Long ago it used to be that a million dollars was serious money, especially at a time when Cadillacs cost $5,000 and a $100,000 home was evidence of wealth, success and luxury.

Now, however, a net worth of $1 million is hardly unique. The new "Ninth Annual World Wealth Report" by Merrill Lynch and Capgemini shows that just in North America we now have millions of millionaires -- 2.4 million of them. This gilded upper crust has assets worth $9.3 trillion, an astonishing figure considering that it does not include "collectibles, consumables, consumer durables and real estate used for primary residences."

Huh?

The idea that a home is not a financial asset is curious. Do not a lot of people use home equity to raise capital for businesses, college educations and other purposes?

If you sell a home for $1,000,000 and move into a property that costs $600,000 do you not have $400,000 in your pocket? And given our current federal tax rules, is it not probable that the entire profit is tax-free?

Can you buy stock with nothing down? Ten percent down? If you own stock for two of the past five years and sell at a profit is there not a tax to be paid?

The number of U.S. millionaires is grossly understated precisely because it does not include prime residences. The Federal Reserve says that our homes have a total value of $18.7 trillion. Subtract loans worth $7.6 trillion and home equity totals better than $11 trillion nationwide.

Worldwide, says the wealth report, there are 8.3 million high-net-worth investors (HNWI), folks with at least $1 million in financial assets in addition to their homes.

The good news is that access to the upper financial tiers is surprisingly open in the U.S. and Canada.

"The United States," says the report, "the country with the largest HNWI population, saw 226,000 more people join the ranks of wealthiest Americans. With an annual growth rate of 9.9 percent, the United States leads the developed nations in the number of HNWIs created each year. Canada also performed well, adding almost 17,000 HNWIs to its rolls, owing in large part to rising oil prices."

The report also says that "real estate investment trusts" (REITs) returns were lower in 2004 than in 2003. Indeed, overall, apartment REITs were hurt in previous years as the affordable housing market turned renters into homeowners. As we observed earlier, with HNWIs growing steadily more risk averse in 2004 than they were in 2003, the fact that they now perceive real estate as a riskier investment justifies HNWIs adopting a more cautious approach towards this asset class. And, in fact, total assets for real estate mutual funds in the United States decreased by 0.5 percent, from $43.9 billion at year-end 2004, to $43.7 billion by April 2005."

Since when did REITs become synonymous with "real estate"? A REIT is something that owns real estate, mortgages or both on a large scale, has shares and complies with certain tax rules. A REIT is not a house with a few bedrooms and baths.

Why is a four-month difference of .5 percent significant in the context of a long-term investment? What does it prove?

According to Business Week, "so far in 2005, real estate investment trusts (REITs) -- entities that manage portfolios of real property -- have generally seen firming fundamentals in all property types, from office buildings and shopping malls to apartments and hotels. And those favorable conditions appear to have been noticed by investors: This year through May, the total return (capital appreciation plus dividends) of the S&P REIT index was 1.26 percent, vs. a loss of 0.95 percent for the S&P 500 index." (See: "Which REITs Rule the Range?" June 9, 2005)

Let's see, the difference between plus 1.26 percent and minus 0.95 percent is 2.21 percent. Sounds like those cautious REIT investors are doing okay.

How can one claim that high net worth investors "perceive real estate as a riskier investment?" Do a lot of wealthy people rent? Judging from home prices and sale volume, it would seem that folks are voting with their dollars.

No investment vehicle is perfect or without risk. There is a place and an opportunity for both securities and real property -- but in neither case is there a guarantee of success. As an example, between 2000 and 2002 losses on Wall Street amounted to an estimated $6 trillion . Worldwide, the number might actually total $13 trillion .

People do not buy "stock" or "real estate" in a general sense; instead they buy a particular stock or a specific property. The movement of broad averages is irrelevant if the value of your individual stock or property is moving in the opposite direction.

No less important, when you apply for a loan, every lender in town thinks of your home equity as part of your net worth, value which has given many people millionaire status.

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