age-old question of houses vs. shares

Forget predicting the future, but if I'm correct on the average returns over the last century, shares did the best, followed by real estate. Does that mean you would have been better off if you invested money in the stockmarket (and used investment income to pay rent) instead of becoming a homeowner-occupier?

Seb

Reply to
silicono2
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My house is valued at about ten times the valuation I bought it at 24 years ago. I am not better off, since I whilst I live in it I has no realisable value to me. If I decide to move/downsize, I'm only better-off to the extent that I'm prepared or able to buy a cheaper house, or to rent. Any other value will only be to my estate. The profit I've made on shares is available directly and now. It depends on what your investments objectives are.

Toom

Reply to
Toom Tabard

True, but to compare like with like you need to compare going "long" on property with buying shares. Your PPR is something you need (hence the fact that it is illiquid). If that's the only accommodation you own then you are neutral (as opposed to being long or short) on housing. You can't really compare it to an investment in shares - no one needs shares, so any holding puts you long.

It would be fairer to compare shares to investment property.

The comparison also becomes distorted by the fact that it's very easy to gear property investment, in fact it's the norm. Having an 80% mortgage means that your capital gains in property are magnified five-fold, which turns mediocre returns into spectacular ones. By contrast it's harder to gear investments in equities, and (because of their volatility) something best left to the brave.

Reply to
martin_pentreath

What?? If you're comparing a *geared* investment in property with a non-geared investment in equities, then the geared investment in property (with 5x gearing, ie an 80% mortgage) is far riskier. You magnify the losses as well as gains.

Reply to
Andy Pandy

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