Real estate is more like investing than you may think. (Steve Pfost/Newsday RM )
Do you know the current value of your home without looking it up? Probably not – and even if you can ballpark estimate it, it may not be what someone would actually pay for it. When you think about it, your home is likely one of your most valuable assets, and the fact that you don’t know it’s exact value at any moment in time is interesting.
In reality, it doesn’t really matter that you don’t know your home’s actual value, because you may continue to own your own for a number of years without needing to know the fair market value of your home. If you’re not selling your home actively, the market value isn’t likely of interest to you. What’s more important to you at the moment is living in your home, building memories in your home, etc.
The one day that matters to you, financially speaking, when it comes to your home, is the day that you sell it.
The day that you sell your home is the only day where you’re turning the purchase or investment into liquidity. It’s the only day where the market value truly matters, and every other day that market value is pretty much irrelevant.
How Real Estate Is Like Investing
Similarly to how your home’s value is only realized on the day that you sell it, the same can be said for investments. The difference here is that you likely don’t follow the day-to-day valuation of your home, but you very well might follow the ups and downs of the stock market, and the day-to-day drops and increases of your investment accounts.
You’re constantly being exposed to the real-time values of your investment accounts, tickers that monitor the real-time movement of your stocks, and then opinions from multiple networks and news outlets regarding those movements.
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Your home and your investment accounts are both intended to be long-term investments, and neither actualize their true “value” until the day they are sold. Both will go up and down over time, which is part of a normal cycle. One is just constantly broadcast in your face, while the other you probably don’t think about at all until it is time to sell it. One of the keys to successful investing in general is to not let irrelevant data cloud your emotions, and to keep your bias and emotions at the door. Try to think of your investments more like you do your real estate to see if it helps.
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