I've read that you make more money by not buying a home and instead using that money to invest wisely--true

I'm thinking of buying a home, but prices everywhere seem to be dropping and I've read that they'll keep dropping for another year or two. I've also read that the stockmarket outperforms the real estate market on average over long periods of time. Would it be a better idea financially to just rent an apartment and put all of my extra money into Berkshire Hathaway or some other high quality, long term growth stock? It seems that people who invest well in stocks (like Warren Buffett) do much better than people who invest in real estate (like Donald Trump--he's very wealthy, but not as wealthy as top stock investors). Thanks for any help you can give me.

First you need to have money to grow it. If making money is your only agenda, then investing in stock markets is the most wise move you can ever do. (Easier said than done.... you could also lose all your money.. if invested wrongly). Prefer to go through the Mutual Fund route to enter stock markets. Also prefer foreign markets especially Asian markets like India, Hong Kong, S Korea, China or even Cyprus. These are emerging economies and have lots and lots of room for improvement unlike the US where the country is already developed with better quality of life. For example, for the past 3-4 years in India many funds have grown 30% plus YOY. India has a very well managed (probably one among the top 5 in the world) stock market. The funds disclose their portfolios more frequently then any other countries funds. The costs also are competitive comparatively. MF are as good as liquid cash whereas Real Estate blocks huge money and the cash is highly illiquid (you may sometimes end up selling in distress which may give you a below market price). You can enjoy diversification with MF which cannot be done in Real Estate.

I have answered in assumption that your intention to buy a home is only for investment purpose and nothing else. I have also answered in assumption that you have some money because you are thinking of buying a home. The simple rule is that if you can make more money than the RENT & Appreciation of the home you intend to buy by investing it elsewhere then please do that. Stock market is the answer to it. Once you are satisfied (lets say 3-4 years of MF investing) with the returns of the MF investments you can allocate a small capital (lets say 5%) of your investible capital and try directly on stocks assuming that you would have got some literacy about the stock market.

Pretty obvious this advise is biased towards mutual funds (probably because that's what the guy sells). To his credit he is right about using mutual funds to get your "feet wet", especially when investing in foreign markets. Goodluck! Report It

It might very well be better to wait a year or two before buying a home. You need to ask yourself several questions: why do you want to buy a house (simply as an investment or for other reasons)? How long do you intend to keep the house? Will you live in it or attempt to rent it out?

it is true investing in the stock market is better than property over a long period .However the principle of stock investing that does so well for warren buffet is basically buying cheap shares of well known companies when they are not doing too well. It is best you start reading the book Intelligent Investor by ben graham(his mentor) before you start in the stock market.

You can look at it both ways a drop in property value is a chance in a lifetime to get on the property ladder.As the saying goes god dont make land twice.At the moment it is hard for people to sale but for those who want to buy they may actually get a better deal.If you hold onto your house like you do with your shares they will definitely go up.

Louie, you have already answered your own question.

Here are my reasons why stocks should out perform real estate for at least the next two years.

1) Because house inventories are so high, it will take until the end of 2008 to begin to create much of a demand. Ideally you want to buy your home at the bottom of the market price. Same as stocks. It will then take another three to four years before housing prices ramp up to where they were a year ago. Right now it is cheaper to rent than to pay a mortgage. So, wait a year.

2) If invested wisely (Of course hindsight is 100%) in high qualitity stocks, stocks you purchased in January 1st week of 2007 would now be up 80 - 95%. That almost doubling your money in less than a year. Warren Buffet says that the small investor, less than $500,000, has a better chance at high returns than he has. This is because when he buys a stock by his very volume, it drives the price up to where he's paying too much. Same when he sells, the stock price drops like a stone. We can pick and chose our stock prices.

3) Liquidity! Homes are now taking an average of six months to sell (even at reduced prices). A stock I bought yesterday can be sold tomorrow as "money in the bank".

As in all smart investing, always diversify your money. Don't put all your money into real estate. Don't put all your money into Berkshire Hathaway or Apple. With stocks spread it around into different sectors. 15% in Tech, 15% in Consumer Goods, 15% in Oil, etc. Keep 25% in cash so that when Apple does drop 30$ a share you can pick up a bargain.

Do your own homework before you buy any stock!

Mutual Funds are a rip-off. Why would you want to intrust a perfect stranger with your money?

If this is too much work, then put your money into the Bank at 4.5% (minus inflation).

Good luck!