Valuation
Any asset can be valued, thanks to the Capital Asset Pricing Model (CAPM). But people make three mistakes, two common and one uncommon:
Most never value an asset using CAPM because they are not aware of this wonderful approach (usually introduced in Finance or an MBA course).
Even when they learn in school, most do not internalize its importance or apply in their personal life.
The uncommon one? Among the few who do use CAPM, they likely don’t add specific risk premium to the risk free rate of return in the formula. This causes them to assume 100% of the returns of a specific asset without discounting it by the risk it may carry.
As an example, if you have an asset (such as a house) that returns 10% year on year versus let us say an S&P 500 mutual fund that also returns 10% year on year, then you may falsely assume that both assets are equivalent in returns - an incorrect assumption. The S&P 500 is a well diversified portfolio as it invests in the top 500 firms in the US whereas you are assuming too much risk by investing all your money into one asset i.e. a house. In other words: eggs in different baskets are less risky than all eggs in one basket.