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Property Vs Stock Investments! – Part 2 by Rolf Suey

Last month DBS wrote an article in SPH “Property may no longer be pot of gold for retirement, says DBS”

I think this is the perfect article for investment companies and banks, and perhaps our government in an aim to cool down the over-hyped property market. Remember that it is DBS writing, SPH publishing. Hahaa….

A friend told me:

“the most parts of your body is not your hands, but your brains!”

Honestly, I do give my two cents’ agreement to the article that price-income ratios are getting too absurdly high at almost 15x median household income at upper range and 8.3x in the 80th income percentile range. E.g. 100K p.a. a year household income buying a 830K to 1.5mil house.

Hopefully Singapore property price will not be like Hong Kong! Otherwise all my kids, I am not too sure how they are going to afford it.

Many of my friends in the 40s purchased their houses recently. Almost all upgrade! Within my circle, I can confidently say none of them are “over-leveraging”. Some may not have very high income, but you will be surprised how much CPF they have as well as their bank savings as back-up plan to sustain the instalment. Most of Singaporeans I assume (hopefully) will still know how to do their sums in purchasing their property.

I am not too sure about those in their 30s though, as I have lesser encounter to this group in real life.

Apparently in Aug, I wrote the following article and also caused some “hooha”, when I said (using my own experience) that property is a better investment for me.

Read below: I should have said Which is Better for me back then!

Property Vs Stock Investments! Which is Better in Singapore?

Respectfully, I do thank all the commenters as diverse views are always better to give food for thoughts and improvements!

PROPERTY VS OTHER ASSET CLASSES – DBS

DBS article compared property to S&P500 investment since 2009 and are mostly referring to the second property investment (I reckon). Looking at the chart below, it is obvious that investing into S&P500 will have been the most lucrative. That is, if you don’t sell!

Then again, how many people bought S&P500 and hold for 10 years compared to people who bought property and hold for 10 years?

Also, the graphs below are just “overall” result, but there will always be people who performed better in individual property investment or stocks in relation to their skills or luck!

INTANGIBLES

Buying a second property for investment rental is definitely tricky considering the tax and hassle of finding tenants and other costs.  Trust me, you really have to do your sums correctly, because typically the rental yield is 2.5-3% (or lower and many other aspects), unlike dividend yields of REITS that tend to be higher.

However, if it is the property for your own stay, your investment is on a HOUSE that you and your family will spend most of the time in it. You can enjoy your house during your rest time, the house is a memory with your family members and friends. If the ambience and the environment are good, it also give you the intangible well-being. If you are alone, then likelihood is a big house make little sense or even renting can be a better choice if you are very apt in your stocks investment. To each their own, based on individual’s needs. No absolutely right or wrong.

One question I always ask myself is if I can enjoy my stock portfolio literally?

E.g. “kiss the mobile/computer screen?”…. perhaps looking at the numbers for ten years when it goes up give me emotional ego for nothing if I don’t sell? It do give me heart attack in the past also, when I do have stocks that go to zero.

Stocks movements are volatile. It does cause a lot of emotional stresses with the big swings. Amateur investors need to learn how to swallow that, and still hold on to your stocks if you think the long term is still sound. Frankly, it is not always easy as most of us always think we are the champion of stocks when we first started. Don’t kid yourself thinking that you are “Warren Buffett” the king of buy and hold without any feelings portfolio drops 30%.

Appreciate the veteran investors here to share your advice/experiences in the comment box when stock portfolio tumble during crisis in the past?

On the contrary, how often are there wild swings in property in the last 15-20 years. Factually, property prices did most of the time trend up in Singapore if not down by a bit. Of course there are exceptions.

Also, the ease of buying and selling stocks, also will cause your “itchy fingers” to click buy or sell too early. However you can’t possible “suka suka” sell your property as you like within 1 day or even 1 week as it is not as liquid. It is a big decision.

This non-liquidness of property is double-edge sword though. It is good in that you tend to hold longer and see better return. It is bad being in case of emergency rainy days, it will take some time for you to sell and get the cash. Or even you show that you are so desperate and buyers can take advantage of that for you to sell cheap and lose money.

HOW MANY OWN ONLY S&P500 FOR 10 YEARS?

Try going out there and ask people on the streets and do your survey what is the percentage who hold property for longer years compared to those who hold a single stock for longer years. I think the answer is obvious!

Next question to the people on the streets! How many people earn more in property (in real life) than those in stocks?

Generally, you do need more education in stocks than a property you stay in! Again, I stress the second property for investment is tricky and definitely need more investigation.

MOST INVESTORS INVEST IN MULTIPLE STOCKS

Furthermore, how many people who invest in Singapore will only invest in one stock S&P500.

You can argue about those in 2009 who buy Apple, Amazon, Facebook (meta), Google, who earn so much etc. I was a financial blogger since 2014 and not many invest into US stocks back then.

What about those who bought into SPH who published this article? Why didn’t DBS use SPH stock as a comparison since it is going to be published by them.

“I will take umbrage on that if DBS publish SPH stock chart as a comparison!”

Even during the bottom of the bottom for stocks in 2009, SPH still pale in the share price compared to today. How about you buying SPH in 2008? How about Sembcorp Ind/Marine, Keppel Corp, Comfort Delgro??? Compared to property returns?

Now, widen your horizon and ask yourself if the article by DBS is all balanced?

Ok, you are one of the few best investors who will throw everything into Tesla or Bitcoin and never take profits when they go 3-4-5x! Good for you, but not many will hold on to that so long.

Ok… still don’t agree with me…. never mind… I am talking rubbish!

BETTER TO HAVE BOTH ASSET CLASSES

End of the day, I am not saying to put all basket into property. Personally I have both asset classes in good balance. It is so important!

For your record in 2010, I was searching for our second property and we really like a house. However to make the purchase, it will mean I have to sacrifice my extra cash that I intend to invest into stocks. Therefore, I drop the idea of buying our first choice house for a cheaper one, and use the extra cash to invest into stocks.

To be honest, it wasn’t a good choice back then, LOL because property will have risen more…

Still, I am happy with my choice as I am not all in for property alone!!! And I have also learnt so much as an investor of stocks, and being a financial blogger that have definitely help me in my life.

Life is not all about money but also wisdom and life experiences. Ok… nvm I talking rot again.

Lastly, the DBS article also say that based on SingStat data, about 42 per cent of Singapore household sector assets still lie in property due to low propensity to invest, with shares and securities making up a mere 9 per cent.

This figure is not great and I am definitely encouraging newbies in stock investment to start learning but don’t get over-emotional or over big betting. Also if you do well in stocks initially don’t be over-arrogant. Journey is long.

As I always quote in many of my blog articles over the years

“If you are doing good, do not be too proud and help those who are not doing well; if you are doing badly, do not be too sad and stay positive. Help will come without you even thinking.  Be patient!”

Read below:

Crisis wipe out your winnings? Be wise rather than clever!

“The highest point of my life should be when I experienced the lowest point of my life. It is at the low point where I can experience a crisis and makes mistakes. Mistakes is good because it produces pain, and because of that, I will learn and remember the most, which will then make me improve and becoming better next time.”  – Rolf Suey

Happy investing….. best of luck for your property, stocks, bitcoins etc investments.

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