The ‘What if I’m Wrong?’ option

The ‘What if I’m Wrong?’ option

I have been saving up for a deposit for a fair while now and last month I surpassed the £10K mark (insert celebration emoji here).

The issue that I have been facing the past month or so though is that I have about £3k of that in an account that is just say in an everyday saver account earning no interest. I am expecting a correction in the market so I was wondering whether to hedge my bets and keep it in there until the point that the market drops, whenever that may be.

The thing is that I have also been expecting a correction in the housing market for like 3 years – all of the typical signs of an impending crash were present in 2018, but the market has only inflated since then due to things like the stamp duty holiday, as well as both the policies to protect people from- and the resultant effects of- CV19.

So what would happen if I just kept that money in my side account and the crash doesn’t come as soon as I think it is likely to? I could pretty much guarantee that I would just eat into it over the coming months, that I could spend three years trying to maintain that level but would see it whittling down slowly. I experienced this a while ago when I had 10K saved up, and a year of very low wage work saw that whole lump sum disappear over the course of the year.

At the same time, I am very aware of the adage of ‘Time in the market beats timing the market’, juxtaposed against ‘buy the dip’. So, what to do?

The solution that I have settled on, wherein I will keep that cash to one side, in case I need it, but will also make sure that I do send £100 a month to my investment accounts, which adds to my monthly savings, whilst also holding a bit of a lump sum to drop in should the crash come. It’s the middle ground, the option that assumes that I am wrong about both extremes of ‘drop it all in now’ vs ‘keep it all aside for the upcoming issues’.

So I wanted to write this and say that I think alongside the 100/80/20/’do nothing’ options that I often put into my different analysis pieces, I may start including the ‘If I’m wrong, what is the option to hedge our bets?’ options in all of my work going forwards.