dothesums blog

Link: http://dothesums.co.uk/blog

I have recently seen a presentation of present and medium term trends in business:

• Less conspicuous consumption.
• Reduced spending on big items.
• The rise of small self-treating instead.
• Researching expenditure.
• Value for money.
• Retreat into the home.
• Less experimentation.
• Escapism.

Now most of these seem obvious to anyone who sees and listens to the media, but several more are perhaps more profound:

• Business will build relationships with customers through dialogue.
• Advertising is dead.
• Collaboration will increase.
• Customers will look for a return on their investments.

I have been concerned that it is now common practice for commentators to proclaim that our houses are our homes and should not be looked upon as a source of money.
Well yes, my house is first and foremost my home, but it is also my single biggest spend and my most valuable asset. As such it needs to be managed just like any other asset, savings, investments and pension. We have seen so much trust betrayed by the pension fund industry in recent times to safely conclude that people will want to be more active and to have a direct involvement in their own pension fund management.
In the same way we think think that whilst houses are first and foremost for living in, owners will want to have a more active role in the management of this financial asset.

The normal measure for all of these types of saving assets is Return on Investment, or ROI for short. Simply the return, interest or increase in value, of an asset and expressed as a percentage of that asset for a given period.

[We tend to use a specialised version of that measure the Internal Rate of Return, or IRR, when comparing investment properties, because it does not take into account centralised costs such as office or motor vehicle, which can vary from one project to another. Thus, we can compare the return on one type of asset with those of any other asset easily. But you don't have to go this far.]