Invest Your Money Wisely

Invest Your Money Wisely

 
I remember studying long term investment alternatives 25 years ago and reading charts that showed stocks returning an average of 9-14% annually.  This was far above the return of bonds, REITS (real estate investment trusts) or CDs.  About 20 years ago I bought my first REIT thinking real estate was undervalued.  Fifteen years ago I bought my first investment property.

I liked the fact that real estate was a tangible asset and felt the owner had more control over the return than a stock that’s value fluctuated at the whim of the market.  I’m not surprised real estate has been a good investment since then, but I was a little shocked by how much better the return has been than stocks, bonds & treasuries.  The graph below shows an average annual return over 15 years for stocks (NASDAQ) at 5.92%, 10 year treasury bonds at 4.28% and REITs (NAREIT) at 8.78%.  The NCREIF Property Index, a measurement of investment real estate managed by professional companies, returned a whopping 9.35%.  That represents a real return of almost 7% above the rate of inflation (CPI has been 2.44% over this period).

The declining interest rate environment has certainly been a factor in the success of real estate over the past 20 years, however if the fundamentals are strong on a piece of property, it will continue to be a good investment vehicle.  If you purchase and manage your own property, there can be more work than owning a stock, but the returns can be even higher.  Everyone has been told by their financial advisor that it is important to diversify your portfolio, but if real estate is not a part of that portfolio, you could be missing out on a large source of investment income.


-Dan Stiebel, CCIM

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Dan Stiebel

Dan Stiebel

Associate Broker
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