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Two important adjustments when using this: "Investment return rate" -- Only 4%? An index fund will return higher than that. "Monthly common fees" -- Required

Two important adjustments when using this: "Investment return rate" -- Only 4%? An index fund will return higher than that. "Monthly common fees" -- Required if you are considering buying a condo. This changes the per month rent comparison dollar-for-dollar.

pessimizer 12y ago
Get ready for lousy stock returns http://money.cnn.com/2014/05/21/investing/stock-returns-low-shiller/ http://money.cnn.com/2014/05/21/investing/stock-returns-low-... "The Shiller price to earnings ratio was designed by Nobel Prize winning economist Robert Shiller to give investors a sense of whether stocks are cheap or expensive. It compares stock prices, as measured by the S&P 500 index, with inflation-adjusted corporate earnings over the past 10 years. "The magic number at the moment is 25. That's the current Shiller ratio, and it indicates that stocks are on the expensive side. The long-term average, going back more than 130 years, is 16.5. "But the current level is significant for another reason. According to research by Credit Suisse, when the ratio has been between 25 and 26 in the past, stock returns over the next five years have been just 2.7%. That's after adjusting for inflation."
- hashberry 12y ago
  In the short-term, perhaps. Returns long-term are high than 3%-4%.
  - pessimizer 12y ago
    Depends on which term. Retirement roulette.
nilkn 12y ago
> Only 4%? An index fund will return higher than that. Just like homes will always go up?
- refurb 12y ago
  That's what makes me laugh when I talk to people who are looking to buy a home. Despite the housing crash of 2007, when I ask them what would happen if housing prices go down, they get this disturbed look on their faces and say "nah! not in this city!!".
  - dingaling 12y ago
    As someone who has nearly paid-off a mortgage I have absolutely no interest in whether house prices increase or decrease. I'm buying somewhere to hopefully live for the rest of my life. I have no idea what the current 'value' of my house is, nor will I be enquiring. If it turns-out that the house eventually achieves negative equity, who cares? I'm still living in it and that would actually mean my property taxes decrease... People still buy cars despite meteoric[0] devaluation. [0] meteors plummet to the ground, you see
    - refurb 12y ago
      Then it sounds like buying for the right reasons! Many people see buying a home as not only getting a place to live, but also as an investment. And for some reason many people see the investment as "low risk", which it often isn't.
    - nilkn 12y ago
      This is great, but it's not a realistic scenario for most folks who aren't approaching retirement and can't be 100% sure they're never going to move again. If you ever needed to move, you'd suddenly care quite a bit about the current value of your home because it will have a tremendous impact on the actual cost of buying a new home.
      - dllthomas 12y ago
        True, but (assuming prices are comparably "up" or "down" in both places and that you're moving into something of similar size or larger) it's better to move when prices are low (since a lot of the costs are pegged to the price of the house).
alexeisadeski3 12y ago
2% would be more accurate...

pessimizer 12y ago

Get ready for lousy stock returns http://money.cnn.com/2014/05/21/investing/stock-returns-low-shiller/ http://money.cnn.com/2014/05/21/investing/stock-returns-low-... "The Shiller price to earnings ratio was designed by Nobel Prize winning economist Robert Shiller to give investors a sense of whether stocks are cheap or expensive. It compares stock prices, as measured by the S&P 500 index, with inflation-adjusted corporate earnings over the past 10 years. "The magic number at the moment is 25. That's the current Shiller ratio, and it indicates that stocks are on the expensive side. The long-term average, going back more than 130 years, is 16.5. "But the current level is significant for another reason. According to research by Credit Suisse, when the ratio has been between 25 and 26 in the past, stock returns over the next five years have been just 2.7%. That's after adjusting for inflation."

hashberry 12y ago
In the short-term, perhaps. Returns long-term are high than 3%-4%.
- pessimizer 12y ago
  Depends on which term. Retirement roulette.

nilkn 12y ago

> Only 4%? An index fund will return higher than that. Just like homes will always go up?

refurb 12y ago
That's what makes me laugh when I talk to people who are looking to buy a home. Despite the housing crash of 2007, when I ask them what would happen if housing prices go down, they get this disturbed look on their faces and say "nah! not in this city!!".
- dingaling 12y ago
  As someone who has nearly paid-off a mortgage I have absolutely no interest in whether house prices increase or decrease. I'm buying somewhere to hopefully live for the rest of my life. I have no idea what the current 'value' of my house is, nor will I be enquiring. If it turns-out that the house eventually achieves negative equity, who cares? I'm still living in it and that would actually mean my property taxes decrease... People still buy cars despite meteoric[0] devaluation. [0] meteors plummet to the ground, you see
  - refurb 12y ago
    Then it sounds like buying for the right reasons! Many people see buying a home as not only getting a place to live, but also as an investment. And for some reason many people see the investment as "low risk", which it often isn't.
  - nilkn 12y ago
    This is great, but it's not a realistic scenario for most folks who aren't approaching retirement and can't be 100% sure they're never going to move again. If you ever needed to move, you'd suddenly care quite a bit about the current value of your home because it will have a tremendous impact on the actual cost of buying a new home.
    - dllthomas 12y ago
      True, but (assuming prices are comparably "up" or "down" in both places and that you're moving into something of similar size or larger) it's better to move when prices are low (since a lot of the costs are pegged to the price of the house).

alexeisadeski3 12y ago

2% would be more accurate...