They published an article saying why buying real estate is causing the wealth gap problem.
Link to the article below:
The rich own stocks, the middle-class own homes. How betting it all on real estate is a wealth gap problem
Not saying if it is true or not, I believe you can judge it for yourself.
But let's see the situation below.
Who Owns What?
The Rich: Owns stocks
The Middle: Owns homes
The Poor: Owns nothing
The Situation
The Rich: Gets richer
The Middle: Gets squeezed
The Poor: Gets poorer
Our Take:
I don't know about you, but from the situation above, I know I definitely want to be on the side of owning stocks.
Homes are great investments because of leverage (you borrowed $400k + your own $100k to buy a $500k home).
If the home appreciates by $50k and you sell it, you made a 50% return on your $100k investment.
If the home depreciates by $50k, you lose 50% of your money, but you probably will convince yourself that it will appreciate back up one day, and in the meantime, you can stay in that home so it's not that bad.
And because most of the transactions are in hundreds of thousands (or millions), it makes it seem like property is the way to make really huge gains.
But we are forgetting that if we accumulate our monthly mortgage payments, it will also be in the hundreds of thousands, and that excludes the property taxes, mortgage interest payments, and other costs associated to homeownership.
Once we factor in those costs, the return on investment from a home on a percentage basis actually no longer becomes as attractive as we initially thought.
It will be better than inflation or fixed income, but it probably would not be the stock market.
We are not saying that investment in property is bad, is it just that relatively speaking, stocks tend to outperform property.
So from an investment standpoint, is if fine to invest in properties, just not fine to have bulk or all of your investments in properties.
The Bulk of the Riches' Wealth
Jeff Bezos: Owns 11% of Amazon
Bill Gates: Owns a lot of companies (listed and non-listed)
Warren Buffett: Owns 16.5% of Berkshire Hathaway
Bernard Arnault: Owns 40.9% of LVMH
Larry Elison: Owns 35.0% of Oracle
Mark Zuckerberg: Owns 28.2% Facebook
Michael Bloomberg: Owns 88% of Bloomberg
These are the world's richest people.
None of these rich people became rich by buying real estates.
We hope you're now slightly more convinced that stocks are better than property.
And if you aren't, then here's another article we hope can convince you that stocks are better than HDB.
Article: 3 Reasons Stocks are Better than 99 Year HDB
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Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?
If you can only live in the property i.e. your own home, then it is NOT an investment. It is a CONSUMPTION.
ReplyDeleteProperty as investment REQUIRES you to rent it out i.e. an income-producing asset. Just like companies or businesses that you own shares/stocks of.