So the WSJ says you should sell your real estate and buy stocks…
The Wall Street Journal posted an article by Robert Bridges http://online.wsj.com/article/SB10001424052702304259304576375323652341888.html?KEYWORDS=Robert+Bridges in this article Robert says that if you had $2.00 to invest back in 1980 and you bought a house for $1.00 and Dow Jones stock for $1.00 that the house dollar would have been worth $2.98 in 2010 and the stock dollar would be worth $11.49. However, he only used housing prices in California, which have almost always been over valued to begin with. However, if you take the median house price for the US, your $1.00 invested in 1980 would be worth $283.00 in 2010. So how are stocks better than houses again? The problem with all of these WSJ, The Economist, GQ, and Maxim articles on reporting are based on what they think most people want to hear, and that will not scare them off. The secret to selling an idea, is having an idea that most people already agree with or think is right. So when you tell someone owning your own home that you live in, is actually a liability and not an investment, freaks them out, just like when you say houses have gone up in value over the past 30yrs a lot more than stock. And to put that in to perspective, gold in 1980 was 559/oz and in 2010 1405/oz so a dollar of gold from 1980 to 2010 would be worth $151.00, so $32.00 less than owning a house. You cannot take advice from people who nothing about the other part of their argument. If you understand stock and are good at it, then keep doing it. If you are not, then don’t invest in it. the same with real estate. But you cannot believe 99% of the crap they publish in papers and magazines. That makes as much sense as going to a car dealership to buy an airplane. And for those of you who need it in black and white; if you want to invest in stock, talk to a stock broker. If you want to invest in real estate, talk to a real estate investor. The investor is the key word though.
Let’s say you did pick all the right stocks and made a huge pile of cash, when you cash out and try to sell off your stock, you have to pay capital gains tax on it. For example you sell enough stock to make a $100,000 in profit. If you made and sold that in a year you would pay about 25% in taxes, if you wait over a year your would pay 15%. The same is true if you Flipped a house and just sold it out right as well. However with real estate you can do a 1031 exchange and take those profits to buy a more expensive house to either live in or invest it, and this can be done over and over and passed on to your kids to do over and over, and never pay a dime in taxed on profits made. If you really want know which one has more strength behind it, call your back and try to borrow money to buy stock, or take out a loan that is backed by your stock.
The housing numbers I got came from the U.S. Census Bureau.
