Weighing investments: No sunsets in stock certificates

I can’t recall the first time I smacked a baseball or scored my first basket. I’m fairly certain both occurred in the backyard of our family home amid the encouragement of my siblings.

But I absolutely can tell you where I was the first time I caught a fish or the first time I was lifted out of the water on a pair of skis. In fact, I vividly remember the width, feel and color of the skis, size and make of the boat and the horsepower of the outboard motor.

The curious and intriguing thing is that my kids can immediately recite their own experiences doing the same thing. They can even tell you who was in the boat, the weather on that particular day and what they had for dinner that night.

What price can you put on that?

Conventional wisdom still holds that common stocks offer the best returns over time. If you measure cash-on-cash return, this might be true, but when you look at total return, the picture changes.

Stocks don’t create memories you get from living in a second home. Stock certificates are pretty, with great colors, cool writing and embossed letters. Unfortunately, you can’t go to sleep in them or stand on them to watch the sunset over the lake, or hold a party for your friends and family in them. They just (you hope) make you money.

A second home provides many different kinds of satisfaction that money can’t buy. The value is not just in the form of wealth accumulation. It’s the total package. Second-home ownership also comes with the ability to enjoy it today and to prolong that pleasure through most of your life.

My wife and I have owned a second home with another family for nearly 30 years. For several years, we’ve shared the maintenance and divided the prime weeks with another couple we truly enjoy. The cabin has become a needed nest egg (similar assets are few), a reliable resource to borrow against in an emergency, and a potential income producer should we choose to rent it out.

The most important factor? The days spent at the cabin are the most memorable in the lives of our four children. They fondly recall the old neighborhood, their buddies and stick ball games in the street.

According to the most recent study by the National Association of Realtors, consumers are making “a lifestyle choice” and turning to second homes sooner in their lives. That finding affirms what we know about Baby Boomers – the prime candidates for second-home purchases – who define themselves by personal experiences and adventure. Interestingly, they are now joined by their children – the proud members of the Gen-X and Gen-Y generations – who view practical experiences as paramount in their lives.

Second homes generate memorable experiences, offer adventures and will mostly likely net you more than a few dollars down the road. They are flexible and interchangeable in their functions: recreation, investment and retirement.

They can provide the moment of a lifetime, be paid for by other people and, when properly positioned, be traded tax-free.

If you have made up your mind to spend more quality time with your family, add to your investment portfolio or do a better job of planning for retirement, you accomplish all three by making a down payment on a second home.

There’s never been a better time in the past three years to “buy low” in a getaway area with the prospect of eventually “selling high.” That’s because many in-city neighborhoods have rebounded and face extremely tight inventories but many second-home markets are now just gaining steam. Second home sales lag behind primary residences for a variety of reasons, most of them financial.

Waiting to roll the dice, however, on a place you know you want to spend leisure time could be a mistake. Attempting to predict the lowest interest rate of the year or the bottom of a targeted housing market is like trying to pick the absolute low point of a stock or bond – you won’t know until it begins to rise.

Think of the memories you’ll lose in the interim.

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