When Should You Buy a Vacation Home?

My writing falls into three main categories:

1. How to Create Wealth — One of my biggest passions. I love talking about it, learning about it, and educating others on the topic.

2. Investing — How to potentially increase the return on your investments while respecting the risk of loss of capital.

   
   

3. Wealth Is Good — The idea that when you become wealthy (which you can if you make as much money as possible and invest intelligently), the next challenge is figuring out what to do with it.

   
   

Today’s post is categorized as Wealth Is Good, and it’s about buying a vacation home.

When should you buy a vacation home?

In my experience as a financial advisor, once families accomplish most of their standard financial planning goals—such as paying off their primary residence, achieving financial independence, paying for their kids’ college, or taking a meaningful international family trip—the most exciting next goal is often buying a vacation home.

The appeal is obvious: a place just for fun, family, and relaxation. Instead of vacationing for one or two weeks per year, you have a permanent escape stocked with your own food, clothes, and belongings. A place to enjoy long weekends or invite friends over for a party. A place with a consistent cost (no holiday price spikes) where you get to feel like a local.

Done correctly, a vacation home is one of the coolest lifestyle assets your family can have. Done poorly, it becomes a source of personal and financial stress—something you may come to avoid rather than enjoy.

One of the principles in my upcoming book is to do things from a position of financial strength. While many of us buy our first home while taking on meaningful financial risk, once you’ve attained financial independence, it is foolish to jeopardize that stability for a dream like buying a vacation home. As Charlie Munger said, “Don’t risk what you have and need for what you don’t have and don’t need.” A vacation home falls squarely into the category of “don’t have and don’t need.”

In the spirit of acting only from a position of strength, the first checkpoint is simple: can you easily afford the vacation home?

Easily affording it could mean having the liquid assets to buy it outright. If you’re considering financing, a useful guideline is keeping total monthly debt payments below 33% of your take-home income. This assumes no other substantial fixed monthly obligations.

The second checkpoint is: how many days per year will you actually stay there?

In my view, the sweet spot for owning a vacation home is spending close to three months living in it annually. For example, if you live in Denver but spend winters in Arizona, many people consider buying a second home there. Unless you’re truly going to spend a full three months in Arizona, it usually isn’t worth the hassle, expense, or upkeep. The same logic applies to a beach house in Florida or a ski condo. Unless skiing is a genuine passion and you plan to spend most weekends in the mountains, I strongly recommend renting instead.

The third checkpoint is whether you plan to rent out the property.

Renting out a vacation home can make ownership more affordable, but as someone who rented out a ski condo for four years, I can tell you it is about as far from passive income as you can imagine. Even with a management company handling day-to-day operations, the mental and administrative burden is significant. Often, the property becomes another layer of complexity in your life rather than a source of joy.

The fourth checkpoint is opportunity cost.

If you’re a savvy investor, tying up substantial capital in a vacation home that may appreciate at 3% per year is far less compelling than investing in the S&P 500, which has historically returned closer to 10% annually. If you buy a $1,000,000 vacation home, is giving up that potential difference too great?

The fifth checkpoint is to dream big: are you giving up family time and meaningful memories in pursuit of a higher return on investment?

The opposite of financial opportunity cost is quality-of-life opportunity cost. By chasing an extra 7% per year in returns, are you sacrificing family vacations and shared experiences that money was supposed to enable in the first place?

The sixth checkpoint is whether renting could offer a better—or simply cooler—experience.

Everyone is different. For some, owning a consistent vacation home in a beloved place is the pinnacle of relaxation. For others, discovering new destinations is what makes travel exciting. If you buy a vacation home on one lake, one ski mountain, or one beach, will you eventually want to explore elsewhere? If so, owning may not be the right choice—and your money may be better spent on new experiences instead.

A vacation home should be the result of wealth, not the thing that jeopardizes it. When purchased from a position of true financial strength, used often, and aligned with how your family actually lives and relaxes, it can be one of the most rewarding lifestyle assets you’ll ever own. But if it strains cash flow, adds complexity, limits flexibility, or quietly replaces joy with obligation, it’s doing the opposite of what wealth is supposed to do. Wealth is good because it expands your options—not because it locks you into them. The right time to buy a vacation home is when it clearly enhances your life. The wrong time is when it merely satisfies a dream at the expense of everything you’ve already built.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Why the Oldest Guy in the Office Keeps Getting Mad & Saying "This time it's different."

My writing falls into three main categories:

1. How to Create Wealth — One of my biggest passions. I love talking about, learning about, and educating others on the topic.

2. Investing – How to potentially increase the return on investments while respecting the chance of loss of capital.

3. Wealth Is Good — The idea that when you become wealthy (which you may if you make as much money as possible and invest intelligently), the next challenge is figuring out what to do with it.

Today’s post is categorized as ‘Dying in the Herd,’ and it’s about investing.

Dying in the Herd: Why Wall Street Prefers Conventional Failure

There is a quiet rule that governs much of professional investing, though it's rarely stated out loud. It is not about maximizing returns, uncovering truth, or even serving clients particularly well. It is about not being alone when things go wrong. In practice, Wall Street often prefers conventional failure to unconventional success. Investors would rather die in the herd than live prosperously alone.

This instinct explains a remarkable amount of behavior in markets: why portfolios look the same, why innovation is slow to be adopted, why bold ideas are watered down by committees, and why genuinely differentiated performance is so rare. It also explains why some of the most quoted warnings in investing are simultaneously true and dangerously incomplete.

The Famous Warning and the Joke That Follows

One of the most enduring aphorisms in investing is the warning that "this time it's different" are the most dangerous words in investing. The phrase exists for good reason. Across centuries of bubbles, manias, and crashes, investors have repeatedly convinced themselves that old rules no longer apply. Technology, policy, globalization, central banks: each era produces a new justification for abandoning discipline.

But there is a lesser-known follow-up joke that circulates among professionals:

The eleven most dangerous words in investing are: "The four most dangerous words in investing are 'this time it's different.'"

The joke matters because it reveals a deeper truth. Blindly believing that nothing ever changes is just as dangerous as believing that everything has changed. Markets evolve. Structures shift. Incentives change. The hard part is not repeating slogans; it is doing the uncomfortable work of distinguishing between genuine regime change and familiar human behavior wearing a new costume.

Yet most professionals never really attempt that distinction. Not because they are incapable, but because the system does not reward them for trying.

Career Risk vs. Investment Risk

The central tension in professional investing is not risk versus return. It is investment risk versus career risk. Investment risk is the possibility of losing money. Career risk is the possibility of losing your job, reputation, or clients. In theory, professionals are paid to manage the former. In reality, they are governed by the latter.

If a portfolio performs poorly but looks like everyone else's portfolio, explanations are easy. "Markets were down." "Correlations went to one." "No one could have predicted this." Failure is shared, diffuse, and forgivable.

If a portfolio looks different (concentrated, unconventional, or early) and performs poorly, the explanation becomes personal. The manager wasn't unlucky; they were reckless. They didn't follow process. They strayed from consensus. They tried to be clever.

The irony is that this logic holds even when the unconventional approach works. Outperformance that deviates too far from the herd can be just as dangerous as underperformance. It raises uncomfortable questions. Why is this portfolio different? Why didn't we do this earlier? What happens if it stops working?

Success that cannot be easily explained is threatening. Failure that is widely shared is comforting.

Why the Herd Is Rational

From the outside, this behavior looks lazy. From the inside, it is entirely rational.

Most advisors, analysts, and portfolio managers operate inside institutions. Institutions are governed by committees, compliance departments, benchmarks, peer comparisons, and quarterly reviews. These structures are designed to reduce variance, not maximize insight.

In that environment, the optimal strategy is not to be right. It is to be defensible.

Defensibility comes from owning what everyone else owns, using language everyone recognizes, anchoring decisions to benchmarks, and being able to say, "This is what prudent professionals do."

The herd is not a moral failure. It is a survival strategy.

The Myth of Independent Thinking

Wall Street celebrates independence rhetorically and punishes it operationally.

Every firm claims to value original thinking. Very few are willing to tolerate the temporary discomfort that real independence requires. Independent ideas look wrong before they look right. They underperform before they outperform. They require explanation when explanation is least satisfying.

Committees tend to filter ideas not by truth, but by acceptability. The most controversial edges are sanded down. The boldest insights are reframed until they resemble consensus. Over time, portfolios converge, not because the answers are obvious, but because deviation is expensive.

This is why so much capital ends up in what is effectively closet indexing. The appearance of diversification masks the reality of conformity. Everyone is managing the same risks, just with different marketing language.

Why True Outperformance Is Lonely

Historically, sustained outperformance has almost always come from people or organizations that were willing to look wrong and stay wrong longer than others were comfortable with.

They shared a few traits. They controlled their own capital or had unusually patient clients. They were structurally insulated from short-term judgment. They were comfortable being misunderstood. They accepted reputational volatility as the price of financial truth.

This is not a personality quirk. It is a structural requirement.

You cannot outperform the herd while thinking like the herd. And you cannot think differently without accepting separation.

The Real Cost to Clients

The tragedy is not that professionals protect themselves. The tragedy is that clients often believe they are paying for something else.

Clients think they are paying for insight, judgment, experience, and independent thinking. What they often receive instead is benchmark-relative positioning, risk management designed for optics, and portfolios optimized for explanation, not outcomes.

Again, this is not usually malicious. It is the natural result of incentives that reward safety over truth.

Conclusion: Choosing Your Risk

Every investor makes a choice, whether consciously or not.

You can choose the risk of standing apart, accepting discomfort, scrutiny, and temporary regret in pursuit of durable advantage. Or you can choose the risk of the herd, sharing in collective outcomes, good or bad, protected by consensus and convention.

Most professionals choose the latter. Not because they lack courage or intelligence, but because the system teaches them too. But the few who choose the former, who accept that prosperity often requires solitude, are the reason markets remain inefficient at all.

In the end, the most dangerous words in investing are not "this time it's different."

They are: "At least we were wrong together."

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

EP: 172 - December Investment Insights (Opportunities in AI, Comparing Bubbles, & New Year's Resolutions)

Advisors and co-hosts Zachary Bouck, CIMA®, CFP®, and Austyn Garcia, recap our December 2025 portfolio meeting, discussing what happened in the markets over the last month, our approach to traditional asset allocation (cash, fixed-income, equities, and alternatives), and our general outlook for the next 6-12 months in the markets.

0:00 – Introduction & Action Items 5:19 – Investment Market Overview & Trends 10:22 – Opportunities in Tech & AI 15:27 – The Future of Data Centers & Space Exploration 20:15 – Comparing Tech Bubbles: Lessons from History 25:21 – Investing Strategies: Balancing Risk & Opportunity 25:50 – The Evolution of Investment Strategies 30:41 – Navigating Cash in Today's Market 35:58 – Setting Goals & New Year's Resolutions

Visit www.denverwealthmanagement.com to schedule a free consultation.