Stock Market and Real Estate Return in 2016: A Comparison


So what’s the point to trade stocks if you could just QQQ or other Nasdaq index and achieve the same return with much less effort? Stock trading may bring a lot of excitement, but people feel lucky when they match the index


Does IB issue mortgages or Heloc? It’s absurd that they offer such low rate in margins. Is the margin loan less risky that mortgages?

I feel that mortgage rate is too high. Manch, please request IB to enter mortgage market


When I calculate returns, I don’t take into account leverage. Because that skews the results. If I took leverage into account, then my real estate return should be infinite %, because I borrowed everything (including down payment)…


Also, I don’t day trade. I’m a buy and hold investor. I hardly ever sell any stocks.


How to borrow downpayment? I would like a 100% leveraged deal.

What I mean is that you calculate the RE equity change. For example, on 1/1, your RE is worth x, with y loan and z equity, x=y+z. On 3/31, your RE is worth x1 with y1 loan and z1 equity, X1=y1+z1.

Then your effective RE gain should be z1/z. Your RE price change would be x1/x=9%


Yes. I do x1/x, for both stocks and real estate.

I use 100% leverage by borrowing money out of existing home equity (heloc) and stock margins.


Margin loan is much safer for brokerages than mortgages or HELOC. Assets are held at stock brokerage which can liquidate when there’s any risk to downfall. No need to go to court. So it makes sense for margin interests to be low.


Yes, this is the biggest risk on using Stock accounts Margin ! When stock falls, it goes steep down in just 3 days, triggers margin call and automatic sale when Margin threshold is reached. time lot of margin call sale was triggered. Safety net is not there for borrowers.

Even though I have margin account, I do not use except for temporary buy/sell. Similarly, I do not use HELOC for stocks or HELOC for other purpose except temporary usage or emergency purpose. Only once I used HELOC to buy another property, but paid it within 6 months.

Conceptually, I do not want to pay higher interest other than first mortgages.


Using debt (not that kind for share buyback because of overseas cash) is old school. Most hi-tech companies don’t have debt. Startups use free money. Many of these old school businesses force to sell assets over the past few years, their market cap keeps shrinking, guess some of you probably didn’t notice. Debt is super when everything goes well. When things didn’t go well, well you will find out and wish you didn’t have debt.


It is really hard to beat the indexes consistently and that comes from training.

I am behind education and training, the more I work/research/read/analyze, the better I am. When you work hard, you get paid. This is brainy work, I am very much attached to this like a game, trying to refine the process more and more, read as many as books. Only regret is “why did not I start early?”, esp on systematic methodology … reading books.

If I continue like this, I may be better in next 5 years or far better latter in next 10 years. Then, education and training stays forever with us.


Leveraging is smart when you are young…As you get older you need to deleverage


Should one start deleveraging at 65, the retirement age?


I had seen , in red-fin, one person was leveraging at the age of 72 buying two rentals during 2008 and 2011 period. It need not be at retirement age. Higher the assets we hold, higher the risk.

It depends on the comfort level and the assets we hold.


I did it at 60…But every one is different. …When the next recession hits you will wish you deleveraged before hand…


Could you please tell me when the next recession is going to be so I can deleverage all my holdings beforehand? :slight_smile:


If you stop buying new properties with mortgage, you are on the way of natural deleverage. Just buying today and you’ll be fully delevraged in 30 years or less.

Things can be done incrementally and naturally. No need to knee jerk, buying crazy and selling crazy. Holding still is your 3rd choice.

At today’s market, it’s not a bad idea to hold still, no selling and no buying, just a steady and incremental slow payoff of your mortgage over 30 years or less


We are half way through 2017!!!

Here’s my semi-annual update:

S&P 500: 8.2% gain
NASDAQ: 14.1% gain
My Stocks: 22.6% gain
My Real Estate: 19.4% gain
My Net Worth: 25.7% gain

To have my net worth increased by 25% in 6 months is crazy. I am beyond thrilled but honestly I think this was an exceptional half. I don’t expect to have another 25% gain in 6 months again for a long while…


You have other income? Net worth can’t increase faster than its component.
My net worth increases by 18%, much slower than yours :blush:


No other income! Net worth increased faster than component because of leverage.


I have $100 stock (net worth $100).

I borrowed $50 to buy a house. House value increased 50%. Stock value increased 50%.

Net worth is now $150 + $75 - $50 = $175. Net worth increased by (175-100)/100 = 75%.

So: stocks: 50% gain, house: 50% gain, net worth: 75% gain!!!


Real estate up 19.4% without leverage in 6 months? That’s really high