The 5 Worst Money Mistakes You Could've Made So Far in 2013
With equity prices rallying, commodity prices retreating, and interest rates starting to inch higher, nobody can say where markets and the economy are going next? But hindsight is 20/20, so we can see where it's been. With that in mind, here's a look at some of the most unfortunate money moves people have made thus far this year.
1. Failing to Refinance or Buy a Home When Mortgage Rates Were Low
It's still historically cheap to finance a new home purchase or refinance an existing property, but a lot of homeowners and potential homebuyers are kicking themselves these days. Mortgage rates bottomed out late last year at 3.31 percent for the popular 30-year term, and they managed to hover around 3.5 percent through most of 2013.
However, as the economy shows signs of life it's getting more expensive to take advantage. Rates have been spiking since May, and Bankrate.com reports that the average 30-year mortgage will now stick borrowers with a 4.48 percent rate. In other words, financing a new house or refinancing an existing one will cost new borrowers roughly 15 percent more in interest payments than it would have just two months ago.
2. Buying Gold as a Hedge Against Inflation
Now would seem to be a great time to own gold. There's no shortage of political instability in some pockets of the world. Inflation fears are creeping in as the economy improves. Many emerging markets are starting to come into their own. Currency fluctuations in some countries have been dizzying.
However, gold has been a colossal disappointment against this seemingly metal-friendly backdrop. Gold prices have fallen 23 percent over the past six months, making it a disastrous investment at a time when most asset classes have moved nicely higher.
When's the last time that you were invited to a gold party where attendees sell old jewelry for cash? You don't see those "we will buy your gold" infomercials late at night anymore. Gold has a funny way of coming back to life when you least expect it, but it's been a huge dud so far this year.
3. Avoiding Last Year's Stock Losers
Promotional material for investments often carry a disclaimer at the bottom, alerting readers that past performance is not an indicator of future performance. This has certainly been the case with some of last year's worst stocks. Some of this year's biggest winners were last year's biggest losers.
Groupon (GRPN) saw its stock plunge 76 percent last year. But the daily deals leader has nearly doubled this year as with a new CEO. Groupon's emphasis has been on milking its local merchant relationships to offer more than flash sales. That has analysts seeing increasing revenue and profitability for all of 2013.
Most stocks fall for good reasons, but don't assume that they will never bounce back.
4. Selling in May and Going Away
It's all too easy for investors to get tripped up by pithy adages that purport to be universal truths. When mutual funds and exchange-traded funds in this country had a record inflow of $39.4 billion in new investments for the month of January, contrarians figured that it was a good sign to sell. ("Buy when everyone else is selling and hold until everyone else is buying." - J. Paul Getty) So many people storming back into the market just had to be a sign that it was time to bail, right?
It wasn't. Mutual funds have generally moved firmly higher so far in 2013.
A few months later, many market watchers began urging investors to cash out in May based the old aphorism that claims that markets get weak between May and Labor Day. But there hasn't been a warm weather lull this year. The S&P 500 has climbed another 5 percent since the start of May.
5. Not Buying That Home You Wanted
It's not just rising mortgage rates that are making it harder for folks to get the keys to their dream homes: Real estate prices are also shooting higher. The latest S&P/Case-Shiller data that tracks the housing market in the country's 20 largest cities shows that home prices have risen 12 percent over the past year through April.
The net result: Reports from the National Association of Realtors show an 18 percent decline in housing affordability since January.
Things may not necessarily get worse. If anything, the spike in mortgage rates should eventually lead to property prices at least stabilizing. However, it probably wasn't fun for people hoping to buy new homes this year seeing the trends go against them.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.