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Which seems wrong, somehow. If I have 500K cash (no other assets/liabilities) and rent my place, I have a NW of 500K (according to this). If I go out and buy a

• giantg2 4y ago
  It's not counted when they want liquidity to be able to cover losses on naked positions. Having a $500k house also doesn't show much financial savvy since a person could have bought it years ago without any experience in trading or finance.
  • medvezhenok 4y ago
    Not sure how a net worth number shows financial savvy in the first place. There might be correlation, but there are always cases of people winning the lottery, making it big on bitcoin or Gamestop or other idiosyncratic bets - or, as you said, buying a house and watching it appreciate. I think it's more about the capacity to absorb losses without having the government be on the hook for bailing you out. Houses also are not as illiquid as most people claim, because things like HELOCs and reverse mortgages do exist, and ultimately you could sell the house (although that takes the most time of the three options). The other thing about liquidity is that we would count private investments in net worth, which could be quite illiquid. Or things like expensive stamps or trading cards (with the same liquidity issues). It's only the primary residence that we make an exception for. We could make another category for "liquid" net worth, and I might buy that argument, with the caveat about house liquidity options that I outlined above.