Does Your Home Obstruct Your View Of The Future?
Home ownership has long been a pillar of the American dream. And many Americans are invested heavily in the value of their homes—not just financially but emotionally as well.
A recent Gallup survey shows just how strong that bond is. In an April 2015 nationwide survey, real estate topped the list of best long-term investments, with 31 percent seeing more opportunity in the housing market than in stocks, bonds, gold or cash.
Unfortunately, this is a case of people looking at the world through their rose- colored front windows.
When you compare the long-term returns of real estate and stocks, using indexes that measure the biggest stocks and housing markets in the country, you can easily see there has been no contest between these two asset classes. From 1987 to 2013, stocks vastly outperformed real estate, more than doubling in value during this 25- year period.
Source for chart: Housing Views, via S&P Dow Jones Indices.
Granted, your home remains an important asset in your overall financial plan. And real estate can serve a purpose in an investment portfolio, depending on your long- term financial objectives.
Plus, this chart convincingly shows that housing values have been less volatile than stocks, especially in the past few years. Memories of the recent market downturn may be contributing to the warm feelings people have about their homes as investments for the future.
But more importantly, the survey reveals how emotional attachments and short- term perspectives can obstruct your view of the future. And that can ultimately lead to poor financial decisions.
This is why it’s important for investors to follow an objective approach to evaluating investment opportunities and making financial decisions. It’s often difficult to take an objective viewpoint on your own. That’s where an independent investment advisor can help.
For our firm, independence and objectivity are essential qualities that help us align with the best interests of our clients. A qualified investment advisor can bring unbiased knowledge and insight that helps you make informed investment decisions and manages the influence your emotions can have over your financial life.
We invite you to learn more about what makes WealthOne Advisors different from other firms.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The S&P/Case-Shiller home price index tracks monthly changes in the value of residential real estate in metropolitan regions across the U.S. The composite indexes and the regional indexes are seen by the markets as measuring changes in existing home prices and are based on single-family home re-sales.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.