Ramit Sethi uses his grandmother's Austin house, bought for $50,000 and now worth $750,000, to show why that $700K gain isn't as big as it looks. Property taxes, mortgage interest, and the money locked in the house cost you returns. The same amount in the stock market could have grown two to five times larger.
My grandma bought a house in Austin, Texas in 1982 and it cost $50,000 and now it's $750,000. They think that she made $700,000 of profit. What they don't factor in is all of the phantom costs. They don't factor in taxes, they don't factor in interest, they don't factor in opportunity cost. They don't realize that if they had simply taken some of that money and put it in the stock market, they would have had 2, 3, 4, 5 times more money. Now please don't write me saying, Ramit, you can't live in an index fund. Because that's what we're talking about here. There are lots of options. You can rent and invest. You can buy at a certain point. There's lots of different ways to think about it.
