Cocktail Economics: Discovering Investment Truths from Everyday Conversations

Chapter 2. Leaping the Transaction-Cost Hurdle: Sometimes It’s Easy, Other Times It’s Not

The parallels drawn in the previous chapter lead us to the logical conclusion that a buy-and-hold strategy will work equally well for investing in residential real estate or the stock market. But now we turn to the differences between these activities, to shed a light on the attractiveness of stock investing relative to home-owning. The critical differences have to do with the transaction costs and tax treatments related to each activity—at first glace, the former favors stockownership, and the latter gives the edge to homeownership. However, when we account for the opportunities alternative investments provide, stocks gain a visible edge over residential ...