Weekend Reading – Stocks or Real Estate for Returns?
Posted on by Scarlett Madison

Weekend Reading – Stocks or Real Estate for Returns?

Weekend Reading – Stocks or Real Estate for Returns?

Hey Everyone, 

Welcome to a new Weekend Reading edition, comparing some high-level stock and real estate returns. 

As always, a few thoughts on that theme to come but some reminders about recent content on my site:

This post remains very popular: watch out for RRSP and RRIF taxation!

I breakdown Lean FIRE, Barista FIRE and wonder if 99% of the population could ever achieve Fat FIRE in this post.

Weekend Reading – is Fat FIRE realistic?

Good, bad or indifferent, I like sharing some portfolio updates with readers and so I took a look back at the reasons to own BlackRock stock in my DIY stock portfolio.

Some interesting comments on my decision!

Then and Now – BlackRock

Weekend Reading – Stocks or Real Estate for Returns?

As always, the answer to whether stocks or bonds or real estate or other assets are “the best” to own usually depends on the timeframe/observation period you are looking at and a complete post-mortem analysis of other factors as well.

That said, this post in The Globe and Mail this week caught my eye (subscription):

Source: G&M.

Author of this post, Fred Vettese rightly put in this as his disclaimer:

“I must caution that such comparisons are very sensitive to both the starting point and the end point of the observation period. If we had started the projection two years earlier – on Jan. 1, 1973 – the two portfolios would be in a virtual dead heat by the end of 2021.”

Other factors that play into this debate include real estate location and the fact that investors cannot invest in a stock market index directly anyhow, although indexed products with very low fees as proxies exist. Many investors are also likely to incur some level of market underperformance based on behavioural factors: poor timing; imperfect buys and sells; transaction costs; and money manager fees (if you have one…)!

Costs associated with real estate such as commissions, taxes, maintenance and repairs are also not usually included in simple graphics as well. Those costs are far too variable and subjective. All of these factors would impact investment returns in real estate.

As we know, past performance is never any guarantee about future results – but it is interesting data nonetheless. Another look with some real estate locations in mind:

Weekend Reading - Stocks or Real Estate for Returns Post

Source: RBC.

Weekend Reading – Stocks or Real Estate for Returns?

Years ago, we used to be landlords but decided our financial independence path in the decades ahead was better served in having ownership in one primary property (our home), and then plowing money into stocks and ETFs beyond any workplace pensions. 

I wrote about my definitive answer between paying down our mortgage vs. investing but your mileage may vary.

The definitive answer to paying down your mortgage or investing

To answer the question, I don’t believe there has been a right or wrong: stocks vs. real estate. 

Depending on your circumstances, real estate investing (in one or more properties) has likely served you very well over the last 20 years in any major city in Canada, and I don’t see that trend stopping near-term. Real estate is likely to continue inching up in value over time unless the supply / demand dynamics change significantly. Higher interest rates today are only making valuations luke warm instead of red hot. 

I recall Ben Carlson asked: is real estate a better investment that stocks?

From Ben, consider three things before going all-in on real estate over stock market equities:

  1. Concentration. It’s difficult to diversify with a single property (or even multiple properties). 
  2. Illiquidity. While you do receive cash flows in the form of monthly rental payments “you can’t spend a home or trade it in as easily as you can with stocks and bonds.”
  3. Potential Headaches. Owning a rental property involves finding tenants and fixing stuff when it breaks. 

Our near-term plan is to continue to investing in stocks while covering off our remaining fixed-term mortgage on our home; just another 9 months left to slay the mortgage dragon at the time of this post.

That means we will be mortgage-free in early 2024.

via GIPHY

When deciding between investments such as stocks or real estate in particular, I believe it’s important to keep in mind that the best asset class for you will depend on your own unique investment goals, time horizon and risk tolerance. This refrain comes up again: personal finance is personal. 

What’s been your path to asset accumulation? Multiple real estate properties? Just one? Do you prefer stocks or real estate? Do share in a comment. 

More Weekend Reading…

A fellow blogger and DIY investor wondered about taxable investing. 

I pointed him to this key post on my site, lots of considerations…

I’ve maxed out my TFSA and RRSP. Now what?

Whether you invest in a taxable account or not, after your TFSAs and RRSPs are maxed like we do, Dale Roberts highlighted that many Canadian stocks are on sale.

Marry for money? Yes, pretty much 1 in 5 Americans might according to a recent survey. 

“According to the Marriage Survey of 1,000 American adults conducted by Clever Real Estate in May (see graph above), financial stability is a primary purpose for marriage, as reported by 1 in 5 Americans (20%). In fact, 19% admit they would marry solely for money reasons (19%). Entering into the calculation are factors like high inflation, escalating living costs, and an expensive real estate market.”

Read more at Jon Chevreau’s site:

65% of Americans say partner having too much debt is a marital dealbreaker

The article also forgot some obvious tips, from me at least:

  • Bring earplugs and your own eyemask.

Weekend Reading – Top travel tips edition

As always, Save, Invest, Prosper!