please note my above post. I’ve been tracking my performance since 2008 and I have returned north of 20% on an annualized basis. 2020 has definitely accounted for a decent amount of that, perhaps 2-3%.

As for options in 2020, long calls have been the star, but as I said above those are the riskiest ones. For selling premium, which is the longevity play, 2020 hasn’t been great as volatility has been surprisingly low.

will explore. I assume these companies have no options or if they do, they’re illiquid?

Which market? Oh you mean the US market. You know there is a whole lot more to the Global equities market than just the US right? :)

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We'll see, after the P-demic. I believe that is global.

Exactly. Almost entirely microcaps, nanocaps, illiquid and dark companies.

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The S&P has returned north of 20% per year since 2008...

I'm not as optimistic as you guys, I still have my ration card from WW2. (My parents stole all my meat coupons, all I had left was veggie tickets.)

20% compounded annually? Don't have the numbers in front of me but I don't think so

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this is not a correct statement. Start here and play with the numbers. https://dqydj.com/sp-500-return-calculator/

12.5% since November 2008
14.75% if you reinvested dividends

dont use my link as your sole source; dig in elsewhere and find if your research jives with this. I always run my annualized returns against VFINX which matches very closely to the above link.

Correct, I wasn’t compounding annually. I didn’t know if either of you were in your calculations.


The S&P opened 2009 at 931.80. It closed today at 3647.49. That’s 23% average return per year on a year-by-year basis, not compounding. Are you saying you took the same 931.80 in 2008 and have turned it into 8,300+?

You are correct. Roughly 300% since 2008 over 12 years is an average of 25% per year. But, this does not take into account the compounding you mention. My returns are annualized using modified internal rate of return (XIRR function in excel). This takes into your starting balance, your ending balance, cash flow in and cash flow out. The number it gives you takes into account the compounding of your returns year over year.

Long answer longer; without doing the math, yes; my returns have probably come closer to the 8,000 you give.

How about I give you $100K & you give me a guaranteed 15% return for 10 years? You can keep the rest. You can collateralize the deal with your portfolio.

I think investing other peoples money is where it goes from “fun”, to “not fun”. Truth is, it’s not as hard as “Wall Street” wants us to believe. I’m no genius, I just followed The Motley Fool religiously, bought great companies and rarely sold anything. A handful of these great companies will provide outsized returns (1000-2000%) and voila, market beating performance! The hard part is sitting on your hands and not “taking profits”.

It’s working for me; but as is it’s so frequently pointed out here, got to find what works for you!

This times a million. Famed value investor Joel Greenblatt stated this. He says he had to screen who his clients were as most people want to question his performance every week rather than look long term. And he averaged 50% annual returns for 10 years. Imagine the compounding on that!

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A good friend of mine is an RIA, and he interviews his clients, not the other way around! Imagine that! He just turned away someone a week or so ago, he could tell they weren’t cut out for his style of investing, despite his incredible track record. They would most certainly be the daily or weekly called asking why the market is down and if they should get out or the market is up, should we take the profits and get out; type of person. It would be incredibly difficult to manage someone’s emotions AND their money.

Food for thought: https://www.cnbc.com/2018/05/07/warren-buffett-10000-invested-in-an-index-fund-when-i-bought-my-first-stock-in-1942-would-be-worth-51-million-today.html

This guy can’t beat the S&P. He’s the GOAT of investing.

Jim Cramer who is a prophet to some, and a fraud to others, he can’t beat the S&P.

Investing in the S&P is investing in America. Is it 100% of my portfolio? No. It’s 100% of my 401k though. Outside of that I have had some incredible luck since the market crash of 2008. You guys can compare percentages and strategies all day, bottom line is S&P with DRIP (dividend reinvestment program) is tough to beat over time.

Interesting side note is that the S&P is basically turning into a tech fund now. Will be interesting to see what happens over time... but I wouldn’t bet against American companies.

This is the problem with historical data. You cherry picked 2009... the very bottom of the market. If you instead started just one year earlier, and bought the S and P at the start of 2008 (it was at 1447), you’d have a much more normal return of about 12% between then and now. Or if you lost your nerve and took your money out in 2012 you would have minimal profit (and you would’ve lost money if you had started in January 2007 or Jan 2008).

It’s historical market timing to compare someone’s performance to the market’s performance during one of the longest bull markets in history.

15% is pretty steep ask for a loan collateralized by a portfolio. 4-7% in a margin account would be a much better deal.

Fidelity Margin Rates
Tradestation Margin Rates
Tastyworks Margin Rates

Amen to that! The "not fun" aspect of investing other people's money is what kept me from accepting partners in any of my real estate deals. Explaining my decisions on distributions vs reinvested earnings didn't sound all that appealing.

At some point there may be a place for passive investors in syndications, but that day isn't here yet. If it does happen, there will be very clearly spelled out expectations about management, distributions and capital events. Aw crap, I think I just talked myself out of it again...

Excellent point, the same holds true in real estate. Lots of us were "real estate geniuses" just by virtue of the fact we started buying in 2007. When analyzing portfolio performance, the income from the properties is the most important metric. Equity can fluctuate by a huge amount with a small movement in cap rates on commercial property. The net operating income is what pays the bills and keeps you solvent.

Problem is... that doesn't sell systems, or software, or memberships, or subscriptions or clicks or books. Sure, you can make great money without thinking or regularly tracking the market, but where's the fun in that?

I have always been perplexed by the stock-picking sections of personal investing magazines that went to print weeks or months before I'm reading them. Having read the diversification advice in the preceding articles of that same magazine, I'm certainly not going pick individual stocks with any significant portion of my savings and if I were, it wouldn't be based on advice in an old school magazine.

To each their own, I guess.

Over the past decade Buffett has lagged the S&P 500 but over his career he's handily outperformed the S&P 500 with 17%+ compounded annual returns. The more assets you have under management the harder it becomes to outperform the SPY

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By no means am I here to pursued you to deviate from what makes you comfortable. But I’m living proof that the s&p can be out performed.

It is ESSENTIAL I compare percentages until I’m blue in the face because you must keep score. If anyone uses an advisor, I challenge you to demand their annualized rate of return versus the S&P 500. 99% chance they don’t track it and will reply with some nonsense as to why.

The traditional wisdom you mention is accurate regarding outperformance of the S&P but I ask you, compared to what? John Smith, individual investor? Or Mega Fund actively invested fund? The traditional wisdom is often comparing the S&P to the ladder. Actively managed funds charge a higher fee and therefore people demand ACTION for that fee. The ACTION the funds take is what kills their performance. My point is that you can concentrate your portfolio and do NOTHING and outperform the S&P by holding great companies, many of whom are listed on the S&P.

The argument is that the law of averages will return my peformanxe to that of the S&P, but this is why Its essential that track performance. If it ain’t working join the crowd and index, but given a 12 year collection of data I’m beginning to see the reality of out sized performance. It’s astounding what outperforming by 5-10% annualized does to a portfolio when you run hypotheticals on a calculator.

Just consider who is telling you that indexing is the only way (institutions, media) and if it’s an advisor demand their performance versus the S&P. And whatever you do, accept no less than the average, it can cost you millions in the long run!

Yes, those are absolute garbage! The problem is, everyone is always looking for the next Amazon at $1 when the best bet is just investing in Amazon. But people price anchor and say “I missed that one, too late”. I’m no exception to this but buying excellence and continuing to do so is where the real money is made!

Well said. For the portfolio/mutual fund/hedge fund manager managing hundreds of millions if not billions of dollars its difficult to outperform the SPY. However for the individual investor managing small funds it is significantly easier granted they have dedicated time learning different strategies and have picked one that fits their personality and temperament.

This is probably diving alittle deeper into the weeds than necessary but I think it needs to be discussed due to the focus by Index investors on the SPY as "the market". The SPY is only 1 of several "markets" that technically are called asset classes. Many use the SPY as a proxy for US Domestic equities Asset Class in a diversified portfolio including a strategic mix of other asset classes like Foreign Developed index, Emerging market index, US REITs(Real Estate) Index, Foreign REITs, Bond Index, and Commodities.

The goal of maintaining a diversified portfolio is its difficult to determine with consistency which of these markets will outperform as every 10 years or so there is a completely new performance leader. There are periods of over 10 years where REITs, Gold, Emerging markets, you name it has destroyed the SPY. While the SPY has had a spectacular run over the past decade, the expected returns over the next 10 years look bleak due to high valuations. I wouldn't expect more than 5% compounded annually returns for the SPY over the next 10 years. Foreign Developed and Foreign Emerging markets have much better valuations and therefore better expected returns of 7%+.

The US is a great country and still will be over the next decade but successful investing is not primarily about investing in the best companies but investing at the best prices/valuations. Google the "The Nifty 50" for a famous example about paying too much for great companies.



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What do you guys think is better for long-term growth and wealth building, real estate investing or stocks?

I'd say both are equal go with the one you are more passionate about.

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Simplistic answer but do both. I have been nicely pleased with my commercial real estate and very happy with my stock portfolio. I am a pilot not an expert in those endeavors. Becoming wealthy is 90% discipline with common sense and 10% luck. MHOO.

Well I am super disciplined. I buy my lottery ticket on the regular every week. Need that luck to kick in. I figure it’s a better investment than my 401K.

Excellent point. Personally while I'm not Jewish I do subscribe to the philosophy from the Talmud text of "Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve."

So for me:

33% in emergency fund

33% in Real Estate (Syndications/Partnerships)

33% in Net Net and Deep Value Equities around the globe

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Side Hustle
 

I was just making an apples-to-apples comparison to the timeframe mispoken quoted. Nothing more. And I offered up $100K at 15% since he claimed his strategy would allow him to make a handy profit while still paying out to me. Why would I sell my money to him at 4-7% when the S&P is going to give me 10%?

Because the S&P doesn't just give 10%. If you were lucky enough to retire in 2008 you took a hit that took years to recover from if you were brave enough to not liquidate. In the mean time your income took a huge hit due to the lower values in your portfolio. If you were trading options or futures and taking advantage of the down move you gained and your income rose.

Don't fall for Buffet's BS. He actively trades stocks, sells mountains of puts and calls, trades in warrants and bonds, and buys entire single companies. If you think he would have his many billions if he just bought an index fund and went to sleep for seven decades you're nuts.

I tend to lean toward equities just for simplicity. Money in account, buy stock, check back in 30 years.

I have started dabbling in RE but only through an acquaintances RE private equity firm. He’s involved in assisted living facilities and the returns are quite attractive. That’s as far as I’ll go into RE; I don’t see myself buying rentals. 12-18% via private equity is more than enough to satisfy my RE needs.

Either way; these two things are the only shot we peeons have at creating real wealth.

Just to clarify Uncle Warren isn't BSing. The S&P 500 index is an Easy Button for those who are not well versed with investing ie his Wife. That's why his will has her investing 90% in the SPY and 10% in bonds.

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Any investment philosophy can be back tested with defined parameters and declared the victor.

My answer is based on comparing a 14 year track record in real estate vs 29 years in stocks, options and mutual funds. When comparing the two approaches, I've invested similar amounts, made 4x more in real estate and done it in half the time. The extra time spent on real estate investing has been compensated with a salary and not included in the investment portion of the returns. Some real estate investments were leveraged with personal guarantees that added risk not present in a 401k. Some stock/option trades involved margin that created risk not present in non-recourse CRE.

Short Answer: Income producing real estate is better. My two favorites are passive multi-family investing and independent owned self storage. Light industrial and office/warehouse are my next set of favorites. With real estate, you can reap the spoils and still maintain the tax advantages. With stocks, you either wait 'til 59 1/2 or pay taxes as you go, diminishing the returns. I get money every month from real estate, but most of my stocks are locked up in retirement accounts.

Longer Answer:
Independent Owned Real Estate - Best option for highest % returns.
-Single Family Rentals (1-4 units) independent owner self managed or via a property manager.
-Multi-Family Rentals (5+ units) independent owner self managed or via a property manager.
-Single Tenant Net Leased - Retail, industrial, medical, office i.e. Dollar General, Sonic Drive In, DaVita or you favorite local mom/pop business
-Multi Tenant Net Leased - Same as above with more tenants, i.e. strip center, office building, multi-tenant warehouse
-Self Storage - from small class C up to large class A. A larger property can support hiring a part time or full time manager or both.
-RV & Mobile Home Parks - similar to storage. Smaller parks operate with a park host vs full time management.
-Any of the above could be bought purely for the yield from day one OR they could be a value-add property where you improve the cash flow via management and rehab.
-Farm land rental - Cash rent (2-4 annual payments) could also include a profit split on harvest.
-Raw land speculation - you pay holding costs with no income while waiting on appreciation
-Land development - This gets into some gray area between investing and speculation. It is the ultimate value-add investment because you are starting with dirt and create a cash flowing asset. You can exit at any point in the development cycle from acquisition, entitlements, groundbreaking, C of O or stabilization.

-Flipping IS NOT investing, it is a contracting business.
-I've done all the above except multi family, RV parks and farm land, although I do have close ties to investors in those three categories.
-The best parts of real estate are inflation protection and tax free access to equity via refinance.

Passive Real Estate - Best option when you aren't comfortable or interested in running a business.
-All of the above assets with someone else managing the asset and taking a cut of the revenue and profits for doing so.
-Each Private Placement Memorandum is different. DYODD. Fees and payouts vary widely.
-Some offerings are only for accredited investors, others accept sophisticated investors. Learn which one you are.
-If you have more money, the SEC has fewer guardrails.
-SEC Regulations - Here is a good summary of Reg CF (crowdfunding), A+, Reg D 506 b & c
-You are investing in a deal sponsor as much as the actual property. Vet them both.
-Local RE clubs are one place to meet deal sponsors, especially for Reg D 506b (sophisticated investors allowed, no advertising)

-Returns are generally lower than individual ownership, but you aren't making operational decisions. It is what you pay for outsourcing the headaches.
-My experience has been limited to Reg D 506b as an accredited investor. I've actively searched for, met and vetted every deal sponsor.

Stocks:
-Individual stocks are great if you know how to pick them. Warren Buffet and others have done well here.
-It takes time researching stocks, probably more than it does with real estate.
-Realize you are buying part of a company, not a trend line on a chart.
-Index ETFs are one way to reduce risks and possibly returns.
-If you crave the "action", get out now while you still have money.

Not Stocks, but Equity:
-With a 5-6 figure down payment you can buy 100% of a small business.
-"Acquisition Entrepreneurship" is the Bing/Google search phrase.

Options:
-You are buying and/or selling insurance.
-If you know how to calculate risk and have self discipline you can make more money that with stocks.

For non-retirement accounts I use a tax efficient approach. BRK stock and S&P ETF make up the bulk.

How much do you have in an emergency fund? That’s a big chunk of change just sitting around especially if you’ve been adding to it for years.

I have about 150k in emergency fund money although it is quantitatively invested across multiple asset classes thru an algorithm that uses exchange-traded funds and strives to achieve a favorable risk-adjusted return by minimizing volatility while maximizing total return.

Not sure how to attach pictures on here.

WKHS bought at $4 and change, now at $22+ with major catalyst looming.

RMG—Romeo Power (SPAC) bought at $10.50. Now ~$20.

MRNA.... yes moderna, bought at $19.36. Now $145.

DAL bought at $19, now $41. (Selling soon).

RARE bought at $42.10. Still holding at $157.

SPOT $74. Now $300+

PYPL at $89.

List goes on and on. I have just eclipsed $600,000 in my regular trading account. Not tax sheltered so that part kind of sucks. Many of the positions above I hold in Fidelity brokeragelink. I was just making a point that in many cases funds and individuals don’t beat the S&P. Meanwhile well on track to be a millionaire by 40 not including 401k. Including that I am there, which is a personal goal I am very proud of. $400k in 3.5 years is doable.

Electric vehicles and renewable energy are hot hot hot. I’d highly recommend looking into PLUG, WKHS, and RMG. As far as WKHS, Cathie Woods from ARK is a major holder and adding almost weekly. Best of luck to all of you. Sound like you know what you’re talking about for a bunch of pilots :)

Wasn’t really “Buffett’s BS” that I originally posted. Just an example of what happens to money when invested in America and enrolled in a DRIP. My old man started a fund for me when I was a young warthog with $14,000 in it. S&P was his play back then. Today that’s a six figure account with zero additional investment.

I love these posts. Time to start taking some profits. When the taxi driver starts telling you about all the money they are making, it’s a sign of a top. Kind of like AA Doug saying they will never lose money again.

Thanks for the write up. Very informative!