Thanks for the reply Adam. My point exactly, it seems that many real estate investors walk around with blinders on. Both real estate and stock market investing are risky. But many real estate investors feel they have to do better than the stock market. Look at the U.S. real estate market since 2007 and its carnage. How many real estate investors have made big bucks in Alberta over the last 4 or 5 years? So how is that different from the stock market?
Duuh!!
Neither do I agree with Rickson that asset allocation and rebalancing doesn't work. Nonsense. It works alright. But the results are lately not very exciting. By the way, over the last decade or so, bonds have clearly outperformed stocks. IN GENERAL.
You see, if you invest in the stock market, you have no control over the assets you've bought and as such, you want to limit your exposure to a single company to a small portion of your portfolio. Stock market ETFs help you to achieve that.
In real estate you have more control over the properties you buy and hence, you can put proportionally more money in a single property - the chance that it goes sideways is somewhat less. Afterall, you are behind the wheel!
Also, there are situations, e.g. owning shares in the company where you are employed and thus you are closer to the 'action' than a normal retail investor. I made a lot of money through savings plans and options provided by my employer. So, in that case, you can have more than just a little in your portfolio.
Run of the mill stocks provide over the long term a decent return. The statistics have proven this over and over again. My own portfolio shows the same. But it does not happen in a smooth fashion. In fact, as Rickson says, real estate and stock investing have something in common. The rent or the dividends provide the cash flow. The appreciation is unpredictable and some years it is great and then there are many years that the appreciation is poor or even negative. On average appreciation makes up around 50 to 60% of your profits and cash flow 40 to 50%.
Oh, and yeah how long did it take you guys to learn about real estate? What is your time horizon? Don't you think the same is true for paper securities? Finally, part of your real estate returns is for you labour, something that is not required when investing in paper securities. So, when evaluting real estate and comparing it to say the stock market, take your personal labour into account.
Sometimes it sounds like real estate investors need to compare their performance with the stock market because of a sense of inferiority. Like companies that always try to put down the leader in their sector. This is a useless exercise. In each portfolio there is a place for real estate and stock market and bond and commodity and god-knows-what-other investments. Sometimes things go right for the stock market; other times real estate does better and sometimes both are driving you up the wall. That is the nature of things. Be flexible, open minded and make money!