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Real Estate is a Better Investment than the Stock Market

Submitted by admin_matt on Wed, 2016-10-19 17:19

There are two ways to make money in the stock market: dividends and capital gains.

Dividend yields are near all time lows, as shown in this historical graph of dividend yield of the S&P500.  The dividend yield of the S&P 500 is currently (as of October 19, 2016) 2.07%, so if you want to make $50K per year off of stock market dividends you'll need a portfolio of about $2.4 million.  

And then you also have to worry about the value of your stocks declining precipitously.  Several times in my investing lifetime the S&P 500 has declined over 33%, and many stocks have gone completely belly up.  If you're planning to retire on your stock portfolio, I wish you the best of luck, but urge you to consider real estate instead.

The Shiller P-E ratio (also called the CAPE, or "cyclically adjusted price earnings ratio") is now at a very high level.  High CAPE valuations indicate the the market is overvalued, and have been associated with impending stock market crashes.  Read more about the Shiller P-E ratio here.

Real estate (if you know what you're doing) seems to me to be a lot better investment than the stock market.  The stock market is like a casino.  You can only win in the short term.  In the long term the house always takes your money.

Matt Taylor, New Hampshire Private Lending, matt@privatelendingnh.com