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> What part of not liquid investment do you not understand. There is a rate of return on the house, it is just hard to realize. Well, i'd thought of not-liquid
by jfoutz 10y ago
> What part of not liquid investment do you not understand. There is a rate of return on the house, it is just hard to realize.
Well, i'd thought of not-liquid investments as something that's tougher to sell than, say stock. Perhaps a family run business or a matisse or a Toyota 2000. Something purchased with the explicit intention of making money. It might be risky, and ultimately be a loser, but the plan is to sell it for more than you bought it for.
Assets on the other hand are things you want or need without much regard for the rate of return. Sure, that comic book might be worth a lot some day, but people buy them because they want them. My coffee maker has a rate of return, i'm sure i could get a few bucks for it on craigslist or a garage sale, but i'm not going to pretend it was an "investment".
Sure, there exist some people that are pretty serious about their house as an investment. I have a couple of friends that bought houses right after school, paid them down, leveraged the equity to by another, and continue the chain.
Most people, call their house an investment but regard it as an asset. Neglecting basic maintenance can wipe out a decade of gains, a new roof, or minor flooding from a plumbing leak. It's easy to watch people blow $30k on a new kitchen. That's very rarely going to be realized in house value when it's finally sold.
Perhaps we're just talking past each other. I think there's a distinction between asset and investment, but i'm willing to admit that perhaps that distinction is inaccurate or wrong somehow. It just seems like people call assets investments to sort of feel better about how they're planning for the future, without actually planning for the future.
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Is it ok to invest with money you can't afford to lose? People put a sizable chunk of their salary into mortgages, and insure them to limit the risk. That doesn't seem like investor behavior.
- dpark 10y agoI'm no financial expert, but I'm pretty sure your idea of an asset is wrong. An asset is anything that has value. An asset can be depreciating or appreciating or neither. An investment is just a place to put money. You can buy stocks in the hope they'll increase in value rapidly. You can buy gold hoping that it will outpace inflation. You can buy bonds with negative yields in the hope that they are at least safe. These are all investments. They are also all assets.
- jfoutz 10y agoI see. I'd thought an investment was a separate and distinct thing compared to an asset, with the intention of having a higher rate of return compared to ordinary stuff. Since an investment is simply a place to put money, there really is no distinction. Seems odd, but I suppose I can accept that as a common understanding.
- dpark 10y agoI think the general expectation is that an investment will make you more money than holding cash. A new car and a gold chain are both assets but most people would not call then investments. But that's not a strict definition, because if you intentionally buy cars and gold chains with the intent of using them as a store of wealth, they are technically investments, just really bad ones.