Equities vs Real Estate

by Steve DeVoe
May 8, 2018

On the fenceEquities vs Real Estate: Keep an Open Mind But Stay Off the Fence

One day some time ago, my father and I were on our way to a favorite hunting area. It was a fairly long trip and as he often did, he used this “together” time to pass along life lessons as he thought required.

My father was a Stoic, and though I’m confident he never read Marcus Aurelius’ Meditations or even knew who Seneca was, if you were to look in a dictionary under Stoic, I have no doubt his picture would be there. I mention this because Stoics are big on quiet but definitive leadership and that day’s lesson was on leadership. It’s a big topic but the gist of his point on that particular trip was staying off the “fence”. He told me, “once you’re on it, it snags you and you can never seem to get off.” “Look, listen and learn” he would say, then make a decision and get on one side or the other. You don’t have to broadcast the side you’re on or try to bring others your way but be prepared, if asked, to profess your reasons and stand by them.

I profess: I’m a real estate guy when it comes to investment. I have had my adventures in the equities side and despite what I considered beyond a reasonable effort, none ended well. Since those dark days I have spent the better part of my real estate investment career advising on the virtues of real estate and the evil vices of the equities market.

Recently, I got together with a good friend of mine and as oft happens we end up in a debate on some aspects of real estate investment versus other options. We went back and forth as usual until he quoted an article he had seen that showed the history of the Dow Jones from the early 20’s until now. He claimed the average return over that period was well over 7%. Frankly, I didn’t believe him. I knew given long enough the tide floats all boats but I had a number in mind more like 4% or less.

The next day the article was in my email and I had a good look through it and I’ll have to admit he was right. In fact, as I scanned, I was shocked at a number of things I saw including the number of positive years in relation to negative years.

Don’t get me wrong, I’m not jumping the fence!  In my humble opinion there are still more positives to real estate; how about leverage for one. I’m sure my friend would be quick to point out you can margin equities (basically borrow to buy) but that is significantly different than mortgaging real estate.

Nevertheless, it brought to mind another Stoic trait, open-mindedness. Something, it would appear, I need to pay more attention to.

In an effort to be more open minded, I’m including the link to the article.  There is interesting information there, particularly for us real estate types. Remember to consider all possibilities, then pick a side or even both sides but try and stay off the fence!

Stock Market Yearly Historical Returns From 1921 To Present:Dow Jones Index


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