Should I ride out the S&P or buy a townhouse at 28 with $120k in stocks?

The S&P 500 has become a lot tougher to ride out with the index melting down more than 10% in just two sessions last week. While only time will tell if the worst is already in the books, it’s not hard to imagine that many dip-buyers are feeling a tad less willing to brave the latest leg lower.

With many retirees likely feeling nauseated and just about ready to sell everything so they don’t need to stick around for a worsening of a global trade war, the best course of action after taking such a 10% two-day hit to the chin is to do nothing at all. And if one’s feeling up for it, perhaps buying the dip or rotating into more defensive securities could allow one to stay invested through such a trying time.

In this piece, we’ll consider the case of a 28-year-old Reddit user with around $120,000 invested in stocks by means of the Vanguard S&P 500 ETF (NYSEARCA:VOO). They’re wondering if it’s time to cash out and use the funds as a down payment on a townhome worth around $430,000. Indeed, the way the stock market is going, it seems wise to step out of the way and put the money on a stable asset, like real estate.

Stay aboard the S&P 500 rollercoaster? Or cash out and buy a “dream” townhome?

Of course, it’s absolutely impossible to know what the right financial move is. Ultimately, both are fairly responsible ways of betting on one’s long-term future. That said, I’d discourage selling out of the S&P 500 just because it’s down close to 18% from its peak. Selling immediately after a steep drop could allow one to avoid a continuation of a move into bear market territory.

But, at the same time, it may mean missing out on the ride back to new heights. For now, there seems to be a low probability of a V-shaped bounce, given that Trump only recently pulled out the big chart of reciprocal tariffs on far more countries than anyone expected. With retaliatory tariffs, it looks like the trajectory for 2025 could be a whole lot nastier than the one from 2018. At the same time, most other investors are likely thinking the same thing, that things can only get worse on tariffs from here. It’s severely oversold conditions and pessimism that tend to be the best times to buy. 

In any case, the Reddit user should make the move that speaks most to them. For many, owning one’s own home is a dream, though, it’s not always the savviest financial move. Either way, if one is keen on homeownership, I see no problem in putting the funds towards a down payment. However, if one is undecided or fine with renting as they stay invested in the S&P 500, staying the course in stocks could prove wise, especially since the penalty (18% drop) has already been doled out.

Of course, there’s one caveat: riding out the rougher waves could entail lower lows over the near- to medium-term. A 25-30% drop isn’t entirely off the table. And there’s a non-zero chance of a much larger decline should a worst-case scenario unfold with tariffs (think Trump raising tariffs above 34% on China in response to their punitive 34% tariffs).

The bottom line

Stay in stocks despite the volatility? Or sell out and put money down to finance a townhouse purchase? Given that volatility has been off the charts lately, the latter must seem a lot more tempting, especially since a worsening of the correction could put one further away from their dream of homeownership. At the same time, selling shares while the stock market is flirting with a bear market is one of the top sins for investors.

Ultimately, one’s time horizon should influence whether they should stick it out in stocks or take the big first step towards homeownership. If one’s thinking about buying a home within three to five years, it’s probably best to be in a less volatile asset class. However, if one’s looking to build wealth over the next five-plus years and is content renting over the timespan, staying the course seems wise despite the S&P 500’s brutal start to 2025, at least in my view. As always, a financial advisor can help individuals make the most informed decision.

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