Let me get this clear one more time. In an ideal situation you will live in a rented house and invest all the money that you have in a great business. This business will grow, you will take it public, and, with the new found free money buy a nice house as per your liking.
Since most of us cannot do this..we accept sub optimal solutions.
People read my blog and say “Subra says buying a house is not a good idea” or “Lic policies give poor returns, so it is a bad idea”….this is just half the story.
- You live in a rented house, and invest in direct equities and have built a good portfolio – this is second best scenario.
- You live in a rented house, and have done good quality SIP and have a CAGR of 16% over the past 17 years
- You live in a rented house, and have LIC policies worth Rs. 17 lakhs and about Rs. 8 lakhs in bank fixed deposits
- You live in a rented house, and have a bank balance of Rs. 29 lakh
If is obvious that if a person does not know how to invest, he is better off in buying a house!! At least potentially the house can (and most probably will) give emotional satisfaction, and a return higher than Lic policies or money being kept in a bank.
What about those people who keep tons of money in the bank account? Say savings account (too lazy to save in bank fixed deposits) and living in a rented house? MAKES NO SENSE AT ALL. Such people are better off investing in a house so that they can save rent. Bank fixed deposits / savings accounts are one of the worst ways of saving / investing money.
So if you do not wish to invest in equities, you are better off buying a house and even taking LIC policies. Not because it is efficient, but simply because it is better than leaving money in the savings account permanently !!
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