Real Estate Investing vs Stock Market – Part 2
Yesterday we took a look at an email I received (during the crash) from a commercial investing company that wanted you to invest your money with them and I wanted to look at it further and include some ideas I picked up from a speaker at a past REIA meeting – please note that the stock market was way down at this time and guess what, it could do this again..
The email quoted: Stock market down (Dow) 53.78% in March 2009 from October 2007. It could easily say, if all the doom and gloom emails I have been receiving of late are true that the Stock Market in 2016 is down 50% from 2014 . . . . but we hope note.
At the REIA meeting mentioned above, the speaker reminded us of the rule of 72. Google this and you will get the basic premise that to find out how long it will take to double your money, take the rate of return and divide it into the number of 72. So if you are getting 7% on your money, divide that into 72 and it will take you about 10 years and 4 months.
Now if your stock market holdings were mirroring the Dow in 2009 and were down for the previous 2 years you had a task to bring your values back up to where they started. Basically you would have need to double your money. If you were at $200,000 in 2007 and you were sitting 50% less and $100,000, to get back to where you were, you need to double you money.
Based on the Rule of 72, look at the rate of return the stock market offers on average, I believe somewhere around 7% and it should Have taken you 10 years and 4 months to go from your $100,000 in the stock market to the $200,000 you had in 2007. Or if you were lucky and were able to get 12 % returns, then only 6 years.
So maybe you might want to look at other places to invest your money rather than the stock market. Where with an education you could very easily make 12% returns on your money, simply by being a lender or even better if you were able to acquire that realll killer deal.
We personally think Real Estate and Privately held Mortgages are a good bet. But it might also be something you know a lot more about. Maybe you are an expert on something like cars and know how to buy them low and sell them high. Maybe you are good and finding antiques in the rough at garage sales and selling them for top dollar on ebay. Or maybe you want to start a business. Just find something that you know you can get a better rate of return than 7% and you could probably get your money back faster.
We will look at Real Estate and Mortgages in our next posts. . .