why the smart ones among us are renters

The article has its merits, but at the same time is disingenuous.

<p class="MsoNormal">The author starts by implying he/she will rent forever, and invest in stocks instead. He/she has decided that they also don’t want, or need, an automobile. Fine – I do. I would rather own stocks and a vehicle, not just stocks. I must be a fool.</p>

<p class="MsoNormal">He/she makes no case whatsoever for diversification, just stocks, stocks, stocks.</p>

<p class="MsoNormal">I have never derived one second of enjoyment from stocks I have owned. In fact, I have felt downright unhappy because of them, when a third of my portfolio evaporated a few years ago.</p>

<p class="MsoNormal">Even IR says that he will buy when prices reach rent equivalents.</p>

<p class="MsoNormal">I have never heard anyone here describe the author’s strategy as their own.</p>

<p class="MsoNormal">Can’t we just keep it real?</p>

<p class="MsoNormal"> </p>
 
When prices are reasonable, purchasing a house is a good inflation hedge. I agree with the author that houses are not a good investment, but I plan to own one again someday, not because I think it is a good investment, but because I want to control my own housing situation and obtain the inflation hedge houses offer.
 
<p>I totally agree with IR on the value, as a hedge against inflation, that housing provides.</p>

<p>All I ever hear is "inflation-adjusted" critiques - as if we can completely toss-out one of the fundamental economic features of housing.</p>
 
You can't make a direct comparison between housing and stocks. You can live without stocks, but you'll be homeless without housing. In terms of owning versus renting, it's clear to me that owning is the much better choice in the long run. When you rent, it's expected that rental rates will go up each and every year. So your cost of living will increase indefinitely. When you own, you can lock your mortgage payment for 30 years. After 10 or 15 years, you can refinance and lower your payment down even more. For example, my aunt pays $1200 mortgage for her 4bedroom house. Her son pays $1200 for a 1bedroom apartment. Thus owning is not only a hedge against inflation, it's also a hedge against rising housing costs. Buying is a terrible idea when payments are much higher than rents while prices are depreciating. But it's an ideal choice if payments aren't much higher than rents while prices are appreciating. Besides, we all know that wealth correllates(sp) directly with home values.
 
The article is a poor explanation of the advantages vs disadvantages of renting vs owning real estate and is written by someone who is possibly as far away as possible from the average middle-income American. He is an unmarried, childless, probably highly-educated man living in Manhattan and working in an unstable job (writer, possibly freelance). The only way his view could be more biased perhaps was if he was homosexual.





The majority of Americans have little investing knowledge and aside from their retirement account should probably not invest in anything more complex than an index fund without the aid of a financial planner. The majority of middle and upper-income families I know have lost far more money in the stock market than they have through real estate (excepting, of course, larger-scale property investment).





Buying a home with the intention of eventually owning it is the best financial decision the average American can make as it enforces a sound savings plan (making mortgage payments). You may argue that buying now would be financially poor planning given a generally depreciating market, but to argue that one should never own property is ridiculous.
 
My opinion is, in addition to your home, you should have a mix of investment property, stocks/bonds/funds, some cash (savings/money market), foreign currency, little bit (1-2%?) in gold and silver, and an emergency escape plan.





You might be better off listening to a professional investment advisor, than to follow my model.
 
Here is what my portfolio is in:


49.77% Real Estate


14.10% Cash Equivalents


0.11% Bonds


18% North American Equity


3.12% Pacific Equity


4.39% European Equity


10.50% Emerging Markets Equity
 
bishie:


Someone will probably say you don't diversify enough. Notice in the latest downturn, all markets declined, not just the US. DAX declined 10% one day. I am also in the same situation having majority of my money in equity, but I have my money mostly in European stocks (to hedge against the falling dollar more than anything else), and I was hurting pretty bad after the big decline.
 
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