Bigger House or Invest in Index funds?

[Anonymous]

Would you invest 350000 into a better inside beltway house or into an index fund? Which has better returns, assuming one can live happily in the current house

[Anonymous]

Anonymous wrote:Would you invest 350000 into a better inside beltway house or into an index fund? Which has better returns, assuming one can live happily in the current house

Houses inside beltway probably will appreciate more especially if you use leverage.

[Anonymous]

Index funds ofcourse. Less stress, no moving. At some point you can buy a house cash inside beltway or your kids can. While the houses here go up, so does your house.
I would go riskier than index funds with some of the cash like $100k.
Don't fix something that doesn't need to be fixed. Your expenses will also go up most likely on the house.

[Anonymous]

If you're happy in the current home, go with index funds. A primary residence isn't truly an investment property anyways- as you would have to sell it in order to gain access to the equity you hope that it builds - and by then, home prices where you look to buy next have also risen.

[Anonymous]

If it will bring you a lot of happiness, I’d get the house

[Anonymous]

Anonymous wrote:If it will bring you a lot of happiness, I’d get the house

+1000000.

You can’t take it with you. Enjoy living in a nicer home.

[Anonymous]

I think Ramit Sethi would say the index fund is the better investment but if you want the house - get the house.

[Anonymous]

Anonymous wrote:Would you invest 350000 into a better inside beltway house or into an index fund? Which has better returns, assuming one can live happily in the current house

Depends on your stage in life. If you have really young kids and you'd like a better located house/walkable to everything/better school, etc. a new house would make sense. If you are empty nesters or close, or kids are high schoolish and have a lot of friends in the neighborhood/school, stay where you are and invest in the market.

[Anonymous]

Unanswerable without the big picture. Will the $350K be a potential additional investment into an already substantial 7-figure+ diversified low-cost portfolio, or will it represent all or most of your investable assets? In the latter case you're taking a huge risk by placing your money into a single asset type, in a single location. That's the antithesis of a bedrock investing principle, which is to diversify investments to reduce volatility and risk. If the former, and you don't already own other real estate in some form (REITs, rental properties), you may be actually achieving greater diversification by increasing your present portfolio allocation to real estate, even if only in the form of a single property. That said, the risk with that particular asset will still be higher than the risk profile of diversified index ETFs or mutual funds. As long as real estate is a relatively modest component in a larger diversified portfolio, adding to the percentage allocated to real estate isn't necessarily a terrible choice.

All that notwithstanding, it's usually a mistake to view a principal residence as an "investment". It's a place to live, which is incidentally subject to movements in the real estate market generally and in your area more specifically. Treat your investments as such - liquid, diversified, low expense, long-term, and consider your residence as exactly that a component of your lifestyle, not as something acquired primarily in the hope of making money from it at some future time. For that, with real estate, look at REITS or rental properties if you think real estate is attractive for its investment potential as compared to alternatives which are more liquid and less management intensive (many professionals do not).

[Anonymous]

Anonymous wrote:I think Ramit Sethi would say the index fund is the better investment but if you want the house - get the house.

Pretty much this, assuming you are talking about exchanging your home. If it's an investment property, then index fund all the way.