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> For example in a market where nobody is willing (or able) to buy your home, your net worth can be ... well, worthless No, because if it's true that nobody is
by chimeracoder 8y ago
> For example in a market where nobody is willing (or able) to buy your home, your net worth can be ... well, worthless
No, because if it's true that nobody is willing to buy your home, your home isn't worth the $300,000 you're claiming it is.
There's no single metric that works for all situations, but net worth is the best way to compare financial health between people and across a population in a meaningful way.
- johnmaguire2013 8y agoIt may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that. Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is. Cash will still be cash. (But also maybe worth less!)
- chimeracoder 8y ago> It may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that. Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is. Cash will still be cash. (But also maybe worth less!) There is no asset (including cash) that is guaranteed to preserve its value across arbitrary amounts of time under all circumstances. Even TIPS could theoretically be worthless if the government collapses. That doesn't mean that net worth isn't still an excellent normalized comparison between arbitrary people or parts of a population today, which is exactly what we're talking about.