Discontinuing Tax Incentives

Not a good idea; at least in my opinion.

Congress is searching for a way to fix the mortgage market, correcting the errors of the past and strengthening the sector to survive and avoid future problems. One economist says the best way to do this would be to get rid of the mortgage interest deductions from federal income tax.

Chris Farrell , economy correspondent for APM's Marketplace, says we should discontinue the incentives for owning real estate. His logic says that with Uncle Sam picking up the tab in part on home ownership it's discouraging investment diversification.

I don't agree with this idea or the rationale. Diversification is one of many investment strategies. I prefer to subscribe to the idea of putting your eggs all in one basket but then you protect and nurture that basket. An idea espoused by steel magnate Andrew Carnegie "Concentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket".

I find that philosophy more consistent with fundamentals of investing; invest in what you know; once you have a goal focus your energies on achieving it. I've always been confused about why we're encouraged to behave opposite of these principals.

Not that I am saying real estate is the only valid investment. I'm saying invest in what you know or what you want to know. Become an expert or find an expert you can trust. Stay in your comfort zone and slowly expand it to encompass more and more in depth information. This strategy is true in the stock market, bond market or real estate. Dollar-cost-averaging agrees with this philosophy.

The key to this is concentration. Keeping focus so that you know you're energies and finances are being spent wisely. Taking away advantages such as mortgage interest tax deduction or capital gains tax deductions would discourage this. Real estate is not an easy investment to make and some would argue, me among them, that owning your residence is not so much a true investment as a hedge. By removing incentives fewer people would be able to own homes.

Keeping homeownership levels high is what this country is all about. Let's keep it that way.