1. You always need a place to live, and a nice home greatly improves your life quality.
2. Most companies will go bankrupt or stagnate eventually. Look at the original 12 Dow stocks from 1896, only GE is there. The rest either went bankrupt or performed poorly over long period. Picking the right stocks requires tons of effort and discipline. Thus, investing in individual stocks is not for the masses.
3. Speaking of leverage, you can get at most 2x with stocks; and if your portfolio suffers a 20% correction, you will be hit with a margin call immediately. With your own home, you can easily leverage up to 5x, and you will not face margin calls as long as you can afford the interest payment. Besides, margin interest on stocks is a lot higher than mortgage interest.
4. However, real estate transaction costs and liquidity are terrible compared to stocks. Nowadays it's easy to keep transaction costs of stocks under 0.5% (commissions + bid/ask spread), but I doubt you will be able to pay less than 3% on a piece of real estate. For small investors, liquidity is not a problem at all in stocks. Unless you are speculating in OTC penny stocks, the quote you see is the price you'll get. My own portfolio takes only a few minutes to liquidate. But with houses?
5. Investors need to identify where values lie, while speculators need to identify where the bull market/bear market is.
Now my questions to all:
- Do you think the current SF Bay Area real estate offers good value?
- Do you know where the bull market is and where the bear market is?
2. Most companies will go bankrupt or stagnate eventually. Look at the original 12 Dow stocks from 1896, only GE is there. The rest either went bankrupt or performed poorly over long period. Picking the right stocks requires tons of effort and discipline. Thus, investing in individual stocks is not for the masses.
3. Speaking of leverage, you can get at most 2x with stocks; and if your portfolio suffers a 20% correction, you will be hit with a margin call immediately. With your own home, you can easily leverage up to 5x, and you will not face margin calls as long as you can afford the interest payment. Besides, margin interest on stocks is a lot higher than mortgage interest.
4. However, real estate transaction costs and liquidity are terrible compared to stocks. Nowadays it's easy to keep transaction costs of stocks under 0.5% (commissions + bid/ask spread), but I doubt you will be able to pay less than 3% on a piece of real estate. For small investors, liquidity is not a problem at all in stocks. Unless you are speculating in OTC penny stocks, the quote you see is the price you'll get. My own portfolio takes only a few minutes to liquidate. But with houses?
5. Investors need to identify where values lie, while speculators need to identify where the bull market/bear market is.
Now my questions to all:
- Do you think the current SF Bay Area real estate offers good value?
- Do you know where the bull market is and where the bear market is?
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