Your home as an investment

Tuesday, February 14, 2012

Investments are enticing for one very compelling reason: to earn us a good return.

Indeed, many Canadians are likely to have some type of investment. It could be in the form of RRSPs, mutual funds, bonds, or stocks. A high-interest savings account might also be considered a kind of investment. They all provide you with some kind of return.

Which investment is right for you

And then there’s Facebook. Zuckerberg and the gang down in Palo Alto, California are going public this spring and offering a whopping (anticipated) $5 billion in Facebook stock.

If you buy the stock, you’re making an investment.

Google went public on August 19, 2004 and when it did, an estimated 1,000 Google employees became millionaires overnight (at least on paper). That’s an investment.

But from a reality perspective, are the Googles and Facebooks of this world the smart choices, or should we be focusing on the smaller guys; you know, those offering year over year growth, perhaps with dividends? It really depends on what you’re looking for.

Is that it for investments?

Of course not. There’s also your home - which happens to be the largest investment most Canadians will ever make. What differentiates property from other forms of investment is the fact that most people will need a loan in order to get onto the property ladder in the first place. This raises all sorts of questions, such as:

• What is the interest rate?

• What are the terms?

• How do the buyout options look and exactly how long will it take to pay it off?

How does a home count as an investment?

When you buy a house, you will likely consider how much it will appreciate over time. Will it be 6% per year or more? What’s happening in the market? Is it a safe bet?

You see, most people will end up selling their home at some point in the future, and when they do, they’re looking to make money on the sale. That’s an investment.

The pursuit of a return

In the end, it doesn’t matter if it’s a stock, a bond or even your home. They are investments and we’re in the game to make money. Therefore, when we decide to buy ‘em, hold ‘em, sell ‘em or unload them, it makes sense to get good advice. Think of that advice as another investment...in the pursuit of a greater return.