If you put all your savings in the brick … you risk to enlighten you to the fanal in retirement! For a decade many investors prefer real estate to any other investment. Are they right? Not always . Asset concentration will always be synonymous with risk.
Simply pay off their mortgage
Some do not take RRSPs or TFSAs and simply pay off their mortgage as soon as possible. We can not be sure of the future, but let’s get rid of an old tenacious myth. An investment in a good mutual fund can be 4 times more profitable in the long term than a house. Although I take just about every housing category and every region of Canada, the gap is still significant.
To illustrate my example, I obtained from Good Finance the value of a luxury 2-storey house sold in the Montreal area at the end of 1982 . In Boucherville, there was a fairly median price for the greater metropolitan area.
Costs of renovations
If I sold this house at the end of 2012 (still according to Good Lender figures), I got $ 512,000 gross. The costs of renovations and repairs, municipal and school taxes, notary fees, brokerage … and time spent on its maintenance are excluded. My yield was 6.09% GROSS . Not so bad.
Suppose you have at the same time received an inheritance of the same amount. But, that you invested it in a fund of investment running in 1982. You would be VERY rich today. Your investment in the Honest Bank fund would be worth $ 1,295,450 .
If you had invested in its global sidekick (the Honest fund), you would even have $ 2,068,383 . Compared to home, these results are NETs of fees of all kinds.
The Canadian fund produced 9.42% annualized average and the global, 11.14%.
Real estate is much more profitable
But why does one feel that real estate is much more profitable? Simply because we all tend to EXTRAPOLER . We are having a hard time or an excellent one and we imagine that all economic cycles will be similar. The last decade in real estate has been great in Canada. It has not always been the same. The growth cycle may be drawing to a close.
As for the investment funds, the Honest fund had very good times and very bad times. But, the good ones were much more numerous and compared to the real estate, the managers could regularly take profits and reinvest them in new occasions. To multiply his investment by four, the saver had only to be patient . To maintain his hedge and his flowerbed, tinker, take care of his family. Live.
Who said you had to suffer to get rich? What if we refused to follow the flock?
So what do we conclude? That it is better to go in an apartment and place your marbles in funds? I’m not saying that. I conclude that one must be wary of the brother-in-law and his certainties.
Diversifying your assets is still in place in 2013.