Renting home can be better than buying

Q: Is it reasonable to buy a house if I plan to move within a few years? — E.W., Flagstaff, Arizona

A: It’s a risky move for several reasons. For starters, home values don’t always go up over short periods. Your house might fall in value, and when you want to sell, you could end up owing more on your mortgage than the home is worth. Then there are the closing costs when you buy, and the agent commissions you’ll likely pay when you sell. Those can total thousands of dollars.

Mortgages typically require you to pay mostly interest in your first years of repayments, so you won’t have built up a lot of equity. You’ll also be paying for insurance, property taxes, maintenance and repairs while you own the home.

Renting is often the smart thing to do. Sure, you don’t get a mortgage interest tax deduction and you don’t build equity. But if your rent is much less than your mortgage payment would be, you can invest the difference and build a little nest egg.

Fool’s School:

Look beyond ‘buy’ rating

If you learn that a Wall Street analyst has slapped a “buy” rating on a stock, don’t immediately call your broker. Ratings from analysts are much less meaningful than you might think.

Consider that as of a few months ago, out of more than 11,000 ratings on the (500 or so) stocks in the S&P 500 index from many different analysts, only 6% were “sell” ratings. More than half — nearly 54% — were “buy” ratings. If you’re starting to suspect that analysts tend to be overly rosy in their ratings, you’re right.

One reason is conflict of interest. Wall Street analysts often work for investment banks, which have many corporate clients and want to sign up even more. Clients and potential clients will prefer banks that have given them positive ratings.

Professor Ohad Kadan of Washington University in St. Louis adds: “Analysts tend to herd. There’s no big penalty if you’re wrong, because everyone else is wrong. You’ve got cover. You’re not going to lose your job. If you take a different opinion, either you get a big prize if you’re right, or you lose your job.”

But analyst ratings can still be helpful because they’re often accompanied by research reports, which offer far more insight than a one- or two-word rating. There might still be some bias in them, but they should also contain useful data and opinions.

Name that company

I came to life in the 1920s and ‘30s as the amalgamation of dozens of airlines. Charles Lindbergh flew my first flight, carrying U.S. mail. I debuted the first airline loyalty program in 1981. I bought TWA in 2001 and in 2013 merged with US Airways, creating America’s largest airline.

Based in Fort Worth, Texas, I boast about 6,800 flights daily to more than 365 destinations in scores of countries. I employ about 130,000 who serve more than 200 million customers each year. My fleet tops 1,550 airplanes, and it’s the youngest fleet among major U.S. airlines. Who am I?

Last week’s answer

I trace my roots to 1963, when a single mother used $5,000 to launch a cosmetics company in Dallas. It was immediately successful and generated nearly $1 million in sales in its second year. My original store employed fewer than 10 people, but I now have 3.5 million people, mostly of a particular gender, selling my wares in more than 35 global markets. I have more than 1,500 patents. I rake in about $4 billion annually, and I like to reward my top sellers with a distinctive set of wheels. Who am I? (Answer: Mary Kay)

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