Wisdom from the Oracle – Part 3

Written by Alex

Topics: Investing

This is the last in a series of posts covering the lessons to be learned from Warren Buffett’s Letter to Shareholders of Berkshire Hathaway.  [See Part 1 (on the economy) and Part 2 (on investing)]

On home ownership:

Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser.

This backs up a belief I’ve developed over the last couple years – a home is a place you live, and not an investment.  Investing should be done objectively; very rarely are home’s bought and sold objectively.  Investments are purchased only the time is right (cheaply priced, hopefully); Houses are purchased when they are needed (e.g. a family grows to large for the space, or a new job is in a new location.)  Investments are (supposed to be) sold as soon as the required gain is attained, or loss threshold is reached – but it’s not possible to do this with your house, due to the emotion and inability to sell at a moment’s notice, not to mention you still need a place to live.

Remember: It’s always best to separate emotions and investing.

1 Comment Comments For This Post I'd Love to Hear Yours!

  1. Dan says:

    Great posts on Buffett’s ideas. I have shared this view of houses as investments for a while but had never quite thought of it this way. You are meant to buy low and sell high. But if you are living in a house that you bought low as an investment, it’s hard to sell when it’s high!

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