Friday, April 20, 2007

Stocks vs. Real Estate

A brief post this morning.

CNN yesterday ran this feature comparing stock and real estate investments across several dimensions, including diversification, leverage, return, tax treatment and more.

The overall clear winner: stocks.

Now that CNN has certified it, I guess it must be true... of course, the implication that one should invest in stocks rather than real-estate is completely inappropriate. A well diversified portoflio should contain assets from multiple asset classes. Even I, who have written extensively about the follies of the real-estate bubble and associated lending bubble, have real-estate investments as part of my portfolio. These currently account for about 8% of the total portfolio but I intend to increase the stake in this asset class to approximately 12% of the total over the next couple of years.

The bottom line is that investing is not an all or nothing game. Ruling out one or more asset classes is not a winning investment strategy.

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