Here’s Why Tony Robbins Tells Millennials to Buy a House, Not a Home

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For generations past, home ownership was a significant rite of passage that signaled stability, commitment, and, often, prosperity.

But, in this as in so many other cases, millennials are different.

As of 2015, adults under age 35 made up 19 percent of U.S. households but less than 10 percent of homeowners, according to a report released by Harvard University’s Joint Center for Housing Studies. In fact, in 2015 home ownership for that group fell to a historic low of 31 percent.

Entrepreneur and bestselling author Tony Robbins says that, while millennials might be missing out on the social upsides of home ownership, real estate is not the best investment they could be making

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“One of the weakest performers [is] your own personal real estate, because it doesn’t provide much income,” Robbins says. “It’s an inflation hedge. You do a little better than inflation, and you can have your own home, so there’s a psychological, emotional benefit.”

Instead, millennials in a position to buy property should be considering how to do so in a way that will provide them additional cash flow, he says.

“If you can own real estate, real estate with an income is the one [form of] real estate that’s more valuable,” says Robbins.

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Opinions on the imperative of millennial home ownership vary.

Self-made millionaire Grant Cardone tells CNBC that home owners are forced to continue to spend unceasingly, and that he regrets buying a house at age 30.

“Unless you have 20 million bucks in the bank, in cash, you have no business buying a house,” says Cardone.

In personal finance classic “Rich Dad Poor Dad,” author Robert Kiyosaki notes that houses should be viewed as a liability, as opposed to an asset, and points out that it’s not a given that a home will appreciate in value.

“I am not saying don’t buy a house. What I am saying is that you should understand the difference between an asset and a liability,” Kiyosaki writes. “When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house.”

Robbins emphasizes that real estate investing doesn’t need to entail keys and a welcome mat.

“You can [invest] through a REIT. You don’t have to buy everything, you get a piece of all these things,” Robbins says.

But whether millennials choose to spend their nest egg on a nest, or begin focusing on a portfolio instead, Robbins says the worst mistake is making no investment at all: “The most important thing, I think, for millennials, is to get in the game.”

 

 

Written By: Kathryn Dill
Source: CNBC

 

How Rich are the Rich, and How Many are There?

© Martin Barraud/Getty Images
© Martin Barraud/Getty Images

The new World Wealth Report for 2015 was released last week from Cap Gemini and RBC Wealth Management. The focus is on the population of high-net-worth individuals, or HNWIs, as the report calls them. The report, based on a survey of more than 5,100 wealthy people in 23 major markets, is packed with fascinating data and graphics.

You are probably familiar with some of the key themes and findings:

• Tremendous amounts of wealth have been accumulated during the past five years.

• Much of this wealth is concentrated in the top 1 percent; and most of that wealth is concentrated in the top 1 percent of the 1 percent.

• The very wealthy have a disproportionate impact on policy, investing and the economy.

No big surprises there. However, some of the specific data points were intriguing:

• The total global HNWI population is 14.65 million, with total wealth of $56.4 trillion.

• The U.S. HNWI population is 4.68 million, with total wealth of $16.23 trillion.

• The U.S. as a region is ranked first for HNWI wealth and second for HNWI population, behind the Asia-Pacific region.

Here are a few other points worth considering:

Asia rising: Asia-Pacific overtook North America to become the region with the largest HNWI population at 4.69 million. While the two regions have swapped leadership roles before, the report notes that the growth of the Asia-Pacific region is more of a structural shift than in the past. That implies it is more likely to retain its leadership over the U.S. in terms of the number of wealthy individuals. Asia-Pacific is also likely to surpass North America in total wealth by the end of this year.

HNWI wealth expanded in Asia-Pacific somewhat slower (6.7 percent) than in North America (7.2 percent) in 2014. These were the second slowest rates of growth during the past five years. These two regions were the only ones that outpaced their five- year (2009 to 2014) annualized growth rates of wealth held by the richest people.

Interestingly, India was the fastest growing market for wealthy individuals in 2014, climbing 26 percent, and jumping five places to rank 11th globally.

Wealth grew even more concentrated last year. Just two nations, the U.S. and China, helped drive more than half the global population growth of the wealthiest people; the next 10 markets expanded by less than the global average.

Perhaps the most significant data point regarding global wealth is the forecast: Wealth held by the richest people will rise 7.7 percent a year to $70 trillion by 2017.

Investments: Perhaps the most significant news is that the wealthy now have more capital invested in stocks than any other asset class. The report notes that “equity allocations moved slightly ahead of cash as the dominant asset” in the portfolios of the rich. Wealthy Japanese and Latin Americans increased their equity holdings the most. Note that this is based on surveys, not actual portfolio data.

It is intriguing to consider that despite the strong rally in equities — especially in the U.S. since 2009 and in China since 2014 — cash was still the top holding a year earlier. It is unclear if the increase in equity holdings came about through an increased allocation to stocks or through appreciation. I suspect it may be the latter.

The disproportionate amount of cash is intriguing as well. The top two reasons respondents gave for holding so much cash were 1) as a hedge in case of market volatility and 2) lifestyle needs. This suggests the scars from the financial crisis linger, but that the willingness of the rich to spend on luxury goods won’t end.

Finally, the disproportionate impact the 1 percent has on just about everything is something to keep in mind. If you want to better understand much of what is going on — from policy to investing to the economy — what the wealthiest investors do tells us a lot about where the world is headed.

Written by Barry L. Ritholtz of Bloomberg

(Source: Bloomberg)