Manage Your Property and Financing for Maximum Return

Journalists routinely quote financial planners who advise homeowners, "Your house is a roof over your head—not an investment!" As to stocks, journalists chant this enthusiastic litany, "Hang tight and you will be rewarded. Over the long run, stocks can be expected to outperform all other investments."

If you wish to build wealth and maximize the return on your assets and investments, you will ignore this journalistic babble. Despite the push for stocks and 401(k)s, 403(b)s, IRAs, and Keoghs, home equity remains the largest source of wealth for the great majority of Americans, and home financing remains their largest liability. Moreover, since the end of World War II, the data clearly show that investments in real estate have yielded much higher and more dependable returns than stocks.

Jack Guttentag, finance professor emeritus at the Wharton School, who now writes a nationally syndicated column on mortgages, received this question from one of his readers: "Why do the media obsess over the stock market while giving relatively little attention and advice to the wealth-building issues that relate to homes and home financing?" Professor Guttentag replied,

"Emphatically, the media give more attention to Wall Street because they believe that consumers actively manage their stock portfolios, and therefore want continuous information about what is happening in the stock market. Whereas, mortgage borrowers drop their attention once their loan closes. But this media view no longer holds true. More than half of the mail I receive is from consumers who ask questions about managing their existing mortgages."

Professor Guttentag has identified an emerging trend. Americans do need to manage their property assets and liabilities to enhance their returns. Informed housing and home finance decisions will pay returns far larger than any amount you can reasonably expect to receive from stocks, bonds, or other investments.1

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