GMAT Essays (AWA)

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ESSAY QUESTION:
The following appeared in the personal finance section of a popular magazine:

"The average price of an acre of land in the United States is now 50 times what it was in 1970, and nearly 200 times what it was in 1920. The nation's population is projected to keep increasing, even as the amount of land remains constant. Therefore, people who are approaching retirement should invest heavily in real estate in order to ensure their financial security."

MY RESPONSE:
The argument contains a number of logical fallacies and makes sweeping generalizations without considering the needs of the demographic that the conclusion aims at.

The author uses historical data selectively and fails to paint the complete picture. There have been many occurrences in history when the real estate market has slumped or even crashed, and people have lost life-changing sums of money. Isn't this possible again? The author also seems to use the past as an indicator of the future without any detailed insights. Our world is continuously changing. The circumstances in the past could be very different from what they'll be in the future.

There is no evidence presented to show that real estate all over the country is booming. Is it advisable for one to buy land in rural areas or urban areas? Residential property or commercial property? The real estate market seems to be a highly complex and diverse area. The author makes a sweeping generalization about real estate without considering the different aspects like locality, purpose, nature, etc.

Life teaches you to never put all your eggs in one basket and that applies to finance as well. All financial markets by nature carry varying amounts of risk. For this reason, financial experts stress on the importance of balancing an investment portfolio. However, the author seems to suggest investing heavily in real estate without considering all the risks it poses.

The argument's conclusion aims at the demographic of people who are approaching retirement without considering their specific needs and goals. People who are approaching retirement might need significant health care which can be very expensive. Can their investments in real estate liquidated easily and quickly if and when a need due to a health crisis arises?

The gaps in logic and fallacies in reasoning mentioned above need to be addressed before the argument can be validated. The author needs to do a more in-depth historical analysis to make sure all the ups and downs are considered. The various intricacies of the real estate market need to be explored. Since the argument directly addresses people who are approaching retirement, their specific needs and goals need to be matched with the risks and rewards that the real estate market offers.

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