Buy a House vs. Invest in the Stock Market or..?

This a question that has been weighing heavily on my head lately, as some would say it’s the best time to buy a house/condo right now, while mortgage rates are low, and others would say it’s the best time to invest in the stock market as the recession, over or not, is still heavily weighting stocks down, and growth will return to the markets sooner or later.

There are a lot of reasons why it is not the right time to buy a house, for me personally. Putting money in the stock market is an investment, buying a house is a life step, not necessarily an investment. It’s certainly tough to aspire to be the next Warren Buffet when your entire liquidity is tied down in a 2br, $500k condo, with a monthly HOA fee to boot.

But I still have to ask myself — am I being stupid? Stocks can just as easily go down as they can go up, and I may just be investing away my downpayment — and all of my savings — by putting my money into the market. And by stupid, I mean by picking individual stocks (something super risky, even with large cap companies) vs focusing on my earlier index investing strategy.

At the moment, I have a little over $100k in my various investment accounts, which include my retirement funds, though most of that is in taxable, non-retirement funds. I tend to reason that my retirement funds, at least when I go through my employer, are more general index funds, so I end up having a fair amount of risk diversification. It’s starting to get a bit scary with $58k (well, $56k as of Friday) in my Sharebuilder “value stock investing” account, where I’m bullish on CMX, SBUX, CBOU, PE, GE, JNJ, BA, MCD, AAPL and IHI, among 24 stocks and ETFs that I’ve invested various amounts of money into in the past five years. At the moment, my account is up about $2k — given I finally took the $4.5k loss on COMV and $400 loss on OSTK. I also have a reasonable % of my investments tied up on my company’s stock option plan — $20k worth — which could either be really smart or really stupid. I’m quite bullish on my company as well (I wouldn’t be working there if I wasn’t), but as a startup it’s extremely┬ávolatile┬áto say the least, and in order to buy my shares, I had to take out a loan through the company for an additional $250. I’m still not sure if I should count that $20k in my investment portfolio, but I guess I should, given that I did pay for it, even though in theory I got a really good deal as an early employee.

So… in any case, am I being stupid, buying stocks instead of taking that $100k and putting it as a 20% downpayment on a $500k condo? Or is there some other place I should be putting my $100k? Like under a pillow?

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One thought on “Buy a House vs. Invest in the Stock Market or..?”

  1. I've been splitting my savings about 50/50 the past few years between retirement (investments) and a down payment (cash savings) for this exact reason. I didn't want to put my down payment savings into the stock market, nor did I want to feel like I was taking money for a down payment away from my retirement savings.

    The problem with buying a house/condo though is that once you have the finances in line, it's a life step. It took my last boyfriend breaking up for me to realize that I am in fact ready for this life step, so now I'm working on finding a place that I actually want to buy.

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