Monday, October 3, 2011

Stocks vs Property

Stocks vs Property

I wonder how many people actually stop to think about the long term performance of their stock portfolio vs their real estate portfolio.  In the past few years maybe a lot more.  But it used to be that stocks were THE thing to invest in.

While CNBC, MBA types and the financial media in general focus almost 100% on stocks, in the long run (at least in the past 13 years), the Dow appreciated a measly 2% per year.  This compares to Manhattan property which appreciated 9.5% per year.  The media focuses on stocks because their sponsors are  financial firms that make money from stock transaction fees.  If the media focused on Manhattan real estate, the audience would shrink dramatically because how many could afford an entry price point of $500K?

My point is that stocks, with all the thrills and excitement/green light vs red light on computer screens, seem to have all the sexiness, it's the illiquid real estate that has performed better.  Well, I am referring to Manhattan real estate.  Add on leverage, which is typical with property purchases, and the returns become even higher.

I have friends who are watching their computer screen as I'm writing this blog entry.   They have stopped asking me for thoughts on the stock market.  Reason is that I tell them my portfolio consists of illiquid real estate only, and I have no idea how the stock market is going to do.  Nor would my opinion matter.  At the end of the day, they're just increasing stress level (from daily fluctuation) and would be happy to break even.  Oh well, maybe they're in it for the thrill.

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