Conventional Wisdom Can Lead to Bad Investment Choices
No Investment Guarantees
Many people listen to conventional wisdom when it comes to financial advice. However, one needs to be careful following commonly held ideas. Simply because a financial concept is widely believed, does not mean it is true. Rather than “chasing performance” by purchasing what many others believe to be true, you should always do your own research-and never assume that a certain financial investment is guaranteed. Here are a couple of commonly held financial ideas that have turned out to be false in the long run.
Real Estate Prices Will Always Increase
This idea gained great traction due to the fact that real estate prices generally increased from the years 1980-2007, and as prices increased dramatically in the early 2000’s. The concept is particularly important for LGBT couples, as they often live in high priced real estate cities, and may be tempted to put a lot of their money into their apartments or homes under the false pretext that real estate prices can’t go down. As most people know, real estate prices fell dramatically across the country during the recession from 2007-2008, leading to dramatic declines in the overall economy. Even though real estate prices have rebounded in some cities, including Manhattan, over the past few years, this does not mean that one should expect prices to always increase. For example, while real estate prices in Manhattan increased by 8% from 2013-14, much of this rise was due to high end luxury purchases by foreign buyers. Many factors could lead real estate prices to level off, or even decline, and thus one should be careful placing too much of their financial future in their home or apartment.
Taxi Medallions Are A Great Investment
For many years, taxi medallions in New York and other big cities were considered a great investment. In fact, as recently as 2013 NYC a taxi medallion was worth $599 per day, and medallions were being sold for 1.3 million each. However, over the past two years, with rise of online apps, primarily Uber, what was once a “sure thing” has declined dramatically in value. For example, NYC medallions were sold this year for only 900,000 each. The same effect has occurred in Chicago, where the cost of a taxi medallion has decreased from $350,000 to $270,000 over the past two years. In short, what was for many considered a near full proof investment, taxi medallions have reduced their value dramatically due to an unexpected technological breakthrough.
In summary, one should not always follow the herd when it comes to their investment choices. It is most important to make informed decisions, and to diversify your portfolio.
Tags: LGBT real estate, gay financial planning, gay financial advisor