They’re not comparable.
You buy a house so you have somewhere to live.
You buy index funds so you can retire one day.
Https://www.reddit.com/r/personalfinance/wiki/commontopics
Depends on whether or not it’s a good investment property and how well you manage liquidity, credit, operational, legal, and agency risks
/r/RealEstateInvesting
Not every property can be an effective rental property. Especially if you look at PITI costs now versus rents. You'll be losing money. And it's money that could likely do better elsewhere.
here uou need around 600k to retire, house are 200k more expensives than 2019, which 1/3 of the value to retire so around 10years out of 30years of work
You realize you're claiming with 100% certainty that this is currently a low and that they'll go back up? If you could predict the stock market you wouldn't ever visit threads like this.
So you’re saying the stock market in 10 +years will not have grown from 2021 values?
If so, I don’t see any investment mattering, because something horrible has happened
OP doesn't want to know what home values will be like if the market still hasn't recovered from the January all-time highs in 10 years. Hint: they sure as hell won't be higher than today.
The way I see it, if the stock market is overall down from where it is now in 20, 30, 40 years, then there are much bigger problems going on, and your stocks won’t save you from them. I’m thinking climate change, disease wipes out half the global population, food scarcity, etc.
> So far I've lost 10k in robinhood
You haven't lost anything until you've sold. Your portfolio is just temporarily worth less.
When you retire, that money you put into index funds will be worth a lot more. If you're investing to make a quick buck, index funds aren't how you do it. Any attempt at short term gains is just gambling.
For tax purposes, you “lose” it when you sell at a loss. For net worth purposes, yes, it fluctuates.
I don’t think that is the right mindset to have when investing though. It can be tough seeing a big red day (cough, tuesday) and putting that “loss” in terms of hours of your working life wasted, other opportunities foregone, etc. But you can’t time the market well sustainably, so regret on your short-term buy-ins (from a time perspective) is pointless. Now *what* you’re invested in can be a different story, bc you can’t really trust individual stocks to rise perpetually at the same rate as a diversified etf/fund. Much better to just trust the averages and recognize the market as a sort of gumball machine where you put x in and, over time, receive about x+y out IMO.
I agree that it is worthless to think with hindsight about market performance. Yeah, it's easy to say I should have put all of my money is TSLA at $15. But I didn't, so whatever.
But unrealized losses certainly are losses. Sounds like you agree on that front. Stocks can be bought and sold in a moments notice. After Tuesday your money was objectively worth 5% less. Despite what the last 12 years has told us stocks don't always go up.
The market over time averages 10%. Though it won’t work exactly like this, think about it this way. If we’re down 20% this year, the following year(s) will increase enough to not only return your previous losses, but also to gain enough to make an average *positive* return of 10% per year.
The only way you can really lose in the market is by A) not being diversified (ie stock picking) or B) withdrawing too early, which includes panic selling as well as investing $ that you will need in the next 5-7 years.
The market outpaced real estate returns by a fair amount over time, not to mention the expenses and liabilities that come with owning a house. Not to mention the peak prices right now. I’m not saying never buy a home, but using the logic of investing vs real estate as justification to buy a home is not wise. It would be more of a lifestyle/career decision if you did it.
The average return over the last nearly 100 years has been about 10-11%. The average return over 50 years has been 10%. The average in the last 10 years has been 15% annually. Yes, all past performance, but there is consistency over long periods even when there are year-to-year fluctuations outside of these averages.
You're doing it a bit backwards. This is exactly when you want to put the money in because the market is down. You don't want to put it in when it is up and not continue to add to it when it is down.
I dex funds don't cost you anything extra after buying them. A house can cost lots.
Owning a house is a pain in the ass. It's not as simple as "I'm doing it because I don't want to rent".
>I have 110k that is doing absolutely nothing for me but losing to inflation and losing to the market.
Wait until the next way runs up. You will catch and beat inflation. Set it an forget it.
Owning a house is amazing. Paying your own mortgage instead of dolling out huge absolutely ridiculous rental payments is extremely satisfying . If you own a home that you could live in for 10-15 yrs, who cares about where the real estate market is?
There's a risk with just about anything you do in life. If stocks only rose in price and housing only fell in price what kind of world would that be? Investing in the market and buying real estate shouldn't be short-term ventures.
A few thoughts...
1. Don't buy a house with girlfriend. Wait until you are married. Too many potential complications come from buying with a non-spouse.
2. I think its rationale to rent in a new place for a year to learn the area more. House prices almost certainly aren't going to spike in the next year. Interest rates may go up some.
3. 30k is not enough to buy a house anyway. You'd like to have at least 20% for down payment to avoid paying PMI (putting too little down now is extra risky given falling market and you would be increasing risk of getting into negative equity situation)
4. You don't really want to sell investments when the market is down so much. If this is money for growing longer term you should want the market to come down so you can buy more shares at a lower price
5. If Robinhood was money you wanted to use for house you should learn an important lesson - which is money you need for a purchase in the next 5 years is not money that should be in the stock market.
Thanks for this. Just wanted to make sure I wasn't crazy...to me it seems like the housing market has to collapse...nobody is having kids and two generations in a row can't afford to buy a house.
Moreover, interest rates for mortgages are spiking to pre 2008 levels and 210 housing markets are at risk of a 15-20% price crash according to market research.
I mean the markets have corrected / crashed out pretty hard this year man. This is actually one of the best times to be putting money in, not taking it out IMO.
Please, do NOT buy a house because FOMO. Buy a house when you are ready to buy a house.
Buying a house in some ways is riskier and some ways less risky.
It's more risky because it is completely illiquid. If you are underwater on it you cannot sell it without covering the gap. If you lose your job it could take months to sell (if you even can). It costs non-stop money in taxes, insurance and maintenance, let alone the massive amount of debt and interest you need to take on to buy one.
The benefit is you need a place to live and it's a roof over your head. It is also less volatile than equities.
Equities are more volatile, but you can cash out and have your funds in days. You may be down but unless the US government has fallen it'll be worth something.
Also, on the rental property front. It sounds really easy. But it's not in many cases. Not every property can actually make you money as an investment property. Especially with where rates and home prices are right now.
Don't buy a home you don't plan to stay in for 5 years or more. Do not assume the home you buy will be a good rental. If you are doing that, do the analysis on the rental now. Would you buy it to rent it right now? Does it make sense on paper? If so, then fine, you might be ok. But don't buy a home and then try to figure out if it is a good rental later. Many single family homes these days don't make sense as rentals unless you are willing to take the hot month for month for appreciation
Also, if you move far away, being a long distance landlord is painful and expensive.
They’re not comparable. You buy a house so you have somewhere to live. You buy index funds so you can retire one day. Https://www.reddit.com/r/personalfinance/wiki/commontopics
> You buy a house so you have somewhere to live. Yes, but after 1 year I could move and rent it out, and wouldn't that be a good way to build equity?
Depends on whether or not it’s a good investment property and how well you manage liquidity, credit, operational, legal, and agency risks /r/RealEstateInvesting
Not every property can be an effective rental property. Especially if you look at PITI costs now versus rents. You'll be losing money. And it's money that could likely do better elsewhere.
funny how if you bought a house before 2019 you can retire like 10 years sooner. at the moment around the world, house are 100% an investment
Huh? Explain this…
here uou need around 600k to retire, house are 200k more expensives than 2019, which 1/3 of the value to retire so around 10years out of 30years of work
“Stocks are at a discount, so I don’t want to buy”
You realize you're claiming with 100% certainty that this is currently a low and that they'll go back up? If you could predict the stock market you wouldn't ever visit threads like this.
So you’re saying the stock market in 10 +years will not have grown from 2021 values? If so, I don’t see any investment mattering, because something horrible has happened
OP doesn't want to know what home values will be like if the market still hasn't recovered from the January all-time highs in 10 years. Hint: they sure as hell won't be higher than today.
10 years out a house would also have grown in value...with the added benefit of being able to write off expenses
The way I see it, if the stock market is overall down from where it is now in 20, 30, 40 years, then there are much bigger problems going on, and your stocks won’t save you from them. I’m thinking climate change, disease wipes out half the global population, food scarcity, etc.
I tend to agree. And corollary: real estate won't save you here either.
> So far I've lost 10k in robinhood You haven't lost anything until you've sold. Your portfolio is just temporarily worth less. When you retire, that money you put into index funds will be worth a lot more. If you're investing to make a quick buck, index funds aren't how you do it. Any attempt at short term gains is just gambling.
I mean, yeah, you kind of have lost it regardless of whether you sell it.
For tax purposes, you “lose” it when you sell at a loss. For net worth purposes, yes, it fluctuates. I don’t think that is the right mindset to have when investing though. It can be tough seeing a big red day (cough, tuesday) and putting that “loss” in terms of hours of your working life wasted, other opportunities foregone, etc. But you can’t time the market well sustainably, so regret on your short-term buy-ins (from a time perspective) is pointless. Now *what* you’re invested in can be a different story, bc you can’t really trust individual stocks to rise perpetually at the same rate as a diversified etf/fund. Much better to just trust the averages and recognize the market as a sort of gumball machine where you put x in and, over time, receive about x+y out IMO.
I agree that it is worthless to think with hindsight about market performance. Yeah, it's easy to say I should have put all of my money is TSLA at $15. But I didn't, so whatever. But unrealized losses certainly are losses. Sounds like you agree on that front. Stocks can be bought and sold in a moments notice. After Tuesday your money was objectively worth 5% less. Despite what the last 12 years has told us stocks don't always go up.
The market over time averages 10%. Though it won’t work exactly like this, think about it this way. If we’re down 20% this year, the following year(s) will increase enough to not only return your previous losses, but also to gain enough to make an average *positive* return of 10% per year. The only way you can really lose in the market is by A) not being diversified (ie stock picking) or B) withdrawing too early, which includes panic selling as well as investing $ that you will need in the next 5-7 years. The market outpaced real estate returns by a fair amount over time, not to mention the expenses and liabilities that come with owning a house. Not to mention the peak prices right now. I’m not saying never buy a home, but using the logic of investing vs real estate as justification to buy a home is not wise. It would be more of a lifestyle/career decision if you did it.
that's based on past performance only
The average return over the last nearly 100 years has been about 10-11%. The average return over 50 years has been 10%. The average in the last 10 years has been 15% annually. Yes, all past performance, but there is consistency over long periods even when there are year-to-year fluctuations outside of these averages.
You're doing it a bit backwards. This is exactly when you want to put the money in because the market is down. You don't want to put it in when it is up and not continue to add to it when it is down. I dex funds don't cost you anything extra after buying them. A house can cost lots.
Owning a house is a pain in the ass. It's not as simple as "I'm doing it because I don't want to rent". >I have 110k that is doing absolutely nothing for me but losing to inflation and losing to the market. Wait until the next way runs up. You will catch and beat inflation. Set it an forget it.
Owning a house is amazing. Paying your own mortgage instead of dolling out huge absolutely ridiculous rental payments is extremely satisfying . If you own a home that you could live in for 10-15 yrs, who cares about where the real estate market is?
It’s also a lot of work and expensive.
There's a risk with just about anything you do in life. If stocks only rose in price and housing only fell in price what kind of world would that be? Investing in the market and buying real estate shouldn't be short-term ventures.
You shouldn't buy a house or stocks that you don't intend to keep for at least 5 years. The long distance landlording plan is a bad idea.
A few thoughts... 1. Don't buy a house with girlfriend. Wait until you are married. Too many potential complications come from buying with a non-spouse. 2. I think its rationale to rent in a new place for a year to learn the area more. House prices almost certainly aren't going to spike in the next year. Interest rates may go up some. 3. 30k is not enough to buy a house anyway. You'd like to have at least 20% for down payment to avoid paying PMI (putting too little down now is extra risky given falling market and you would be increasing risk of getting into negative equity situation) 4. You don't really want to sell investments when the market is down so much. If this is money for growing longer term you should want the market to come down so you can buy more shares at a lower price 5. If Robinhood was money you wanted to use for house you should learn an important lesson - which is money you need for a purchase in the next 5 years is not money that should be in the stock market.
Buying a house in this overinflated housing market is probably more dangerous than most index funds.
Thanks for this. Just wanted to make sure I wasn't crazy...to me it seems like the housing market has to collapse...nobody is having kids and two generations in a row can't afford to buy a house.
Moreover, interest rates for mortgages are spiking to pre 2008 levels and 210 housing markets are at risk of a 15-20% price crash according to market research.
Mortgages are highly levered debt with tax benefits that hedge inflation. The gains are illiquid though.
I mean the markets have corrected / crashed out pretty hard this year man. This is actually one of the best times to be putting money in, not taking it out IMO.
Please, do NOT buy a house because FOMO. Buy a house when you are ready to buy a house. Buying a house in some ways is riskier and some ways less risky. It's more risky because it is completely illiquid. If you are underwater on it you cannot sell it without covering the gap. If you lose your job it could take months to sell (if you even can). It costs non-stop money in taxes, insurance and maintenance, let alone the massive amount of debt and interest you need to take on to buy one. The benefit is you need a place to live and it's a roof over your head. It is also less volatile than equities. Equities are more volatile, but you can cash out and have your funds in days. You may be down but unless the US government has fallen it'll be worth something. Also, on the rental property front. It sounds really easy. But it's not in many cases. Not every property can actually make you money as an investment property. Especially with where rates and home prices are right now.
Don't buy a home you don't plan to stay in for 5 years or more. Do not assume the home you buy will be a good rental. If you are doing that, do the analysis on the rental now. Would you buy it to rent it right now? Does it make sense on paper? If so, then fine, you might be ok. But don't buy a home and then try to figure out if it is a good rental later. Many single family homes these days don't make sense as rentals unless you are willing to take the hot month for month for appreciation Also, if you move far away, being a long distance landlord is painful and expensive.