No longer should the 3 most important things in real-estate be “Location, Location, Location”. Instead it should be “Education, Education, Education” and it should be applied to ANY form of investing.
Quick quiz, how many of you believe that one of the disadvantages of renting is you throw your money away? Common answer is “absolutely”. Correct answer is “it depends”. For a full analysis see this article. To do the actual math see this rent vs. buy calculator,
The problem is that for all the proposed solutions to the current financial crisis ABSOLUTELY NO ONE is talking about consumer education. Its all about protecting the consumer with regulations as opposed to education. Well whatever your political view on regulation/deregulation (BTW its not about more or less regulation its about the right type of regulation) I can absolutely guarantee you that it WILL NOT prevent the next financial scandal no matter what we do now. The crooks/financial geniuses/snake-oil salesmen will ALWAYS be ahead of the regulation and if the population is not educated we will have the next crisis (circa 2018-2021).
Want proof look at the previous bubble. Like this one it was driven by the same old mechanisms including good old fashion lying, cheating and, of course, greed (banker, business and, yes, individual). That bubble was based on tech stocks in which easy money was available, valuation estimates were, uhm, inflated and the common consumer could easily invest over his/her head (sound familiar?). The result of that collapse was more regulation like Sarbanes-Oxley and other accounting rules but not so much in the way of education. PHEW, now everyone would be safe…
Now its almost 9 years later and everyone was protected…from another tech stock bubble. But wait, didn’t Joe Six-Pack as well as the economy just get screwed (and screw themselves) again with an entirely different asset class? Yup, but his time it was housing.
So, in short, wherever you stand on regulation (pro or anti) it won’t be sufficient to protect you in the future. You need to complement that with education so you can spot the too good to be true offers. Just ask Greg Brady in The Brady Bunch episode “Wheeler Dealer” (Season 3, Episode 4) in which he buys a $100 car that, OMG, turns out to be a lemon. Mike Brady is there with the fatherly advice ”Caveat Emptor”. Don’t know what it means? Look it up it will be good exercise in doing research.
So get smart and get prepared because the wolves, while being hunted now, will be back (in new sheep’s clothing) and no amount of regulation can completely protect you.
