Investment
Why you shouldn’t think of a home as an investment – Boston Herald
As investments go, the home you live in is likely a bad one.
“From a rate of return standpoint, your primary residence tends to only appreciate a little bit faster than the rate of inflation,” says Greg McBride, chief financial analyst for Bankrate.com. Translation: The home you bought for $400,000 in 2010 that is now worth $500,000? Inflation alone would put it at about $480,000. During that same period, the stock market, as measured by the S&P 500, slightly more than doubled.
Yes, yes, there’s leverage in real estate. We’ll get to that below. But, no, homes don’t lead the pack in investment results.
Yet we fawn over real estate because it’s visible. We can see it and brag about it and host in it and inherit it and, most importantly, gooseneck at others’ homes, with the supposed values conveniently posted on the Internet. This is not the same as stashing money smartly.
This is not what people want to hear about their biggest asset. But there are so many downsides to residential real estate that I’m having difficulty choosing which to expound upon here. And I say this as someone who owns two properties.
First, consider risk. As investments go, residential real estate is dicey. It locks up your money, leaving you at the whims of the market or banks when you want to actually access your cash. And as contractors will tell you, you don’t know what you own until you tear into the walls. Just ask my friend who recently spent $80,000 to repair incessant flooding in a 10-year-old house.
Justin Pierce, a Virginia real estate investor and agent, points out that homes are rather complicated structures. “All the trades are involved, and then on the transaction side, it’s real estate agents, attorneys, accountants, a home inspector.” These people are essential, and they cost money and your time. Annual upkeep typically costs around 1% of the home value (no bond or stock requires an annual deposit) — and much more if you like landscaping or cleanliness or hot tubs.
And your attempts to add value to the property will likely just drain your wallet. The expense of a new kitchen or bathroom is rarely recouped in the sale price.
What about all those people on TV who seem to be flush with cash from real estate deals? They’re spending someone else’s money. Primary homes are typically profitable in a few scenarios: If someone else (a renter, your parents, etc.) is paying off the mortgage; or if the property is generating a cash flow (Airbnb, roommates, seasonal rental, TV/film set leasing); or, as too many of us assume will happen, if the home’s market value appreciates substantially.
In the latter scenario, a mortgage can make wealth seem to magically spring forth. A $200,000 home with a $40,000 down payment (here’s the leverage) that rises in value by 20% over three years means you’ve doubled your initial investment to $80,000, right? But over that time, you’ve also paid $25,000 in mortgage costs (including tax deductions), plus selling fees and taxes that will typically cost 8-10% of the home value — meaning that after inflation, you’ve actually lost money (but had a place to live).
“And it’s a disaster when asset prices go down,” McBride says. By any measure, this is not a winning investment.
The sweet spot, then, is to purchase the minimum that you need, and invest other money elsewhere. By our math, skipping an extra bedroom can earn you $500,000 over time: www.rate.com/research/news/richer-retirement.
“It’s really dangerous to go looking for a home primarily as an investment,” Pierce says. “That can encourage people to overpay and get in trouble in the long run, or buy something that doesn’t really fit their family’s needs. And then they end up having to move, which creates more cost.”
Another cost! Moving is expensive. My recent move cost $1,400, plus new places inevitably need some immediate work, which in my case was a $5,000 interior paint job. (The walls were tapioca yellow. The whole place. Yes.) Plus I spent a pile on essential furniture, and let’s be real: Did I work much in the weeks surrounding the move? No. I was too busy applying room labels that turned out to be nonremovable on expensive furniture. The total move cost easily topped $10,000.
A useful rule of thumb: You can likely afford a home that is 3.5 times your annual income(s) with 20% down, and less than that if you pay significant expenses such as tuition or debt payments, says certified financial planner Dana Levit, owner of Paragon Financial Advisors. “That essentially leaves you with enough money to live on.” This equation can be challenging in expensive neighborhoods.
Just remember: No one gets filthy rich on a house or two. Lots of people have grown immensely wealthy through seed investing or stock trading (careful) or starting a business — and then they buy real estate when they have money to burn.
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2 hours ago
Everton are searching for third-party investment in order to push through a protracted takeover by 777 Partners.
The Miami-based firm agreed a deal to buy the Toffees from majority owner Farhad Moshiri in September, but are yet to gain approval from the Premier League.
On Monday, Bloomberg reported the club’s main financial adviser Deloitte has been seeking fresh funding from sports-focused investors and lenders to get 777’s deal over the line.
BBC Sport has been told this is “standard practice contingency planning” and the process may identify other potential lenders to 777.
Sources close to British-Iranian businessman Moshiri have told BBC Sport they remain “working on completing the deal with 777”.
It is understood there are no other parties waiting in the wings to takeover should the takeover fall through and the focus is fully on 777.
The Americans have so far loaned £180m to Everton for day-to-day operational costs, which will be turned into equity once the deal is completed, but repaying money owed to MSP Sports Capital, whose deal collapsed in August, remains a stumbling block.
777 says it can stump up the £158m that is owed to MSP Sports Capital and once that is settled, it is felt the deal should be completed soon after.
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Investment
Warren Buffett Predicts 'Bad Ending' for Bitcoin — Is It a Doomed Investment? – Yahoo Finance
Currently sitting in sixth on Forbes’ Real-Time Billionaires List, Berkshire Hathaway co-founder, chairman and CEO Warren Buffett is a first-rate example of an investor who stuck to his core financial beliefs early in life to become not only a success but a once-in-a-lifetime inspiration to those who followed in his footsteps.
One of the most trusted investors for decades, the 93-year-old Buffett isn’t shy to pontificate on his investment philosophy, which is centered around value investing, buying stocks at less than their intrinsic value and holding them for the long term.
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He’s also quite vocal on investments he deems worthless. And one of those is Bitcoin.
Buffett’s Take on Bitcoin
Over the past decade, it’s been clear that the crypto craze isn’t something Buffett wants any part of. He described Bitcoin as “probably rat poison squared” back in 2018.
“In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” Buffett said in 2018. And his stance hasn’t wavered since. According to Benzinga, Buffett believes that cryptocurrencies aren’t a viable or valuable investment.
“Now if you told me you own all of the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything,” Buffett said at the Berkshire Hathaway annual shareholder meeting in 2022.
Although the Oracle of Omaha has his misgivings about the unpredictable investment, does that mean crypto is doomed as an investment? Not necessarily.
For You: 10 Valuable Stocks That Could Be the Next Apple or Amazon
Is Buffett Wrong About Bitcoin?
Bitcoin bulls argue that while it’s not government-issued, cryptocurrency is as fungible, divisible, secure and portable as fiat currency and gold. Because they occupy a digital space, cryptocurrencies are decentralized, scarce and durable. They can last as long as they can be stored.
Crypto boosters continue to predict massive growth in the coin’s value. Earlier this year, SkyBridge Capital founder and former White House director of communications Anthony Scaramucci told reporters that Bitcoin could exceed $170,000 by mid-2025, and Ark Invest CEO Cathie Wood predicts Bitcoin will hit $1.48 million by 2030, according to Fortune.
“They really don’t understand the concept and the whole history of money,” Scaramucci said of crypto critics like Buffett on a recent episode of Jason Raznick’s “The Raz Report.” Because we place a value on “traditional” currency, it is essentially worthless compared with the transparent and trustworthy digital Bitcoin, Scaramucci said.
Currently trading around the $66,000 mark, Bitcoin is up nearly 50% in 2024. This means it’s massively outperforming most indexes this year, including the S&P 500, which is up about 6% in 2024.
Although Berkshire Hathaway has invested heavily in Bitcoin-related Brazilian fintech company Nu Holdings, which has its own cryptocurrency called Nucoin, it’s possible Buffett will never come around fully to crypto, despite its recent surge in value. It’s contrary to the reliable investment strategy that has served him very well for decades.
“The urge to participate in something where it looks like easy money is a human instinct which has been unleashed,” Buffett said. “People love the idea of getting rich quick, and I don’t blame them … It’s so human, and once unleashed you can’t put it back in the bottle.”
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This article originally appeared on GOBankingRates.com: Warren Buffett Predicts ‘Bad Ending’ for Bitcoin — Is It a Doomed Investment?
(Bloomberg) — Ping An Insurance (Group) Co.’s profit dropped 4.3% in the first quarter as stock-market declines and falling bond yields eroded investment returns.
Net income fell to 36.7 billion yuan ($5 billion) in the three months ended March 31, from 38.4 billion yuan a year earlier, the Shenzhen-based company said in a filing to the Hong Kong stock exchange Tuesday.
Operating profit, which strips out one-time items and short-term investment volatility, fell 3%.
China’s stock market rout at the start of the year and lower bond yields have weighed on insurers’ investment returns. They hurt profit even as more customers seek to buy savings products. Co-Chief Executive Officer Michael Guo said last month that profitability will recover after a 23% drop in net income last year.
“China’s macroeconomy gradually recovered in the first three months of 2024, but there were still challenges,” the company said in a statement, citing weak domestic demand. “In response to volatile capital markets and declining treasury yields, Ping An continued to pursue long-term returns through cycles via value investing.”
Read More: Ping An Trust Wins First Court Ruling Over Delayed Trust Product
Net investment yield of insurance funds dropped to 3%, the statement said, down from 3.1% a year earlier. Real estate investments fell to 4.2% of the 4.9 trillion yuan portfolio, from 4.6% the year earlier.
The CSI 300 Index slumped as much 7.3% this year through the start of February, before government intervention fueled a rally.
New business value, which gauges the profitability of new life policies sold, rose 21% in the first quarter. That followed a 36% jump last year as the company’s efforts to improve the productivity of life agents started to bear fruit. NBV per agent jumped 56% from a year earlier, the statement said.
Ping An shares rose 3% to HK$33.00 in Hong Kong trading on Tuesday, trimming the year’s loss to 6.7%.
(Updates with company comment in fifth paragraph, more details afterwards)
©2024 Bloomberg L.P.
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