YO-YO on an Escalator

When I was first getting started, my financial advisor taught me how to think about long-term investments.

He said, “Imagine your investment as a YO-YO on an escalator.”

Here’s what he meant:

Market conditions will always fluctuate, which means the value of your home will always fluctuate… Up and down, up and down, like a YO-YO.

But you’re riding an escalator, which means you’re set on an upward trajectory so the overall value of your asset will increase over time.

This perspective changed everything for me.

I don’t know what another housing market crash will look like, but I do know home values will never hit as low as they did in 2008.

How do I know that? Because the value of money is not the same as it was then. Factors like inflation have changed the value of the dollar, the cost of living has increased, etc.

Even the 2008 crash had a floor. It’s not like we saw home values fall back to the 1920’s (maybe a little dramatic, but you get the idea).

And despite that crash (YO-YO low to the ground) over time, now 18 years later regardless of where your home value is today, we are higher up on the escalator so your floor is higher.

Here’s the takeaway:

Even when the market is down and therefore the value of your home is down (YO-YO), it’s ok because you’re riding an escalator. The market over time is always trending up.

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Until next week, 👋