OMG! Our lunch was quickly stolen by the Bear!
We quickly realize how damaging and fearful the Stock Market can be? Company stock price can crash 80-90% so fast before we could even overcome our emotions to hold or cut losses, and some even went to ZERO before we can do anything!
With such fearful experience in the stock market, retail investors (those with smaller capital) start thinking in the current environment of low loan interest rate of less than 2% fixed for 3 years, it is better to invest in property. Property will never crash 80-90% like stocks. So it must be safer as a long term investment over the future bear markets.
We have to be extremely careful as retail investors (those with smaller capital) as objective comparison between property and stocks is tricky, because property is typically a leveraged investment, in which the retail investor makes a down payment equal to only a fraction of a property’s value and borrows to finance the rest.
The knowledge, and skills required for investing in property is far more complex than you think. The risks hidden in a leveraged investment are often not too obvious to many. Many retail investors will just think it is location, location, and location and that about it.
There are factors that are often overlooked by the retail investors:
1. You are putting probably more than 80% of your investing capital into 1 single investment and there is no room for judgement error. You have to be absolutely right in 1 bang.
2. You may under estimate the impact of future higher interest rate.
3. You may under estimate the risk of not getting enough rental income to offset the mortgage payment.
4. Forgetting that leverage is a double-edged sword.
5. Harder to cut losses
6. You can't do partial draw down from your investment to fund any unexpected expenses.
http://createwealth8888.blogspot.com/2009/07/investing-in-property-or-stocks-revisit.html <--- More reading if you may to continue ...
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