Stocks, long bonds, cash and gold. 4 assets at 25% each. It doesn't get much simpler than Browne. Maybe too simple? In my opinion, there is at least one important asset that has been overlooked...
Real estate
Real estate has some things in common with gold. In fact, both are sometimes referred to as real assets. Personally, I find that the shares of certain quality companies are at least as "real" as yellow metal or a house, but that's another story.
The tangible reassures. They say that we invest in "stone"... it brings security. Go tell that to the Americans. The subprime crisis has considerably tarnished the robust image of real estate. That being said, comparison is not reason, and Switzerland is not the USA. Fortunately.
The merit of this crisis is that it has opened our eyes to the so-called ultimate stability of real estate. Yes, in some cases, even in stone, we can take big slaps. And when we don't expect it, it can hurt even more.
In Switzerland, the market has clearly experienced a big boom due to demographic pressure (immigration) and especially to the constant drop in interest rates over many years. In some respects, we find ourselves in a situation somewhat comparable to bonds, which have risen at the same time as rates have fallen.
Can we talk about a real estate bubble? You would have to be a specialist in the field to say, but you only have to look at the number of cranes in our cities to tell yourself that there is a small problem. Especially since prices are starting to fall and the number of vacant homes is rising. The only question is whether we will see a soft landing, which is plausible, or, less likely, a bursting of the bubble, "American style". Here again, it is difficult to be a fortune teller and especially useless to try to make plans on the comet.
It should also be added that real estate is not very friendly with deflation. On the other hand, it protects well against inflation. In any case, even if it is not as decorrelated from other assets as gold, real estate offers good diversification in a portfolio and above all, unlike the yellow metal, it pays income, even quite generous.
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Hello Jerome,
Real estate is also and above all a source of problems!
My brother, whom I am talking about in this article, chose real estate while I chose the stock market: http://www.celtinvest.com/preparer-votre-retraite
My yield is 4 times higher than his and I have no problems with work or tenants.In 2017, out of these 3 apartments, 1 will not bring him anything at all because he had to do plumbing work.
He is also so disgusted by the tenants that he has entrusted the management of his apartments to an agency and he will not buy the 4th as he had planned...
An uncle of my wife spent two weeks of his vacation cleaning one of his apartments because the tenant, not content with not having paid him the last rent, returned the apartment to him in a terrible state!
Real estate? In shares then! 😉
I understand the interest of real estate in order to diversify and stabilize one's portfolio.
On the other hand, I often ask myself the question of the REAL yield of real estate: We generally read that it yields in the range of 4 to 5% (in any case in Switzerland).
Do you think these figures are realistic? And above all, is this the short/medium term return? In other words, do these figures take into account the major and very costly renovations that will be necessary after 20 or 30 years?
5% percent in Switzerland is correct if we rely on the index that I will talk about tomorrow. It is also the reference figure used unless I am mistaken by professionals (even a little more I think) to estimate a property.
Now it's like with stocks, if you buy too expensive, the profitability drops, especially if you still have to do work in the case of physical real estate. In the latter case, let's not forget that in addition to the rents, you also earn in capital gains... Hey, that reminds me of something...