Personal Finance

Real estate or mutual funds?

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  • Jan 4th, 2011 2:40 pm
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Newbie
May 30, 2007
4 posts
Earth

Real estate or mutual funds?

Hi Everyone,

Wondering if I might get a word of advice from y'all. I've saved about $300,000, $100,000 in S&P500 and $200,000 in cash. I'm not sure what to do with the money. I work abroad and my employer provides housing. I plan to move back to Canada (Toronto or Ottawa) in three or four years, at least for a while. I'm in my 20s and unattached.

Other than giving it away, I have lots of options:
1) keep things as they are;
2) put more money into the market into income/blue chip index-funds;
3) buy a house in Canada and rent it out.

4) Or a wild fourth option -- buy a property in Phoenix or Miami for around $150,000 and rent it out.

I'm leaning towards the second option because it's easy to maintain from abroad. But I don't like the risk in the short term. I like the idea of a house in Canada as I could pay less capital gains after living in it. And I like the fourth idea because the Cdn dollar is so strong and the markets there are so cheap!

Any ideas?

Thanks!
8 replies
Sr. Member
Nov 8, 2010
963 posts
214 upvotes
What are your goals? What are you planning to do with the money?

Is this money for retirement? Are you planning to take a 2 year vacation sometime and fund it with this money? etc....


It's difficult to give intelligent answers without knowing why the money is being invested.
Banned
User avatar
Feb 15, 2008
26318 posts
3242 upvotes
Calgary
If you do nothing else, here's my recommendations:

a) Diversify your stock holdings. For instance, 1/3rd XIU (TSX60 ETF), 1/3rd VEA (EAFE ETF), 1/3rd VWO (Emerging Markets ETF), and 1/3rd SPY/VTI (US ETF) would be better than leaving everything in the S&P500.

b) Diversify your 'cash' holdings with metals. For instance, you might want to convert a portion of your cash into gold, silver, and platinum physical metal. Historically, the combination of cash + precious metals, rebalanced periodically, performs better than just cash, or just precious metals.

c) Diversify 'cash' fiat currency amongst currencies. For instance, if you put $50k into precious metals, then you would want to take your remaining $150k, and put some in Yen, some in Euros, some in US dollars, some in Canadian, etc.

As for the houses, watch out, you might be exposing yourself to a tax filing requirement in Canada/USA, which would require you to pay tax on the entirety of your worldwide income. Your employer-paid housing may be tax-free in the jurisdiction you reside, but may be a taxable benefit for the purposes of computing Canadian taxes. Retain professional advice if you have questions on this matter.

BTW, unless you live in Phoenix or Miami, why on earth would you consider buying a house/condo there? Just buy yourself a REIT if you want exposure to that asset class. As a foreigner, you're not allowed to 'manage' a US investment property anyways, and its not like you're going to get a discount. Phoenix and Miami condos are 'cheap' (well not really!) for a reason.....
Deal Fanatic
Jul 1, 2007
8569 posts
1763 upvotes
$150K for a house in Miami or Phoenix? What are you talking, like 10 bedroom mansion? You can get something a lot cheaper than that, lol.

Seriously though, real estate is a roof over your head and land to live on, not an investment. Owning real estate in a different country than you live in just isn't worth the headaches.
Money Smarts Blog wrote: I agree with the previous posters, especially Thalo. {And} Thalo's advice is spot on.
Deal Addict
Nov 15, 2010
2043 posts
793 upvotes
Ottawa
Mark77 wrote: If you do nothing else, here's my recommendations:

a) Diversify your stock holdings. For instance, 1/3rd XIU (TSX60 ETF), 1/3rd VEA (EAFE ETF), 1/3rd VWO (Emerging Markets ETF), and 1/3rd SPY/VTI (US ETF) would be better than leaving everything in the S&P500.

That is a lot of thirds.
Sr. Member
Jul 11, 2005
956 posts
76 upvotes
[ Originally Posted by Mark77
If you do nothing else, here's my recommendations:

a) Diversify your stock holdings. For instance, 1/3rd XIU (TSX60 ETF), 1/3rd VEA (EAFE ETF), 1/3rd VWO (Emerging Markets ETF), and 1/3rd SPY/VTI (US ETF) would be better than leaving everything in the S&P500.

quote=eiad77;12187471]


that is a lot of thirds.[/quote]

LOL
Banned
User avatar
Feb 15, 2008
26318 posts
3242 upvotes
Calgary
coolcoolfi wrote: that is a lot of thirds

LOL

Well for being his age, he is underweight equities.....
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
Sr. Member
Feb 11, 2010
502 posts
262 upvotes
If you don't like the short term risk of the equity markets, consider the possibility that there may be as much or more risk in the short to mid term real estate market. I'd stick with your instincts and go with option 2 - much easier to manage. It is also more liquid so if your situation changes or you change your mind on what you want it is much easier to do.

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