Why choose to invest in real estate when you could gain better returns from other forms of investments? I have been asking myself this question lately. You could easily make 100% returns a year in the stock market during a bull run. One of the hottest stock market in the world today is definitely China in which the Shanghai Composite Index gained an impressive 130% in 2006 and is still on an uptrend this year (around 50%)!
Or why be a boring real estate investor when you could be a trader? For example, take the legendary trader Richard Dennis whom borrowed several thousands dollar in the 1970s and made US$200 million in a span of 10 years by trading commodities. In 1983, he taught a group of students his trading methods whom are now famously known as the ‘Turtle Traders’. The ‘Turtles’ gained an impressive average annual compound rate of return of 80% over the next 4 years. So why real estates investments?
Simply because, what you gain trading in the markets. . . you could easily GIVE it back. Everything in China looks good with impressive earning records. However, the stocks there are trading at a very high PE ratio (30x - 40x) and many are predicting a sharp correction in the future. While the China growth story is set to continue. . . there is a risk of a bubble burst. But don't get me wrong, I believe in buying stocks as a great form of investment. However, because of the volatile nature of the world markets today, what you gain in the stock markets you need to PROTECT. Real estates are one of the best forms of investments to protect your assets.
By all means, continue to make from your profits from stock investments or trading in futures, options & forex. Whatever profits you make, use real estates investments as a steady form of investment to preserve your wealth and fight against inflation. Diversification in different asset class is always a sound investment strategy. You might be extremely confident of your trading abilities. . . but even the legendary trader Richard Dennis lost US$60 million in the stock market crash of 1987.
A returns of 15% pa from real estates investments is easily achievable. It may seem like peanuts in comparison to stocks, futures, options and forex but it still provides a ‘good enough’ returns for most investors. Real estates are still a favorite asset class among the super rich to park their wealth, the average investors that can't ‘stomach’ the volatility of the stock markets. . . and for investors that are seeking for diversification.
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