Comment by mschuster91 17 hours ago
> Thinking about your home as a financial investment, rather than a...home.
Sadly, the way all Western economies have devolved over the last decades, real estate equity is the only form of wealth that at least some part of the 99% has for retirement.
> Of course, many people prefer to invest in extra big and luxurious houses/cars/vacations/restaurants/alcohol/coffee/etc out and I would even throw in educations with low ROI, rather than broad market index funds.
The problem is, index funds have no inherent value, they (just like all stocks and other financial derivatives/instruments) are effectively a paper with one or another form of "IOU" written on it. Economic crashes, wars, tariffs, morons in politics, whatever, there are tons of ways massive amounts of value can be straight up destroyed in a matter of days.
A house however? As long as it's reasonably well built, come what may, you still have a roof over your head. No one's gonna come and kick you out of it. And that's inherent value.
> No one's gonna come and kick you out of it.
Real estate suffers from the whims of the market, governmental policy and especially war. Even if you rule out outliers like imminent domain (used on many many homeowners in the first half of the 20th century in the US) or destruction via war, simple economic changes as we saw in 2008 cause people to lose their homes.
> index funds have no inherent value, they (just like all stocks and other financial derivatives/instruments) are effectively a paper with one or another form of "IOU" written on it
What do you think a real-estate deed is?
> No one's gonna come and kick you out of it
Property tax. Title fraud. Mortgage fraud. Mistaken foreclosure. (Legitimate foreclosure.) Squatters' rights. Eminent domain.
The difference between real estate and financial assets is possession. But every time you're away from your home, you aren't in possession of it. And possession, control and ownership are three overlapping but ultimately separate concepts.
Broad market index funds have performed spectacularly over the last few decades, and far more than 1% have them (or could have had them) for retirement. It has been the standard recommendation since I graduated college in the early 2000s.
Of course, many people prefer to invest in extra big and luxurious houses/cars/vacations/restaurants/alcohol/coffee/etc out and I would even throw in educations with low ROI, rather than broad market index funds.
This is specifically about those who had been earning money in the ~1980 to ~2010 period, for the vast majority, their house should not have been the only equity.