Thanks to everybody who took part in last week's Fun Online Poll, results as follows:
How many minutes do you spend waiting at traffic lights on a normal week day?
0 minmutes - 27%
0 to 5 minutes - 33%
5 to 10 minutes - 18%
10 to 15 minutes - 8%
15 or more minutes - 10%
Other, please specify - 3%
The weighted average of all those is about six minutes, which is (happily) the number I first thought of, so we can pencil in an economic loss of £12 billion a year*.
* 40 million adults x 6 minutes x 5 days per week = 1,000 million hours per year. 1,000 million hours @ £12/hour = £12 billion per annum (or 1% of GDP). The £12 is an arbitrary figure, being half the value of output per hour worked in the UK economy (it's difficult to put a value on leisure time lost).
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Inspired by Tim W, this week's Fun Online Poll asks which is the better investment: paying off your mortgage as quick as possible/saving up a deposit to buy a house; or investing spare cash in stocks and shares?
Vote here or use the widget in the sidebar. There's no 'other' option this week as the possibilities are endless.
Monday, 14 March 2011
Fun Online Polls: Traffic Lights and Investing
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12 comments:
Mark,
why do you conflate paying off ...., and saving up .... ?
Aren't they very different?
This week's seems a pretty clear result so far.
VFTS, nope. Having a higher cash deposit is the same as having a smaller mortgage.
And I had to put that in for the benefit of people who are renting (including me). Although you earn nothing on your cash (in nominal terms), a cash saver who intends to buy is gambling on house prices falling; whereas a potential buyer who thinks that stocks and shares are a better short term investment is gambling on the price of stocks and shares rising.
JH, indeed :-)
Paying off your mortgage as quickly as possible has a return equal to the interest rate you are paying. The return on paying off the mortgage does not depend on house price movements.
Saving up cash to buy a house has a small return (the interest paid on the money in a savings account). That return is not related to house prices, unless the alternative to saving up cash to buy a house in the future is to buy a house now with a smaller deposit.
Did you actually mean which is the better investment, buying a house or buying stocks and shares?
AC: Did you actually mean which is the better investment, buying a house or buying stocks and shares?
Nope. If I'd wanted to know people's opinions on that, I'd have asked exactly that question.
"Saving up cash to buy a house has a small return (the interest paid on the money in a savings account). That return is not related to house prices, unless the alternative to saving up cash to buy a house in the future is to buy a house now with a smaller deposit."
Correct. But I'm assuming that people who think buying a house NOW with a smaller deposit is their best bet have already done so (if somebody thought that was his best bet but didn't do it, then he clearly knows nothing about investing!!!).
That's a really good question - which exercises me frequently.
Whatever way you look at it there is an opportunity cost to owning a house outright, or there is a cost of rent - renting the money to buy the house or renting the house. In any case it is all a 'cost of living'.
So, if one thinks that the ultimate aim of all investment is to buy an income (and I have yet to be persuaded that it isn't) then investing in stocks and shares should be the better deal, since the purpose of owning stocks and shares is to pay you a regular and rising income. Owning them puts money in your pocket every day, whereas your house takes money out of your pocket every day.
(And here speaks a man whose house value is roughly half his overall wealth! Excluding the capitalised value of Mrs Lola's entitlements as a state employed teacher.)
L, I wasn't thinking about it as deeply as that.
Don't forget that in a Home-Owner-Ist system like ours, we are conditioned to see a house as an investment AND as a source of income (despite it is actually a cost, certainly from the point of view of society as a whole).
The fact that the benefits of having a place to live exceed the cost is a separate topic (like the benefit of spending money on food vastly exceeds the cost, because you'd starve to death)
MW - I am paid to think about it as deeply as that!
Of course the benefits of a dry roof over ones head exceed the cost. The fact that most of us can, either by renting or buying, afford quite a luxurious gaff as compared to say the average villein or serf from the Middle Ages is a result of effective wealth creation under capitalism - BUT it's been distorted as eny fule no by H-O-Ism and the rent seeking landlords / landowners which brings us back to....
Anyway, shareownership (or enterprise financing generally) is a version of rent seeking, it's just that capital so deployed is more beneficial for society as whole than locked up in houses.
L, owning shares is only 'rent seeking' in the narrow sense if there are barriers to entry/govt subsidies protecting their value; and by the time outsiders get to buy shares, they are paying over the odds for the future rents, which the early entrants and true rent seekers have already capitalised into the price.
MW - Yeah, I was simplifying and why I extended shareownership to financing enterprise generally. Like me f'rinstance. My capital finances our business and I get paid for its use. The payment reflects risk to that capital as well as the earnings of the business. I am an original shareholder - I will get the gain when (if?) I sell.
BTW - seen 'my kitchen' on Middle Aged Dad? Thought I'd add my bit...
I posed the original question on Tim Worstall's blog here:
http://timworstall.com/2011/03/14/your-questions-answered-in-fundraising-fortnight/#comments
The first few hours of discussion raised, as well as general economic issues, quite a lot of issues that depend on my specific personal circumstances.
I've therefore posted a comment (#22) providing context, detail and clarification.
Thank you, Mark, for covering this issue.
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