than usual, homes under contract getting re-listed because people can’t get financing, and more and more homes doing price reductions. I’m lucky to not have a strict timeline constraint for when I need to purchase by, but I definitely would like to find something sooner rather than later.

One of my biggest hesitancies with purchasing a home is that if I leave my current investment portfolio grow, I’m most likely guaranteed to be very comfortable at traditional retirement age. Assuming no additional contributions, no inheritance, with a 10% annual return, I’ll have close to $15M at the age of 60 and almost $24M at the age of 65. This is a conservative estimate given I will continue to make contributions, will likely inherit a meaningful amount of money, and hopefully have better than market returns (otherwise, why am I doing anything other than investing in index funds?). So, one of the outstanding questions I have is should I invest in something else in the meantime or should I let my money grow?

You can use this compound interest calculator to see how much your portfolio will grow.

The idea would be to try to grow my money faster by purchasing a business. Let’s say I want to put down $200,000 to buy a small business, that’s $200K that would’ve turned into $3.2M by the time I’m 60 if I just let it grow in the stock market. Do I think I would be able to grow the purchased business to be worth more than $3.2M in 29 years? If so, do I want to put in the work to make it a $5M business? I’m trying to figure out if the annual income would be worth the time and energy effort. I used to romanticize being a business owner. My dad was a corporate man throughout his entire career and he did very well for himself. I also saw his friends who are business owners and have had no limit on their income and are much wealthier. Part of me would like to prove that I can be a successful business owner. However, I have a greater appreciation now for how difficult it is to run a business. I see it in my best friend who runs her family business and the extreme levels of stress and responsibility she feels everyday. I see it in the startup founder I’m working with who is struggling to get the first few customers even after a year. This is one of the reasons why buying an established small business is a lot more appealing because on some level, you know what the P&L is going to look like—if you’ve done your due diligence correctly.

For a home purchase, I don’t view this as an income generating asset. Even if I end up buying a home that can be used as a rental in a couple of years, the area that I want to live/buy in is very expensive and at best, a home purchase would be cash flow neutral asset that builds equity slowly over the next 30 years. I dislike the idea of being a landlord and having tenants. After getting into the Bigger Pockets books and podcast, I thought it would be so easy to house hack and purchase 30 doors, but in today’s market, it’s unclear who is able to do this so easily.

I’ve gotten a lot more realistic on how challenging it is to make either a small business or real estate work. There is a lot more risk and illiquidity than with investing in the stock market. I’m comfortable with the stock market because I’m used to it, but there is a newness to these other asset classes. I probably will buy a home because I need somewhere to live. While I love hanging out with my parents, I also do want to get a dog, which means I need to move out. I’m treating any home I look at as a potential investment, so if it’s not cash neutral at the very least, it’s out. I definitely want to keep exploring the small business purchase, but would likely wait until my portfolio is much bigger such that the same $200K is a much smaller portion of my net worth and from that perspective reduces risk if that were to be a total failure.

To answer the question posed in this blog post’s title, I should probably just do something. Letting my money grow is a great option, but what good is it at the age of 60-65 if I don’t have a home to live in? Having some financial cushion means that I can take a risk if there is great opportunity but I still need to be mindful of the effort and risk involved. As much as I would love to plan exactly what kind of business I’m going to buy and when, I’ve learned that many of life’s opportunities don’t come from planning but by being present and ready to say yes when a great opportunity comes along. For now, I’ll continue to focus on my house hunt while learning more about different small businesses I might be interested in operating.