Real Estate Versus Equity Investors

You just never know when a discussion about money will crop up. I had a rather interesting conversation with a man yesterday while we both waited for our cars’ news tires to be installed. He’s into real estate; always has been, always will be. Said the stock market was “A crap shoot.” I respectfully disagreed but acknowledged that investments in real estate were significantly different from investments in stocks, bonds, mutual funds etc…yet both require the same tactics: Faith, Work and Patience.

Some years ago I developed an analogy to help people deal with stock market declines; a perspective that provided some comfort when many felt they needed to DO something (i.e. “sell, tell or yell”). I would explain that stock market indices and their underlying stocks’ prices would fluctuate, that it was completely normal. If they were homeowners, I would explain that the current appraised value of their home may fluctuate, too, depending on the property condition of other neighbors’ homes, the condition of their home, news events etc…yet they (1) may not KNOW the price declined and (2) are not about to sell their house because of it.

The problem with people knowing every minute of the day about the stock market is that they feel a need to react to that information. I heard one financial planner say “We make a decision every day about our clients’ portfolios. Most days our decision is to do nothing.” But most people get drawn into the media frenzy that is financial reporting and react in ways that are purely emotional (fear and abandonment) and usually to their own detriment.

It’s different when you have something tangible to look at, walk through, obtain rental income from and so on than simply a number on a piece of paper or a computer screen. We can have a hard time connecting to a number. But a home, well, that’s very easy to connect with.

The gentleman has done very well for himself, he’s never worked at a “real” job, and is enjoying his “golden years” with a marvelous woman who shares his passion for real estate. There was a peace within him that I wish more consumers had.

If you or anyone you know needs some financial coaching on these or other matters, please contact me for a complimentary initial consultation.