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I've read that you make more money by not buying a home and instead using that money to invest wisely--true

Answers:1   |   LastAnswerAt:2009.12  

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Corpulo Embonpoint 
Asked at 2009.12.19 00:09:52
I'm thinking of buying a home, but prices everywhere seem to be dropping and I've read that they'll keep dropping for another year or two. I've also read that the stockmarket outperforms the real estate market on average over long periods of time. Would it be a better idea financially to just rent an apartment and put all of my extra money into Berkshire Hathaway or some other high quality, long term growth stock? It seems that people who invest well in stocks (like Warren Buffett) do much better than people who invest in real estate (like Donald Trump--he's very wealthy, but not as wealthy as top stock investors). Thanks for any help you can give me.
answer Make Your Money work for you  Answered at 2009.12.19 00:09:52
First you need to have money to grow it. If making money is your only agenda, then investing in stock markets is the most wise move you can ever do. (Easier said than done.... you could also lose all your money.. if invested wrongly). Prefer to go through the Mutual Fund route to enter stock markets. Also prefer foreign markets especially Asian markets like India, Hong Kong, S Korea, China or even Cyprus. These are emerging economies and have lots and lots of room for improvement unlike the US where the country is already developed with better quality of life. For example, for the past 3-4 years in India many funds have grown 30% plus YOY. India has a very well managed (probably one among the top 5 in the world) stock market. The funds disclose their portfolios more frequently then any other countries funds. The costs also are competitive comparatively. MF are as good as liquid cash whereas Real Estate blocks huge money and the cash is highly illiquid (you may sometimes end up selling in distress which may give you a below market price). You can enjoy diversification with MF which cannot be done in Real Estate.

I have answered in assumption that your intention to buy a home is only for investment purpose and nothing else. I have also answered in assumption that you have some money because you are thinking of buying a home. The simple rule is that if you can make more money than the RENT & Appreciation of the home you intend to buy by investing it elsewhere then please do that. Stock market is the answer to it. Once you are satisfied (lets say 3-4 years of MF investing) with the returns of the MF investments you can allocate a small capital (lets say 5%) of your investible capital and try directly on stocks assuming that you would have got some literacy about the stock market.
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