sub-prime mortgages

Since this seems to have turned, once again, into a buy/rent debate, I offer a NYT article that I've not seen referenced in this NG. It allows the user to offer the assumptions regarding certain variables and then gives a break-even on the decision. The original URL was huge, this is the Tiny version;

Joe

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Thanks for the excellent response, Mark. As I said earlier, I am i neither the "investment" nor "non-investment" camp. I think it is likely an investment, but I'm still reserving judgement. Actually I meant to focus my comments on whether it was appropriate to include a home in one's net-worth/financial planning (regardless of its "investment status"). I think I did a poor job of conveying that. Life insurance cash values also face a similar dilema. Sure it's fun to count the asset because it boosts your net worth, but what good is it for planning purposes? Most of the financial planning methods/software/ etc I have encountered include neither your home nor life insurance cash values into retirement planning if the client does not _intend_ to utilize that reasource.

Agreed, the wine is an investment. Again, how useful is it to be included in net worth for financial planning purposes if I'm going to drink it? Perhaps the fact that I could sell it, even if I intend otherwise, gives sufficient reason to include it. Perhaps it does not. I'm still unsure.

I'm not sure buying is always the right answer for every person at every time either. I think we agree largely agree and I muddied the waters by switching between "investment status" and "usefulness in planning".

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kastnna wrote: I am i

Then do you not consider jewelry, gold, rare stamps, fine art, and vintage cars not an investment and not to count in net worth? It just makes sense to me that these assets are certainly a hedge against stocks and bonds and deserve their place as an investment.

Chip

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Not if the client does not intend to utilize that resource by eventually converting it into cash. If a client had $1M in personal property (wife's jewelry, gold coins, stamp collection, etc) and $1M in an IRA, it would not be prudent to plan on retiring into an $80k annual income unless that client expressly intends to convert those collectible *investments* into cash. I contend that conversion rarely happens. It is not common place for the wife to sell the family jewels when it comes time to retire. Nor do most people take all the artwork off the wall an head to the auction house. And I would be incredibly reluctant to part with my wines. [please forgive the crudeness of the example. SS payments were ignored as were pensions, age, expected return, inflation, etc.... I also used the questionable 4% rule. Regardless, none of those things should detract from the point].

Depending on the specifics, the "investements" mentioned above might or might not have a place in your asset allocation. How much of a hedge does your wife's jewlery really provide? Is that changed if she will only consider selling as an absolute last resort? How much is gained from factoring a $5000 stamp collection into a $5,000,000 asset allocation? Perhaps more importantly, does the gain justify the extensive work that would go into valuing, possibly selling, and calculating expected returns, standard deviations, and beta for such an obscure "investment"? Does the answer change if the stamp collection is worth $5M itself and you bought it because you felt the stamps were undervalued and plan on selling them to retire?

Just to be clear, this is not simply MY stance. It's the general consensus among the financial planning industry. It is common practice to inventory personal property, real property, and life insurance cash values. In particular they are important factors into estate planning and taxation. However, the majority (if not all) of the programs (software and otherwise) I have encountered specifically ask if those items are being "used to fund retirement goals". If the answer is negative, they are not included in the financial plan, but simply documented for bookkeeping purposes.

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