Personal Finance

Are uneducated people the only ones who think stocks are riskier than real estate?

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Deal Addict
Jan 5, 2006
1054 posts
253 upvotes
Mississauga
Forsa wrote: ...

The financial world is a 3 dimensional pendulum swinging through time. If you are in a city with low (<1%) vacancy rates and can generate a positive cash flow from buying a property and renting it then get a rental property and manage that well once you have maxed out your TFSA and have a decent exposure to equities via Index/ETF market. The topic was risk. You always have to look at your horizon, timeline. If you are younger and can afford to take a few temporary losses/recessions then you can get into higher risk stuff like buy stock when they are down or getting into various advanced stuff like options, day trading, etc. I have no experience in the advanced stuff. I've made many financial mistakes such as gold/silver, travelling the world, student loan debt, not paying off high interest loans first, etc. But I have learned from it and now that I am almost 30 I feel like I finally am starting to understand things.

Thanks for reading this rambling rant.
Thank you for that, to add a point that critical thinking skills is possibly the most important thing out there, but yet there's a lack of it. I'm not going to get into the debate about what to do, but it really depends on your personal situation. I have co-workers who always tell me that now is the best time to buy real estate to build equity, or else I'm going to get priced out. They tell me that their place appreciated 20% in the last 3 years according to the city's assessment and that prices will always go up for real estate. When asked if they think prices will rise at a steady rate as before the answer is always yes, but yet there's an inability to answer the simple question of who will be able to afford at that point since we certainly didn't get raises to match.

Always ask Who, What, Where, When, Why and How? That's all it takes to get a start on things. It's a shame that so many won't even ask these basic questions.

So really question the financial advisor telling you to buy Mutual Funds with a 3% MER and that is essentially a fund of funds.
Who benefits and is there a conflict of interest? What kind of fine print is there on these investments? Where's the investment risk or where geographically is the risk concentrated? How are the gains even possible and have all the costs been accounted for properly in calculations? What is the timeline for the investment and can you wait out the rough patches?

So don't just plunk down 5% on a mortgage at x% interest rate because your realtor told you prices always go up and definitely don't take out a line of credit or margin to buy AAPL stock because some analyst says the stock will hit $10000 with the upcoming holographic apple TV. Oh, lastly always question the mainstream media because there's little truth in the news and little news in the truth.
"If one's conviction is strong enough whether you're a bear or a bull, you should put your money where your mouth is. Otherwise, you don't have skin in the game, and you are nothing more than a cheerleader in the stands" - SamInfinity
Deal Addict
May 28, 2006
2389 posts
181 upvotes
Forsa wrote: When did this forum turn into personal attacks and rebuttals? I come here seeking informed debate with data, facts and sources to back up claims so that I do not have to scour the internet and to have a discussion based on these analysis or interpretation of those sources. Sad to see this PF forum degrade so much over the last 6 months or so. Personal attacks have no place on the internet. Such a waste of bandwidth. Here is something that I have been told, can someone confirm???

The best time to buy a house is NOW. The best time to start investing is NOW. Everyone needs a place to live so your primary residence is not an investment unless you are renting out portion to have others pay mortgage. At best it's a hedge against inflation. Some markets allow you to rent and have a lot of money left over. In Winnipeg a 1200 sqft bungalow like mine costs ~$1600 to rent. It costs me $1600 (mortgage, utilities, insurance, property tax) to operate.
1) Buy house/condo to expose yourself to RE.
2) Invest in equities. Index Funds, ETF's or even Mutual Funds. Ideally in this order TFSA, RRSP, Canadian $ dividend paying stocks, etc.
3) Expose yourself to higher risk markets when they turn down. Such as oil now or automotive/financial sectors during last recession.

The financial world is a 3 dimensional pendulum swinging through time. If you are in a city with low (<1%) vacancy rates and can generate a positive cash flow from buying a property and renting it then get a rental property and manage that well once you have maxed out your TFSA and have a decent exposure to equities via Index/ETF market. The topic was risk. You always have to look at your horizon, timeline. If you are younger and can afford to take a few temporary losses/recessions then you can get into higher risk stuff like buy stock when they are down or getting into various advanced stuff like options, day trading, etc. I have no experience in the advanced stuff. I've made many financial mistakes such as gold/silver, travelling the world, student loan debt, not paying off high interest loans first, etc. But I have learned from it and now that I am almost 30 I feel like I finally am starting to understand things.

Thanks for reading this rambling rant.
I would argue if you're looking for a place to call home and is your primary residence than you have to weigh the benefits and consequences. You have to acknowledge real estate prices have gone up a lot in last 5 or more years and may come down. Interest rates have been at historical lows for over 5 years. US has ended its quantative easing program interest rates will rise soon as Canada will follow US so not to lose anymore currency value.

But interest rates have never been this low so it could be a strong reason for you to buy that house and lock yourself in for next 5 years And a blip downturn in housing prices may not effect you if you intend to hold your home for the long term. If you accelerated your mortgage payments and insulated yourself with cash reserves over the next 5 years, a mortgage hike should be easy to handle.
Penalty Box
Apr 16, 2012
3565 posts
688 upvotes
Greely
Psycho44 wrote: I would argue if you're looking for a place to call home and is your primary residence than you have to weigh the benefits and consequences. You have to acknowledge real estate prices have gone up a lot in last 5 or more years and may come down. Interest rates have been at historical lows for over 5 years. US has ended its quantative easing program interest rates will rise soon as Canada will follow US so not to lose anymore currency value.

But interest rates have never been this low so it could be a strong reason for you to buy that house and lock yourself in for next 5 years And a blip downturn in housing prices may not effect you if you intend to hold your home for the long term. If you accelerated your mortgage payments and insulated yourself with cash reserves over the next 5 years, a mortgage hike should be easy to handle.
I would argue if you're looking to invest in the long term for retirement than you have to weigh the benefits and consequences. You have to acknowledge stock prices have gone up a lot in the last 5 or more years and may come down. Interest rates have been at historical lows for over 5 years. US has ended its quantative easing program interest rates will rise soon as Canada will follow US so not to lose anymore currency value.
Deal Addict
May 28, 2006
2389 posts
181 upvotes
What does stock prices have to do with buying houses for retirement? I think if you're not stock or investment savvy as most people aren't than forget the whole argument that instead of buying a house you could have made money investing in the stock market.
Deal Addict
User avatar
Nov 23, 2001
4486 posts
58 upvotes
Calgary
Depends a great deal on what country and currency, as to whether or not stocks are a good investment.

If you own rubles and went through the 1000:1 redenomination in 1998, stocks were horrible as was investing in the bank (which gave 150% interest for a short period of time) It didn't really matter what numbers meant at the end of the day. If you made 300% a year profit, you still ended up in the poor house because your 1000 ruble bill became 1 ruble by forced government mandate.

If you owned real estate in Detroit (Detroit being the most expensive city in America during the car boom days) then it constantly appreciated in value, of which you were taxed proportionately. At the end of it all when the boom went bust, people were desperate to dump their property to avoid the tax liability. Leaving a property to a grandchild would become a great burden on them financially.

Everything is risk. Even metals are risk in that they are not a producing asset, their primary use is that they can store value when the stock market and real estate cease to be considered assets.

The ultrarich are heavily investing in Swiss currency and bank accounts, even though they are now giving negative -0.25% interest rates? Why? Because at this particular point in history, housing and stocks are both seen as liabilities to them. The ultrarich also buy art like the $69.6 million Cy Twombly... Because owning art, is not taxable on a year to year basis like real estate, and is setup in a system that makes it easy to convert to other currencies.
A US nickel is worth more than 5 cents.
Sr. Member
Dec 24, 2013
668 posts
80 upvotes
Toronto
Psycho44 wrote: It's not as simple as a $60k profit. If not selling without realtor you have to factor in 7% profit, closing costs on buying and selling house and the possibility of mortgage penalty fees. And if you did maintenance and upgrades during those years it will eat away your profit too. But at least you squeezed out a profit unlike renting you would not have recouped anything and have enjoyment of your own domain.
Ummmm ... I think you are mleaving out property taxes and the mortgage interest you have paid also pay (quite substantial).
Sr. Member
Sep 20, 2003
669 posts
280 upvotes
Burnaby
Look everyone, diversification is KEY. I'm in it for the LONG TERM. I picked WINNERS for my porfolio such as Bowman, Donruss and Opeechee.
Deal Addict
May 28, 2006
2389 posts
181 upvotes
jblast wrote: Ummmm ... I think you are mleaving out property taxes and the mortgage interest you have paid also pay (quite substantial).
Thank you and you're right I left a lot of stuff out for convenience. And noticed I made a typo. It's 7% give or take for Realtor fees. Utilities bill eats up more than property taxes. And there's non refundable CMHC fee if needed that you lose if porting your mortgage and having to apply for a new one if needed. But you get my point.
Deal Expert
User avatar
Oct 19, 2003
20241 posts
8367 upvotes
Toronto (Bloor West …
I wish I could live in and raise my family my stocks, even after they tank.
Deal Addict
User avatar
Dec 14, 2006
3385 posts
441 upvotes
Montreal
4 years ago I wanted to buy, people told me wait it's gonna go down.
It went up.

3 years ago I wanted to buy, people said wait it's going down.
It went up.

2 years ago people told me, it's gonna crash.
It went up. Interests went down.

1 year ago people told me don't buy prices are going down for sure.
I waited, prices went up, interest rates peaked to an all-time low.

This year people are telling me wait, it's gonna crash.

I am saying : interests are low, if I wait another year the 300k house might me listed at 320k with rates around 4-5%

Screw that, I'm buying now.

Fact of the matter is no one can predict how the real estate market will be next year on in two, 3, 4 years. Canada is a stable economy, Toronto, Vancouver or Montreal isn't Detroit.
Psycho44 wrote: I would argue if you're looking for a place to call home and is your primary residence than you have to weigh the benefits and consequences. You have to acknowledge real estate prices have gone up a lot in last 5 or more years and may come down. Interest rates have been at historical lows for over 5 years. US has ended its quantative easing program interest rates will rise soon as Canada will follow US so not to lose anymore currency value.

But interest rates have never been this low so it could be a strong reason for you to buy that house and lock yourself in for next 5 years And a blip downturn in housing prices may not effect you if you intend to hold your home for the long term. If you accelerated your mortgage payments and insulated yourself with cash reserves over the next 5 years, a mortgage hike should be easy to handle.
I was there at the 32$ price error at dell.ca day AND at the 150$ off price error at fs.ca
RFD price error moto: "Buy now, think later." -Ahzuz
Deal Expert
User avatar
Oct 19, 2003
20241 posts
8367 upvotes
Toronto (Bloor West …
Ahzuz wrote: 4 years ago I wanted to buy, people told me wait it's gonna go down.
It went up.

3 years ago I wanted to buy, people said wait it's going down.
It went up.

2 years ago people told me, it's gonna crash.
It went up. Interests went down.

1 year ago people told me don't buy prices are going down for sure.
I waited, prices went up, interest rates peaked to an all-time low.

This year people are telling me wait, it's gonna crash.

I am saying, interests are low, if I wait another year the 300k house might me listed at 320k with rates around 4-5%

Screw that, I'm buying now.

Fact of the matter is no one can predict how the real estate market will be next year on in two, 3, 4 years. Canada is a stable economy, Toronto or Montreal isn't Detroit.
Yeah 4 years ago I was told the same thing, I bought anyway, thankfully.

But why does every single thread that even mentions real estate have to end up with the same old posts in it, aren't you guys all getting bored yet?
Deal Fanatic
Dec 5, 2009
5768 posts
3612 upvotes
Ahzuz wrote: 4 years ago I wanted to buy, people told me wait it's gonna go down.
It went up.

3 years ago I wanted to buy, people said wait it's going down.
It went up.

2 years ago people told me, it's gonna crash.
It went up. Interests went down.

1 year ago people told me don't buy prices are going down for sure.
I waited, prices went up, interest rates peaked to an all-time low.

This year people are telling me wait, it's gonna crash.

I am saying, interests are low, if I wait another year the 300k house might me listed at 320k with rates around 4-5%

Screw that, I'm buying now.

Fact of the matter is no one can predict how the real estate market will be next year on in two, 3, 4 years. Canada is a stable economy, Toronto or Montreal isn't Detroit.
I got the same when I bought in 2005. Some were claiming RE had peaked and I was buying in at the top of the market. Boy were they wrong.

But it's not just a numbers game. I could have invested in the stock market and done very well too. Maybe better. But I enjoy being a home owner and could never be a renter. Just doesn't work for me. Things like pride of ownership, the ability to "feather my nest" so to speak, be the king of my castle, and lay down roots for my family appeals to me in a way that can't be quantified in a RE appreciation statistic. It's my personal preference. But not for everyone.

It's all good. As long as none of the houses on my street get rented out, cuz those houses turn to *****. :)
Penalty Box
Apr 16, 2012
3565 posts
688 upvotes
Greely
Ahzuz wrote: 4 years ago I wanted to buy, people told me wait it's gonna go down.
It went up.

3 years ago I wanted to buy, people said wait it's going down.
It went up.

2 years ago people told me, it's gonna crash.
It went up. Interests went down.

1 year ago people told me don't buy prices are going down for sure.
I waited, prices went up, interest rates peaked to an all-time low.

This year people are telling me wait, it's gonna crash.

I am saying, interests are low, if I wait another year the 300k house might me listed at 320k with rates around 4-5%

Screw that, I'm buying now.

Fact of the matter is no one can predict how the real estate market will be next year on in two, 3, 4 years. Canada is a stable economy, Toronto or Montreal isn't Detroit.
Bears cannot respond to that.
Deal Guru
May 1, 2012
10538 posts
11427 upvotes
Toronto
Ahzuz wrote: 4 years ago I wanted to buy, people told me wait it's gonna go down.
It went up.

3 years ago I wanted to buy, people said wait it's going down.
It went up.

2 years ago people told me, it's gonna crash.
It went up. Interests went down.

1 year ago people told me don't buy prices are going down for sure.
I waited, prices went up, interest rates peaked to an all-time low.

This year people are telling me wait, it's gonna crash.

I am saying, interests are low, if I wait another year the 300k house might me listed at 320k with rates around 4-5%

Screw that, I'm buying now.

Fact of the matter is no one can predict how the real estate market will be next year on in two, 3, 4 years. Canada is a stable economy, Toronto or Montreal isn't Detroit.
We're at the peak of the housing market. It's going to crash badly. Remember 2008 in the US? Same thing will happen here but much worse. While all this is unfolding, the BoC will raise rates from emergency 1% to around 15%. This will basically default anyone on a variable and those renewing on a fixed.

In a nutshell, the entirety of Canada is going to be like Detroit or Flint. Be smart.
Deal Fanatic
User avatar
May 11, 2014
6582 posts
9090 upvotes
Rankin Inlet, NU
ZenOps wrote: Depends a great deal on what country and currency, as to whether or not stocks are a good investment.

If you own rubles and went through the 1000:1 redenomination in 1998, stocks were horrible as was investing in the bank (which gave 150% interest for a short period of time) It didn't really matter what numbers meant at the end of the day. If you made 300% a year profit, you still ended up in the poor house because your 1000 ruble bill became 1 ruble by forced government mandate.

If you owned real estate in Detroit (Detroit being the most expensive city in America during the car boom days) then it constantly appreciated in value, of which you were taxed proportionately. At the end of it all when the boom went bust, people were desperate to dump their property to avoid the tax liability. Leaving a property to a grandchild would become a great burden on them financially.

Everything is risk. Even metals are risk in that they are not a producing asset, their primary use is that they can store value when the stock market and real estate cease to be considered assets.

The ultrarich are heavily investing in Swiss currency and bank accounts, even though they are now giving negative -0.25% interest rates? Why? Because at this particular point in history, housing and stocks are both seen as liabilities to them. The ultrarich also buy art like the $69.6 million Cy Twombly... Because owning art, is not taxable on a year to year basis like real estate, and is setup in a system that makes it easy to convert to other currencies.
Just FYI, a redenomination on it's own does not destroy any value. It just gets rid of zeroes. It would have been a different case if they redenominated and prices stayed the same or only a certain value could be transferred per person (e.g. North Korea). Inflation is what destorys value.
Deal Addict
User avatar
Nov 23, 2001
4486 posts
58 upvotes
Calgary
Of course a redenomination destroys value. In real street value at the time in 1998 it was seen on the street as inflation of somewhere between 600% and 800% which was almost overnight. The day before the denomination you paid 1000 rubles (RUR) to buy somthing, by the next day you had to pay 6 or 8 new rubles (RUB), but you still had to go to the bank to change at 1000:1.

http://www.huffingtonpost.com/2014/12/1 ... 33546.html

Is the TSX a bad place to invest if a barrel of oil returns to $8.03 US like it did at the end of 1998? You tell me.
A US nickel is worth more than 5 cents.
Deal Addict
Jul 24, 2011
1100 posts
236 upvotes
Anikiri wrote: We're at the peak of the housing market. It's going to crash badly. Remember 2008 in the US? Same thing will happen here but much worse. While all this is unfolding, the BoC will raise rates from emergency 1% to around 15%. This will basically default anyone on a variable and those renewing on a fixed.

In a nutshell, the entirety of Canada is going to be like Detroit or Flint. Be smart.
you have a crystal ball!!!!?
Jr. Member
Dec 7, 2008
199 posts
59 upvotes
Toronto
Psycho44 wrote: It's not as simple as a $60k profit. If not selling without realtor you have to factor in 7% profit, closing costs on buying and selling house and the possibility of mortgage penalty fees. And if you did maintenance and upgrades during those years it will eat away your profit too. But at least you squeezed out a profit unlike renting you would not have recouped anything and have enjoyment of your own domain.
Yeah man you're just throwing away your money by renting, even if it's significantly cheaper than buying and even if you achieve a better return by investing the savings in a diversified portfolio instead of a single illiquid asset. Because equity!! 111
Deal Addict
Apr 19, 2014
1042 posts
991 upvotes
Anikiri wrote: We're at the peak of the housing market. It's going to crash badly. Remember 2008 in the US? Same thing will happen here but much worse. While all this is unfolding, the BoC will raise rates from emergency 1% to around 15%. This will basically default anyone on a variable and those renewing on a fixed.

In a nutshell, the entirety of Canada is going to be like Detroit or Flint. Be smart.
You forgot the part about renters knocking at your door at 2am to take your house from you.

In all seriousness someone should start a 2015 prediction thread where we put our bets on what the interest rate, Canadian dollar and year over year home appreciation for Tor, Van and Cal will be in dec 2015. Think it'd be entertaining to see whose the most right and who's the most technicrum

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