Then we would also need to figure out what kind of stock he owned. Those stocks could’ve been very speculative ones too.
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He probably bagheld Wamu/Lehman/Bear Stearns.
I agree with your point about stock investments maintaining purchase power parity no matter how much they fall. Only true if you are holding the index though. Its the same thing with rentals in a good area. I feel real estate is better because it’s more stable, and the rent even in the Bay Area is higher than s&p 500 yield.
If you can’t make your payments you lose the house. You have no choice - bottom of the market, too bad.
Stocks need not involve leverage. That in itself makes them safer than real estate unless you can finance all your transactions with cash.
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Not fair comparison. Stocks can also be bought on margin… probably a better comparison. My buddy at dinner tonight told he has lost $500k in his stock portfolio this month. That is like loosing a house. Not a good feeling. Especially since pundits are predicting a massacre in January. 2009 scenario?
If you own dividend stocks this downturn is less painful. Same if you own RE mortgage free, even if rents decrease.
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Only $500k?
Yeah he didn’t seem that bothered. Maybe when it hits a million he will panic and sell:sunglasses:
The title of this thread I find poses a mutually exclusive argument (either stocks or RE) which I find is just too narrow.
Just spread everything out ---- own a balanced portfolio of stocks, own some properties (loan-free if you want to be conservative), have a big slug of municipal bonds ---- then you won’t get eye-popping returns any one year, but you CAN get decent 6-9% returns, year, after year — for multiple decades. Over time, that compounding adds up, and you can sleep easy.
What’s not sexy is often times the best for your mental health over the long run. Maximize Joy. Don’t be envious of anyone’s eye popping returns for one year. People always brag about their wins, but never about their losses. Comparison is the thief of Joy.
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That threshold seems kind of low…
I agree, but this is a RE forum. Funny how we have to fight to keep the focus on RE.
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Buying stocks on margin is speculation (gambling). Nothing wrong with that but it shouldn’t be confused with investing. It is a choice. Using leverage in real estate is a necessity unless you have fairly high net worth. The ease of diversification in stocks is another thing that makes them safer. Not all stocks come back from a crash but stock markets nearly always do.
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@aalj, good advice. What are the best municipal bonds to buy, and do you purchase them directly or through a fund?
Can remove the nearly 
For most people especially started working or not interested/ no time to learn more about market/economy/stock investment, should just DCA purchase of market index (such as S&P) funds, not sector or industry or customized ones. Can allocate up to 5% for stock picking to soothe our gambling instincts… treat it as entertainment.
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If you want to compare Stock vs Real estate, you need to compare them equal terms. If one is leveraged and another is not leveraged, equality is broken and you will miss seeing the benefit.
Supposing you have 250k, getting 750k mortgage at 4.75% 30 year fixed, buy a 1M home, doubles in 10 years, you assume your 250k+carry cost gets 1M profit.
Assume I have fully paid home of 1M now, and 250k cash on hand, I cash out refinance my home for 30 year fixed at 4.75% 30 year fixed, I get 750k mortgage.
I take this 1M in stocks, If I make it 3M in 10 years, I supersede you by a million.
Simple examples were practically shown by hanera’s AAPL, wqj’s FB, TSLA and AAPL. Even in future lowest Dipped Stock market their holdings are win against real estate.
Even if you take dumb investment like S&P 500,buy long term, they grow at 7% while real estate at 5% or below. There are better growth options (like ITA, BRKB, QQQ) than S&P500 as common person buy and hold.
There is a thread for this debate
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Jil, with all due respect, I believe you are overlooking the effect of taxes. There are lots of things you can do with real estate to minimize the effect of both federal and state taxes, which are especially important in a high tax state like CA, to boost your return. Furthermore, property taxes are deductible against income if your RE business is counted as a pass through entity.
Its not a matter of whether or not RE gives more return than Stocks or vice versa. Its a matter of asset allocation. Allocate everything in orderly fashion and then you can tamp down volatility and sleep well and night — and let compounding work for you.
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I do not know if these are best. I try to hit a credit rating average of at least AA. In my ladder, the average maturity is 6.7 years.
Municipalities to look at in CA - San Diego, Desert Sands, Cypress, Fort Bragg, El Dorado, Lawndale, Chino, Moreland, Merced, Gilroy, Carson, West Sacramento, Brier Creek, San Marcos, Fontana.
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There are also muni bond funds. MCA is for California. The yield is a little lower but they include insurance against default.
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Thanks. I think those muni bond funds typically use some leverage though right?
I don’t believe they do. The yield would be higher if they did. There are bond funds that do though. Anally capital uses leverage.
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