My Worst Investment Ever Podcast Laurens Swinkels – Stay Liquid Even When Investing Long-Term
BIO: Laurens Swinkels is an Associate Professor of Finance at Erasmus University in Rotterdam and Executive Director and Head of Quant Strategy at Robeco’s Sustainable Multi-Asset Strategies team.
STORY: Lauren bought a house in Rotterdam. Just five years later, he had to move to Norway. Laurens managed to sell the house in the Netherlands many years later at a loss.
LEARNING: Liquidity is very important even when investing long-term. Remove emotions from your decision-making.
“Even though you’re a long-term investor and you think you’re really long-term, there may be things that cross your path that require liquidity.”
Laurens Swinkels
Guest profile
Laurens Swinkels is an Associate Professor of Finance at Erasmus University in Rotterdam and Executive Director and Head of Quant Strategy at Robeco’s Sustainable Multi-Asset Strategies team. His areas of expertise include allocation research and empirical asset pricing. He teaches Finance courses and has published his academic work in peer-reviewed journals such as the Journal of Financial Economics. Laurens holds a Ph.D. in Finance and a Master’s in Econometrics from Tilburg University in the Netherlands.
Worst investment ever
When Laurens started his masters in Tilburg, Netherlands, he decided to move out of his parent’s home. He was torn between buying an apartment and renting one because the real estate prices were quite favorable for buyers then. He decided to rent since he would only be in school for a few years.
After completing his master’s, Laurens decided to do a Ph.D. and stayed another five years in Tilburg. He was still renting his apartment. After graduating, Laurens moved to Amsterdam, where the house prices were unimaginably high. Hoping that the prices would go down, he rented an apartment. But the prices just kept going up. Laurens had to commute daily from Amsterdam to Rotterdam. After getting tired of the commute, Laurens decided to buy a house in Rotterdam, where the prices were lower than in Amsterdam.
Laurens didn’t foresee that he would have to move to Norway five years after that decision. At this point, the house he’d bought was 25% underwater. The investment in this house made a large part of his wealth, so taking a 25% loss was tough for Laurens. He managed to sell the house only two years ago.
Lessons learned
- The liquidity that allows you to sell and buy a house in another location whenever you want is very valuable.
- Even when you’re investing long-term, liquidity is still essential.
- Remove emotions from your decision-making.
Andrew’s takeaways
- Buying a house is a trap because you may lack liquidity.
- Home buying comes with the risk of not realizing the final capital gain that you thought you would.
Actionable advice
If you’re not yet ready to buy a home or don’t know where to buy, you can first get exposure to real estate through listed markets.
Lauren’s recommendations
Laurens recommends his data page on the university website, where you can download datasets if you want to do number crunching when investing. You can also check out Google Scholar or SSRN, where people post their latest thoughts. You can set alerts and get notified when papers on topics you’re interested in are published. If you don’t have the time for that, there are several people, like Larry Swedroe, that have blogs that summarize the papers for you and make them easily digestible.
No.1 goal for the next 12 months
Lauren’s number one goal for the next 12 months is to discover things he doesn’t know yet so he can change his prior ideas on how financial markets work.
Parting words
“Till next time, take care of yourselves and each other.”
Laurens Swinkels
[spp-transcript]
Connect with Laurens Swinkels
Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- The Become a Better Investor Community
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- FVMR Investing: Quantamental Investing Across the World
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points
- Achieve Your Goals