The worst investment advice I ever received

[EdwardBaiamonte]

It's been well documented how stocks have done. Since 1928, stocks have returned about 10% per year. Home prices in the US have risen about 3% a year.

if you wanted to be realistic you'd say the economy will grow at 2%, plus inflation of 2% giving you a return of 4% from stocks, minus expenses. So its probably better and safer to be in a big house rather than in the corrupt hands of Wall Street which is paying billions and billions in fines for corruption and stupidity in every single business they are in.

10% is pure BS

I didn't know you hated capitalism, freedom and Republicans so much.

I don't hate the above but I do hate the seemingly unlimited corruption of Wall Street. The govt should impose capitalism on the crooks.

 

[boedicca]

Right now, buying a house with a mortgage is a better bet than buying stocks for the long run.

Houses are cheap in most cities whereas most stocks are expensive.

Right now, interest on a mortgage is cheap. For the long haul it makes to buy a house as opposed to renting. It also makes sense to buy the cheapest house you are comfortable with and invest the difference. On average, over the long term, houses don't appreciate 9-10% annually but the stock market does. And houses certainly don't appreciate 9-10% annually above the (current) 4% interest on the mortgage.

It makes sense to buy a house if you can afford the down payment, the mortgage-property taxes-insurance payments are a rational amount of your income, and you have enough income to also build up financial savings/investments...and if you plan to stay in the house for a long time.

People who frequently move up pay a great deal in transaction costs and don't build equity. Also people who treat their home equity like a bank account are fooling themselves.

 

[EdwardBaiamonte]

. The entire plate full of conventional wisdom regarding the "American Dream" needs to be thrown out. It's rotten garbage.

what's rotten is that soviet liberalism is making Americans poorer rather than richer. With new inventions people get richer but its not happening anymore because of liberalism.

Perhaps the highest corporate taxes in the world is the best example of soviet liberalism. Liberals force corporations and jobs offshore then wonder why there are fewer and lower paying jobs. Why not make liberalism illegal as our Founders intended??

 

[Toro]

It's been well documented how stocks have done. Since 1928, stocks have returned about 10% per year. Home prices in the US have risen about 3% a year.

if you wanted to be realistic you'd say the economy will grow at 2%, plus inflation of 2% giving you a return of 4% from stocks, minus expenses. So its probably better and safer to be in a big house rather than in the corrupt hands of Wall Street which is paying billions and billions in fines for corruption and stupidity in every single business they are in.

10% is pure BS

I didn't know you hated capitalism, freedom and Republicans so much.

I don't hate the above but I do hate the seemingly unlimited corruption of Wall Street. The govt should impose capitalism on the crooks.

You hate the stock market. Therefore, you hate capitalism, freedom and America.

Go back to Russia, commie.

 

[EdwardBaiamonte]

It's been well documented how stocks have done. Since 1928, stocks have returned about 10% per year. Home prices in the US have risen about 3% a year.

if you wanted to be realistic you'd say the economy will grow at 2%, plus inflation of 2% giving you a return of 4% from stocks, minus expenses. So its probably better and safer to be in a big house rather than in the corrupt hands of Wall Street which is paying billions and billions in fines for corruption and stupidity in every single business they are in.

10% is pure BS

I didn't know you hated capitalism, freedom and Republicans so much.

I don't hate the above but I do hate the seemingly unlimited corruption of Wall Street. The govt should impose capitalism on the crooks.

You hate the stock market. Therefore, you hate capitalism, freedom and America.

Go back to Russia, commie.

too stupid by 100%. I didn't say I hated the stock market or housing market. I do wich they were both more capitalistic though.

 

[alan1]

My mortgage payments were as cheap as renting so I don't see it as a bad investment. Putting money in someone else's pockets is a bad investment. I own the home now so I figure I invested in a place to live.

Like I said, a hedge against inflation. Which isn't a bad investment but I still don't think it should be ones largest investment.

 

[alan1]

I was traveling for work this week and flew home today.
As I'm driving home from the airport this evening I hear an advertisement on the radio for a window company and guess what the ad said? They said that replacing your windows was good for "YOUR LARGEST INVESTMENT, YOUR HOME". Even advertisers are claiming that a home should be your largest investment.
I did a quick google search and it seems that the average home value in the USA is about $240,000. Imagine if you retired today with a home value of $240,000 (and assume it's paid for) as your largest investment. Lets say your retirement portfolio is worth 1 dollar less, $239,999. Guess what, chances are you're going to run out of money long before you run out of life if you're 66 or 67 years old today.

 

[Roadrunner]

My mortgage payments were as cheap as renting so I don't see it as a bad investment. Putting money in someone else's pockets is a bad investment. I own the home now so I figure I invested in a place to live.

I'd rather pay rent than all that mortgage insurance and interest.

Paid cash for my house, and gonna pay cash for the next one.

I just absolutely HATE paying interest.

 

[SteadyMercury]

They said that replacing your windows was good for "YOUR LARGEST INVESTMENT, YOUR HOME". Even advertisers are claiming that a home should be your largest investment. .

While I get your point (and great thread by the way nice to have something not political in here) I think the advertisers are right. They aren't saying it should be your largest investment, they are saying it is your largest investment which is probably correct for most homeowners.

Whether they are making a poor financial deciosion with too much house/investment is something else altogether, the reality of it is I bet for most people it is true... house is their biggest investment.

Could be worse, at least not the dude with the 50k pickup parked in front of a piece of shit mobile home they rent. Biggest investment is a declining asset in that case.

 

[Toro]

I was traveling for work this week and flew home today.
As I'm driving home from the airport this evening I hear an advertisement on the radio for a window company and guess what the ad said? They said that replacing your windows was good for "YOUR LARGEST INVESTMENT, YOUR HOME". Even advertisers are claiming that a home should be your largest investment.
I did a quick google search and it seems that the average home value in the USA is about $240,000. Imagine if you retired today with a home value of $240,000 (and assume it's paid for) as your largest investment. Lets say your retirement portfolio is worth 1 dollar less, $239,999. Guess what, chances are you're going to run out of money long before you run out of life if you're 66 or 67 years old today.

For most people, it's true

I used to be a stock broker. I was shocked when I would meet couples in their 50s with $10k to their name. These were educated people with good incomes. They drove nice cars and lived in nice houses. I remember having this one meeting with this couple who said they wanted to retire in 10 years, and told me that they wanted to turn their $10,000 into $500,000 within a decade. I told them I couldn't do that, and that their expectations were unrealistic. Needless to say, I didn't get the account. Someone else was happy to pile up the BS for them though.

 

[rightwinger]

It is not a question of whether you should put your $1000 a month towards a mortgage payment or a $1000 a month in the stock market. You will probably make more money in the stock market but you still have to have a place to live.
A $1000 a month mortgage payment is still better than $1200 rent and you get to deduct interest and taxes.

But should you spend $1000 a month to buy a 2000 sq ft home or $1500 a month to buy a 3500 sq ft home in a better neighborhood? That extra $500 a month would probably yield more in the stock market than in increased value on a bigger home

 

[SteadyMercury]

The best calculators I've seen for own vs. rent come down to a year of a breakeven point. Few people buy a home and stay in it for 30 years to make it as simple formula of (final_home_value - (total_mortgage_paid + taxes + insurance + maintenance)) - total_rent because even at today's low interest rates after 15 years half your mortgage payment is still interest.

But there is almost always a point in time where the advantage turns distinctly to the homeowner. It isn't precisely solvable due to assumptions about rent increases, income increases, changes to home values, etc. but one can take a swag. The answer is often a higher number of years than most people stay in their house.

 

[alan1]

It is not a question of whether you should put your $1000 a month towards a mortgage payment or a $1000 a month in the stock market. You will probably make more money in the stock market but you still have to have a place to live.
A $1000 a month mortgage payment is still better than $1200 rent and you get to deduct interest and taxes.

But should you spend $1000 a month to buy a 2000 sq ft home or $1500 a month to buy a 3500 sq ft home in a better neighborhood? That extra $500 a month would probably yield more in the stock market than in increased value on a bigger home

That was my point.
One is better off buying a modest home and investing the difference. A home as ones largest investment is not a wise move.

 

[OnePercenter]

The advise was good. What you weren't told is that you should never live in the house that you own. I don't.

 

[EdwardBaiamonte]

The advise was good. What you weren't told is that you should never live in the house that you own. I don't.

but we know you're an idiot liberal so the advice was probably bad which explains why you are afraid to tell us why you think the advise was good.

 

[jasonnfree]

Still, a home is an investment you can live in, borrow against, write off some of the expenses etc. Even use your house for a place of business. Get hard up for income in old age, rent out a room or two. Real estate: bought a 4plex for 350k in 1999 , Tustin, Ca. sold at top of market in 2006 for just under a million. About 18x gross was sales price. Many write offs involved in real estate especially if you're high income. The owner gets the write offs, not the tenants, very undemocratic. Even depreciate property that's not depreciating but doubling, tripling in value. Major reason why the rich get richer. I have done many deals and the last one with my son, 2 and 1/2 years ago, bought a condo a little under 220k. About a year ago, they were going for 360k if not upgraded. This was southern californian south county, capistrano. You do have to know the market of course and a lot of cash helps. These are recent times I'm talking. The 60's and 70's much better returns/bubbles in real estate at least in So. Cal.

 

[jasonnfree]

It is not a question of whether you should put your $1000 a month towards a mortgage payment or a $1000 a month in the stock market. You will probably make more money in the stock market but you still have to have a place to live.
A $1000 a month mortgage payment is still better than $1200 rent and you get to deduct interest and taxes.

But should you spend $1000 a month to buy a 2000 sq ft home or $1500 a month to buy a 3500 sq ft home in a better neighborhood? That extra $500 a month would probably yield more in the stock market than in increased value on a bigger home

Agreed, still, a home bought right, is a great first investment. You can live in or rent it out, can't do that with ginny mae's or gold.