| Search by tag or site | Login to my blog ? Start my own blog |
 |
Millionaire Now! by Larry NusbaumThis blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth". |
Stocks vs. Real Estate: "YAWN"
Let the false debate rage on. And, for what purpose? Well, there is none at all. CNN money is at it again. But, as I asked back in August: WHY DO WE TORTURE OURSELVES?: It’s not one OR the other. A proper wealth accumulation plan contains both asset classes. Wealthy individuals invest in both.
Round 1: Performance - Actually, this is from 1978 to 2004, in which real estate (they meant housing) produced an 8.6% return, which is over 40% compounded with a modest 80% leverage. Afterall, we don't buy property for cash. {see below} So, how did stocks win?
Round 2: Leverage - The financial tool of the wealthy. Enough said.
Round 3: Costs - There are two costs in real estate: lost opportunity and the price paid at acquisition. The rest is b.s.
Round 4: Taxes - Well, wealthy people hate paying them and real estate provides quite a bit of shelter. However, one can also avoid paying taxes almost forever by exchanges.
Round 5: Transparency - This is actually pretty funny and pretty silly. What would be the incentive for companies and mutual funds to lack transparency? Right. They're hiding something from you. But, in real estate, you probably wouldn't be hiding something from yourself! Next....
Round 6: Effort - There the stocks win. It takes zero effort to watch Enron go from 7th in the country in revenue and a $65 stock price to $0. Or, to see your Yahoo go from $496 to $8 in a very short period of time. GE? $35 from $65.
Round 7: Volatility - The Francis-Ibbotson study, for example, found that over the 27 years surveyed, homes in their worst year returned 3.5% and commercial property lost only 5.6%. The S&P 500's worst annual performance was a 22.1% decline.
Round 8: Diversification : They are wrong here. Both asset classes provide it and not for the millions in property they claim. But, today, with markets being global, diversification won't provide as much safety as once thought.
Decision - Please note that the endowment funds of Harvard and Yale Universities invest only about 12% of their funds in the U.S. stock market. Their returns are legendary. Yale earned 22.9% on a portfolio that started the year on July 1, 2005 at $15.2 billion. "Yale's allocations of 12 percent to domestic equity and 4 percent to fixed income cause only 16 percent of the University's assets to be invested in traditional U.S. marketable securities. In contrast, the average endowment has nearly 50 percent of assets in U.S. stocks, bonds, and cash."
Also, look at the Forbes 400 list and see how many people made fortunes in real estate. Did you know that the top 10% wealthiest people in America have 65% of their wealth in real estate? Housing Bubble and Real Estate Market Tracker from SA for 4/19
- Are Financials Suddenly Cheap? Part Ii
- Are Financials Suddenly Cheap?
- Top 10 Sectors & Stocks By Relative Strength (weekly Update)
- Short-Term Sell Signals Given
- "Who Is Next?" By Dick Bove
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- Millionaire Now!
- The 7 Steps to Millionaire Now!
- Build Your Financial Plan
- RETIRE RICH: Survival Guide
- ASSET ALLOCATION MODEL
- THE BIG ROLLOVER IS HERE
- THE END OF THE GRAND SUPERCYCLE?
NOTE: Please click on the charts below to enlarge them if [read more]
NOTE: Please click on the charts below to enlarge them i [read more]
U.S. stock futures rebound on Citigroup results"S&a [read more]
<< My Home | TheMoneyBlogs Home