A lot of my friends are buying houses. For many, it seems like it is their main financial prerogative as they see it as a good way to invest in their future – and sure, it lowers their losses to rent and puts them in an advantaged tax situation. But many are single, or married without children and have very little actual space requirements.
Black Friday in 1929 was caused in part by the commoner starting to leverage stock. Ticker tapes were everywhere, newspapers were printing prices, and then you could telegraph or telephone in stock orders to your broker.
Etrade got big in the 90s, but then we had the technology bubble burst. But the concept is that with the internet and technology, everybody can buy stocks and do great research on their own. Pricing is more perfect, and more. But perhaps the bubble bursting taught my generation that stocks are complicated and risky.
If you compare the expected return of a house versus a ‘safe’ utility stock, the Utility stock is going to outperform about 4x any given year. [On the other hand, 20% mortgages mean that a house is 5x leveraged – but the APR exceeds the expected growth, even with the federal reserve making money cheap]. But, even my brightest of friends who understand opportunity costs are… afraid of stocks.
Occupy Wall Street and the Mitt Romney tax rate news has made it apparent to me that the average American is no longer owning stock – and inherently is not going to understand the upper class or where they get their money from, how it could lead to job growth, or how it is money at risk. Have Americans lost their risk tolerance? or is is this an issue with education? and if it’s education, is a 10% tax discount on stock earnings and dividends not an incentive to educate oneself?
Also. Buying a House is Really Complicated! How do people see getting inspectors, talking with agents, and going in debt several times over as easier than picking stocks – or even index or mutual funds.
Finally, maybe it’s related to 401ks and burn out. I know that my company has switched 401k programs once each year over the last 3 years and the mutual fund options are never explained extremely well. Perhaps this gives people the feeling that they are investing and that this is all of the saving they should do.