Renting your home avoids the risk of having most of your wealth in one basket, wrote Canadian Business Online Jan. 26 in a story about the top 11 reasons why some people would rather rent than own. As York University Professor Moshe Milevsky of the Schulich School of Business at York University writes in his new book Your Money Milestones: “Buying a house for an investment has strong similarities to someone being convinced stocks are a good investment for the long run, but they decide to buy only one stock for their portfolio. I don’t care how reliable that one stock is, or how large are the dividends, that stock portfolio is not diversified. The same goes for housing.”

Housing is not only a “completely undiversified” investment, in the words of Milevsky: it’s also a highly leveraged one, say other observers. While this aspect magnifies gains in house prices it also magnifies losses, so that relatively small fluctuations can wipe out all of the owner’s equity. Indeed, the value of the house could even fall below the value of the mortgage – as millions of US citizens have discovered since 2007. Renting reduces exposure to this scenario.

For all 11 reasons, click here.

Republished courtesy of Canadian Business Online.