Abundance

by Ezra Klein

It is worth a moment to consider how financially problematic an owner-occupied home was at the beginning of the twentieth century—and remains to the present. An investment advisor whom you have consulted looks at your middle-income portfolio and tells you that you should put almost all of your liquid assets in a single investment. It is not a diversified mutual fund; it is a single firm, and the firm makes only one product in a single location. It has a great upside in that its returns are almost entirely untaxed under federal and state income tax laws, and it insures you against rent increases by the landlord. But its asset value is subject to a multitude of risks. Not least are those from the neighborhood and the single municipality in which the firm is located. Bad events next door, down the street, at the school district, and in city hall can put your life savings in a tailspin.

Woah