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80% of Financial Advisers invest in real estate

[quote user=bizaro86]Diversification will provide the average person with an above average retirement, .. only after a period of wealth accumulation !



Feel free to re-read my blog from Oct. 2009 on "5 ways to make money" .. one being investing your money .. there are 4 more .. and if combined 3-4 of them will lead to substantial gains over time !
 
For me, making money in the stock market is simple. However, for whatever reason, most individuals have a hard time of it.



My baseline premise for stock investing is straight-forward: the rich get richer. I believe this to be true. Others may not.



I know that if a wealthy person has millions of dollars, they want tens of millions. If they have tens of millions, they want hundreds of millions. If they have hundreds of millions then they want billions, etc. A wealthy person will drive themselves (and those around them) to exhaustion in order to hoard money.



All I need to do is find one of these workaholics and ride their coattails and forget about it.



The public (stock) markets makes it so easy to find wealthy individuals. Jim Jannard owned 70% of Oakley, Roger and Michael King owned 50% of King World Productions (syndicator of Oprah in the 80s and 90s), Dan Hirschfeld owns 40% of The Buckle, Tom and Kosta Kartsotis own 20% of Fossil, Gert and Tim Boyle own 60% of Columbia Sportswear, etc.



All these people once had millions, then tens of millions, then hundreds of millions, and then billions of dollars. The addiction to hoard money is an extremely powerful narcotic. All of these individuals are extremely talented entrepreneurs.



I am a very bad entrepreneur. I have no drive. I don't want to work. I don't even like waking up early. Working on weekends or after 5pm? Forget it.



But it doesn't matter because we live in a capitalistic society.



And in a capitalistic society I don't need to be intelligent, entrepreneurial or even hard working to make money. All I need to do is invest alongside an entrepreneurial workhorse and I will reap the same benefits.



If I went to a private business that made hundreds of millions in profit and asked to pay 8x earnings or 2x book to buy their business, they would tell me to f!cuk off.



But it dosen't work like that in the public market.



The owners of public companies can't stop me from buying their business on the cheap. They have no say in the matter.



Technology blows up. I get a great deal.

Housing blows up. I get a great deal.

Greece blows up. I get a great deal.

Credit markets blow up. I get a great deal.

The Eurozone blows up. I get a great deal.



99% of the time businesses are fully valued by the market. 99% of the time, I don't do anything. 99% of the time, it's boring.



But boy, oh boy, when that 1% rolls around do I get excited! I become Jim Jannard's, Dan Hirschfeld's, Tom and Kosta Kartsotis's, etc. partner for pennies on the dollar!



I don't pay any administration fees.

I don't pay any management fees.

I don't pay any fees of any kind whatsoever.



I pay $9.99 to TD Waterhouse in commissions to hold a profitable, growing business - forever. Just because Greece blew up.



Why should I work for money when there are more able, more intelligent, more driven, more entrepreneurial individuals already doing a better job than I could do with a 1000 lifetimes? Do I want to be a hundred millionaire's lifetime business partner for $9.99? Sure!



It's so easy it's almost unfair.



But I don't care. It's all free money to me.



PS: I'll ride Dan Hirschfeld's coattails until the cows come home. Forget that useless diversification, asset allocation and re-balancing nonsense.
 
[quote user=Rickson9]

The public (stock) markets makes it so easy to find wealthy individuals. Jim Jannard owned 70% of Oakley, Roger and Michael King owned 50% of King World Productions (syndicator of Oprah in the 80s and 90s), Dan Hirschfeld owns 40% of The Buckle, Tom and Kosta Kartsotis own 20% of Fossil, Gert and Tim Boyle own 60% of Columbia Sportswear, etc.





Where do you find this info?
 
That's an interesting stat. As a CFP, CLU and financial advisor, I can recognize a good long term asset, and also own real estate. However, I also own stocks, bonds, mutual funds and cash. Each asset class has it's own unique features and uses. In my experience, it's not either one or the other, but a combination of several.
 
[quote user=RealtorDave]Where do you find this info?




Anyone with strong opinions of the stock market backed by useful knowledge and experience in stock investing want to answer this one?



The answer should be fairly easy especially for those who are quick to point out the advantages of RE vs. stock since all we're talking about is the "MLS" of the stock market. Anybody?
 
[quote user=dpeacock]mutual funds .. Each asset class has it's own unique features and uses.


enlighten us !



What about the so called "exempt market" or "alternative investments" better "tangible asset market" ? [usually syndicated private deals in real estate, mining, oil/gas or private equity ]
 
[quote user=dpeacock] That's an interesting stat. As a CFP, CLU and financial advisor, I can recognize a good long term asset, and also own real estate. However, I also own stocks, bonds, mutual funds and cash. Each asset class has it's own unique features and uses. In my experience, it's not either one or the other, but a combination of several.





In a technical sense it is true that "every asset class has it's own unique features and uses", however the majority of asset classes are useless or detrimental to the individual investor.



Retirement plans are generally built for the retirement of the planner.



Ignorance isn't just dangerous, it's expensive.
 
[quote user=Rickson9]Anyone with strong opinions of the stock market backed by useful knowledge and experience in stock investing want to answer this one?



The answer should be fairly easy especially for those who are quick to point out the advantages of RE vs. stock since all we're talking about is the "MLS" of the stock market. Anybody?


Information on the insider ownership of each publicly traded company is available from their filings on SEDAR (for Canadian companies) or EDGAR (US companies).



I'm afraid I don't fit under the category of those who are anti-stocks, since I invest in and use both stocks and RE, but for different purposes.



Regards,



Michael
 
[quote user=Rickson9][quote user=dpeacock] That's an interesting stat. As a CFP, CLU and financial advisor, I can recognize a good long term asset, and also own real estate. However, I also own stocks, bonds, mutual funds and cash. Each asset class has it's own unique features and uses. In my experience, it's not either one or the other, but a combination of several.















In a technical sense it is true that "every asset class has it's own unique features and uses", however the majority of asset classes are useless or detrimental to the individual investor.







Retirement plans are generally built for the retirement of the planner.







Ignorance isn't just dangerous, it's expensive.

]

My experience with Real Estate is that it's a business, like many others, requiring training, experience, time, effort and money to succeed, and success is not guaranteed. It's a way to create wealth and shouldn't be compared to other forms of more passive wealth preservation, which don't require one to operate a business.

At some point, many people who've accumulated wealth, just want to take some of their money off the table. Have it managed by someone else. Are willing to accept more modest returns with less risk and go have fun with the grandkids. As an example, 2 million invested in Boring Bonds, Annuities, and Dividend Equities could be be counted on to generate 70,000 - 100,000 annual income for life. Lots of folks are happy with that. (and you don't need a financial planner for that math :)
 
Speaking only for myself, managing a couple million dollars doesn't require a planner nor does it require much time.



Just sayin.
 
Hi Guys'



I was gone for a while missing out on the perpetual discussion of real estate versus...



I would like to respond to some of the points made in this discussion that may have been by-passed in the heat of the discussion.



1 "Diversification does not make you rich" - nonsense it can make you rich enough to live a nice Belize. But... to be truly rich you need to get a break. Yep, e.g. when you get the chance to take part in a company savings plan - that can give you quite a boost. When you get stock options you can also get a big wealth boost. Guys like Bill Gates and Steve Jobs and Henri Ford made it big as entrepreneurs, but you don't hear about the many that fall by the wayside



2 Many millionairs are small business owners in smaller towns where life is more steady and predictable. They build up their wealth gradually over many years. Real Estate investing as advocated by REIN is mostly a business and you can build up wealth there as well over many years. Guys like Thomas Beyer are excellent entrepreneurs, but he got an enormous leverage boost during the 2004-2008 real estate bull market. Without that 'lucky streak' he would own a lot less. Those were exceptional years - Don does not call those years 'Tiger Wood' years for nothing.



3 Stock market investing is in many ways similar to real estate. Especially in these volatile markets dividend income and net rental cash flow are two pies in the pot. Stock market valuation determines the appreciation component of profits and is a lot less predictable. Stockmarkets are leveraged through corporate leverage. Real Estate appreciates as well and it is leveraged by the investor rather than intrinsic to the publicly traded corporation.



Either way if a corporation is too high in debt or if the real estate investor takes on too much mortgage debt, your risk level goes up. In my calculations both forms of investment are equally risky and when you take out the compensation for your labour, both asset classes are similar in profitability.



4 Rickson9 claims he makes so much on the stock market because he follows the people with the money. Well, many people that run companies make a lot of money whether they deserve it or not. So I think this is an oversimplification and that Rickson9 sooner or later will be hit by the law of averages.



5 In my experience and in my market simulations, I have learned that regular stock market purchases and reinvestment of dividends in plain vanilla blue chip companies, such as the ones that make up the Dow Jones gives you better performance than just buying 'good companies' at the bottom of the markets. The reason for that is simple - dividends. If you're not in the market collecting dividend and investing your moneys at all times you have less money to invest and you will own less shares. If you invest like Rickson, you'll be out of the market for a long long time not collecting those dividends and missing out on a lot of profits. 40% or more of a stock's profits come from dividends and dividend reinvestment. In the short term the stock market is a casino - over the long term it is a money machine (provided you don't trade too much). Just like real estate you need a long time horizon and it is frustrating. I would say at least a 10 year time horizon. If you bought properties in 2005-2008 in Calgary, you probably need also such a long time horizon. Toronto has a much more steadier appreciation than Calgary but then the average rate of appreciation is lower than Calgary's.



So where is the best place to invest? There is none - the investment profit centers shift continuously - over the short term. Diversification, long time horizon and good cash flow management that is realy critical. Hmmm, that may be true for average Joes like us Warren Buffett may do better.
 
Just for clarification purposes only:



1. Partially true. I don't invest in individuals who "run companies". I invest in individuals who "own companies". Personally I don't care who runs the business as long as their compensation is tied to the 20%+ of the company stock that they hold (not to be confused with stock options).



2. True. I don't care about dividends. I don't believe a fast growing business should bleed the business by paying out dividends to shareholders.



3. True. Diversification as a method for building wealth doesn't make sense to me.
 
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