It’s a choice between taking a left and taking a right…
One offers substantial growth over the other, the catch is most people can’t see the winner without reading on.
Right now, we are in a critical stage with our country’s economy. The recession has allowed us to see that property values do not continually increase over time, Blue chip stocks can fall just as quickly as small-cap stocks, and that money is not 100% safe from devaluation anywhere including houses.
Even though we’ve been shaken up a bit, the principles of investing must be interpreted between real estate investing and stock market investing. The facts that come forth will be able to point you in the right direction.
Real Estate Facts:
The United States’ growth in real estate was created by a higher demand for houses in the early 2000’s. This increase demand grew the property value of each piece of real estate. Now that we can see real estate values can stop, the growth has turned into a decline. The real estate value swing will not just be a year or two, but has the potential to continue downward for a couple of decades until properties are in demand again. It will take this long because of the large base of property owners at this current time is quite large. Unfortunately, the amount of buyers who want to increase their real estate properties are quite small. Until real estate is seen as valuable and creates demand within the market, the value of real estate will not be above the inflation rate per year. This results in you losing money per year until real estate values go up which could be a long time.
Stock Market Facts:
Investing in stock market indices will result in a 7% real gain above inflation. Buying in the lower times in a stock market will result in the biggest capital gains once the market has corrected itself back to a healthy standard. While this point is impossible to predict, buying incrementally along the path of the stock market will ensure that you will be prepared for maximum growth when the stock market self corrects its prices.
By investing in the stock market, you will see much higher rewards and unlike real estate investing, your money will actually make you more money.
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5 comments:
Good article, Matt! Where did the ads on your site go?
Good thoughts Matt. I must say I agree with you on the concept that the stock market is a better place to park your money than real estate.
However there are some times in life when you have to consider other factors, such as quality of life, and a happiness factor. Homeownership has always been an american dream, and that will help keep a demand for the market. Based on all of this, I think homeownership shouldn't be considered an investment. Real Estate shouldn't be considered an investment unless it is some sort of rental with positive cash flow.
Secondly regarding stock market. True stock gains will be around 7%, But inflation is not the only beast we have to face in these situations. As always there is taxes, (Short Term and Long Term), As well as fees. In my opinion Fees can take the biggest bite that most of us don't think about. Look at the amount of transaction fees, Loads on Mutual Funds and crazy Expense Ratios.
Got any thoughts on Index funds ?
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