I have some amount of earnings apart from the ones that I save for my necessities. I want the earnings invested in some real estate or may be in stocks. I do have some knowledge on stocks but, earlier my cousin had invested in the stocks and had a set-back. I know that you need to be updated in that but – What is a better option from the two???
Invest in Real Estate or Stocks?
- Thread starter Mekvin
- Start date
Your choice of an investment vehicle will be specific for your own goals in life.
Personally, I like Real Estate. Since it provides me with steady dividend, its leveraged, and have control of the business.
Both require extensive due diligence, patience and focus.
QUOTE (Mekvin @ Jul 30 2008, 02:43 AM) I do have some knowledge on stocks but, earlier my cousin had invested in the stocks and had a set-back.
This quote kind of worried me, make sure you pay attention to the numbers and statistics and try and getting unbiased information.
A good book is the `paradox of choice`. This comes to mind as they did an experiment where they asked participants to review some statistics data which clearly outlined option A to be better than option B, and most people selected option A. However when they a second person discuss a negative personal experience regarding option A, the participants became more inclined to choose the inferior option B.
The moral of the story is don`t put too much weight on your cousins bad experience. Pay attention to the facts, what is real and do some homework.
Personally, I like Real Estate. Since it provides me with steady dividend, its leveraged, and have control of the business.
Both require extensive due diligence, patience and focus.
QUOTE (Mekvin @ Jul 30 2008, 02:43 AM) I do have some knowledge on stocks but, earlier my cousin had invested in the stocks and had a set-back.
This quote kind of worried me, make sure you pay attention to the numbers and statistics and try and getting unbiased information.
A good book is the `paradox of choice`. This comes to mind as they did an experiment where they asked participants to review some statistics data which clearly outlined option A to be better than option B, and most people selected option A. However when they a second person discuss a negative personal experience regarding option A, the participants became more inclined to choose the inferior option B.
The moral of the story is don`t put too much weight on your cousins bad experience. Pay attention to the facts, what is real and do some homework.
Real Estate or Stocks ---- I would prefer real estate just for the sake that I don`t know much about the stocks ….. but as the case with your cousin goes …. I would advice you to have some investments in the real estate market as the place is at a boom now and you may get good returns for the investments there. Being updated on the stock market is a must for investments there but I find investment a risk in the stock market.
- Joined
- Oct 22, 2007
- Messages
- 1,188
There is a place for both. Strangely enough many investors tend to do one or the other, only few dabble in both. I started out in stocks and diversified into real estate. Right now, rental income sounds fine, but there have been times that it was tough to collect sufficient rent to cover the expenses of a property let be making a profit. If during such times you don`t have the financial strength to sit through the `bad times` then real estate investments can be very painful.
In the 1980`s mortgage rates in Canada were up to 16%. A true nut-house and because interest rates rose so fast, so did mortgage payments. At the same time, rental vacancies were sky high (6 to 10%). Rents were frequently below mortgage payments not counting things such as condo fees, property taxes etc. My personnel experience says, don`t do real estate until you can afford to go several (3 to 4) months without rent, in particular if your stomach tends to get upset during times of vacancy. Mine did. I was a junior geologist who got himself in enough trouble that I had to pay my groceries by credit card. A school of `Hard-Knox".
REIN guidelines may help you prevent from getting in trouble. But if you use your LOC to pay your down payment and you finance the rest with a variable rate mortgage, can you survive a 2% interest rate hike? Think sub-prime!
Investing in stock, requires knowledge and experience as well. I even lost money by investing in a GIC, the trust company that provided the investment was seized by the government. Their sale people said, they were insured but not CDIC and that turned out to be baloney. The trust president moved to the US, his name was Donald Crombie. Well Crombie was crummy but the Alberta Government did not get hold of him and thousands of investors held the (empty) bag.
When you learn investing in the stock market, do it one small step at the time. My tactic was to pay off my house as fast as I could. The savings in mortgage payments were for investing. If you save every month your mortgage payment and use it for investing in the stock market, things add up at a decent clip. But you can`t use leverage like in real estate; the stock market is too volatile. If you buy stocks be prepared to buy only well managed and financially sound companies, such as Canadian Banks, Insurance Companies and other blue-chip investments. I got hit by downturns such as the 1987 crash. I always had enough cash reserves to buy some more stocks when they were cheap during such a crash. It goes against your guts, buying when others sell in a panic. And often prices fall even further, because, at least me, I tend to buy too early in a crash our downturn.
The secret is, not to sell during a crash or downturn, but to buy good quality companies instead. Some beginning investors buy mutual funds or other `actively` managed products. My experience is that you buy diversification but at a high commission and high management fees (MERs). If you want to diversify I recommend you have a significant portion of your stock in one form of investment pool or other; not mutual funds but Index funds, such as the XIUs which are `i-units` that represent the TSX60. These can be bought through discount brokers at a low commission and very low MER. Much better than a mutual fund.
So when you have a couple of good companies and/or i-shares and you get hit by a downturn. Don`t panic and sell out. Not even when you`re down by 30 or 40%. The stock market moves in cycles and good times follow bad, that is the law. Provided the companies you bought were good businesses they will turn around and ultimately make a profit. Buy dividend paying stocks so you get always some cash flow. Right now, buying a Canadian Bank(all except National Bank and CIBC) or something such as Power Corp gives you `positive cash flow` in the range of 3.5 to 7%. Dividends are tax advantaged over interest. So 3.5 - 7% dividends is equivalent to 4.5-8.5% in interest (or rental income).
Just like real estate, investing in the stockmarket is investing for the long term (5 years or longer). Both real estate and stocks have their place in achieving your own Belize. If you believe authors such as Robert Allen you need to own even other investment classes, such as your own business or royalties on a book you wrote. He calls this `Multiple Income Streams`. When all is said and done, there are many forms of investment that can make you rich, except one thing. That is something nearly all self-made millionaires have in common: "Live below your means and use your savings for investments" or as Robert Kiyosaki calls them `Assets`.
I hope these ideas help.
In the 1980`s mortgage rates in Canada were up to 16%. A true nut-house and because interest rates rose so fast, so did mortgage payments. At the same time, rental vacancies were sky high (6 to 10%). Rents were frequently below mortgage payments not counting things such as condo fees, property taxes etc. My personnel experience says, don`t do real estate until you can afford to go several (3 to 4) months without rent, in particular if your stomach tends to get upset during times of vacancy. Mine did. I was a junior geologist who got himself in enough trouble that I had to pay my groceries by credit card. A school of `Hard-Knox".
REIN guidelines may help you prevent from getting in trouble. But if you use your LOC to pay your down payment and you finance the rest with a variable rate mortgage, can you survive a 2% interest rate hike? Think sub-prime!
Investing in stock, requires knowledge and experience as well. I even lost money by investing in a GIC, the trust company that provided the investment was seized by the government. Their sale people said, they were insured but not CDIC and that turned out to be baloney. The trust president moved to the US, his name was Donald Crombie. Well Crombie was crummy but the Alberta Government did not get hold of him and thousands of investors held the (empty) bag.
When you learn investing in the stock market, do it one small step at the time. My tactic was to pay off my house as fast as I could. The savings in mortgage payments were for investing. If you save every month your mortgage payment and use it for investing in the stock market, things add up at a decent clip. But you can`t use leverage like in real estate; the stock market is too volatile. If you buy stocks be prepared to buy only well managed and financially sound companies, such as Canadian Banks, Insurance Companies and other blue-chip investments. I got hit by downturns such as the 1987 crash. I always had enough cash reserves to buy some more stocks when they were cheap during such a crash. It goes against your guts, buying when others sell in a panic. And often prices fall even further, because, at least me, I tend to buy too early in a crash our downturn.
The secret is, not to sell during a crash or downturn, but to buy good quality companies instead. Some beginning investors buy mutual funds or other `actively` managed products. My experience is that you buy diversification but at a high commission and high management fees (MERs). If you want to diversify I recommend you have a significant portion of your stock in one form of investment pool or other; not mutual funds but Index funds, such as the XIUs which are `i-units` that represent the TSX60. These can be bought through discount brokers at a low commission and very low MER. Much better than a mutual fund.
So when you have a couple of good companies and/or i-shares and you get hit by a downturn. Don`t panic and sell out. Not even when you`re down by 30 or 40%. The stock market moves in cycles and good times follow bad, that is the law. Provided the companies you bought were good businesses they will turn around and ultimately make a profit. Buy dividend paying stocks so you get always some cash flow. Right now, buying a Canadian Bank(all except National Bank and CIBC) or something such as Power Corp gives you `positive cash flow` in the range of 3.5 to 7%. Dividends are tax advantaged over interest. So 3.5 - 7% dividends is equivalent to 4.5-8.5% in interest (or rental income).
Just like real estate, investing in the stockmarket is investing for the long term (5 years or longer). Both real estate and stocks have their place in achieving your own Belize. If you believe authors such as Robert Allen you need to own even other investment classes, such as your own business or royalties on a book you wrote. He calls this `Multiple Income Streams`. When all is said and done, there are many forms of investment that can make you rich, except one thing. That is something nearly all self-made millionaires have in common: "Live below your means and use your savings for investments" or as Robert Kiyosaki calls them `Assets`.
I hope these ideas help.