In this week's personal financial newsletter installment, I have a couple articles to highlight from my reading -- Home Ownership vs. The Stock Market and An Under Appreciated Way to Save Big Money -- Your Car(s)
Home Ownership vs. The Stock Market
The age old question, "what's a better investment, owning a home or owning stocks?" is addressed in this article. The article writer, Ben Carlson, is more-so writing a response to a research paper put out by the San Francisco Federal Reserve Bank in March entitled The Risk Premium Puzzle. Like many a research paper that attempt to take on a massive data-set in order to draw out a couple of conclusions, there are some glaring issues with this research paper. Namely, the paper shows real returns of the world wide housing market as pretty much keeping pace with stock market returns going back all the way to 1870. Which could then lead people here in the U.S. to believe that owning a home is as good of an investment as owning stocks, aside from the fact that any world wide housing data going all the way back to 1870 would be fraught with all sorts of questionable data gathering methods. Taking world wide data on housing, and using as a basis for owning a home in a very specific part of the world is obviously flawed. Carlson points a couple other very important items to consider when owning a home which this paper didn't consider, "the leverage involved, the cost of borrowing, the length of time in the home, the imputed rent, the psychic income from home ownership and the fact that you have to live somewhere."
Here are a couple opinions from the article I agree with:
"... comparing your home as an investment to the stock market makes little sense."
"Risk can be exponentially higher in housing for the simple fact that it’s also the roof over your head."
"I’m not saying people shouldn’t invest in real estate ... But before you head down that path, no matter what the historical return numbers show, first understand the risks involved in trying to make the roof over your head the biggest part of your nest egg."
An Under Appreciated Way to Save Big Money - Your Car(s)
I like this article because it gives some outside-the-box ideas and resources when it come to saving money and counting the cost of car ownership.
First consider the actual cost of your car, including:
Nerdwallet has a helpful tool for finding out the real cost of your car per month: https://www.nerdwallet.com/blog/loans/total-cost-owning-car/
The 3 main points listed in the save money category, from most to least obvious & convenient, include:
1. Buy Used
2. Go Down to One Car
3. Negotiate via Email for your next car
On the negotiating via email front, here's a link to an email template: https://www.moneyunder30.com/get-the-best-deal-on-a-new-car