How to think of value in an on-sale world
Once upon a time, we would wait for holiday season sales to stock up on necessities or those “just gotta haves.” Now it seems there is a sale on every week and the temptation to buy can be overwhelming. Sometimes it’s hard to pass up on that great throw cushion or scatter rug, especially if it’s a bargain.
The mesmerizing pull of what we perceive to be a well-priced investment can feel similar. As can happen in the home furnishings aisle, what appears to be an attractive price can sometimes distract investors from their big-picture needs.
Michael Sherman, RBC behavioural economics expert, explains how we can think about value when contemplating a “sale item” for our investment portfolio.
“If you see value, and if you have a rational reason for buying an investment that will complement your other holdings, then by all means, that could be a great opportunity,” he says.
However, he adds, if it is likely to clash with your portfolio or if you haven't done your research to understand what you're buying, it may not be the right fit. You may fall in love with a sassy-looking faux fur bolster, but if it doesn’t match anything in your home and is dry-clean only, you may want to place it back on the sale shelf and slowly back away.
Most importantly, ask yourself if what you’re considering is actually on sale. In other words, how much should a throw cushion really cost anyway? A $25 sticker price may seem really low if your previous cushion purchases were $50 each. If you anchor yourself to a price, the “less than” sticker can create the impression of value where there is none.
So, to sum up: know what best suits your style and budget, and do your research. The right investments – and throw cushions – could be out there waiting for you.