Most sayings and proverbs look contradictory. For example the famous saying to like this. ‘Save a penny for a rainy day’; ‘Spend and God will send’ and ‘Invest your money in stone’ or rather real estate of gold, or put one-third of you money in property, one-third in business, speculation and one-third hold in cash. But a serious study over the past 100 years has shown that the best investment areas are unquestionably not in the real estate, as was the case over the centuries, and this is mainly due to specific facts concerning tangible land scarcity and the need for it.
The sense of happiness of owning a house to live in or a building that generates money is not comparable to happiness in any other investment. Financial disasters that have ravaged other areas of investment and stock exchanges, most recently in 2000 and 2008, have scared away many people, especially small investors, from venturing out of the circle of real estate. Despite the real estate boom in America in recent years, the increase in the value of agricultural and residential land from 1915 to 2015 was only slightly more than 3 times, or 1.1 percent more annually, says economist Robert Shiller of the Yale University, and this means the error of real estate investment, especially if we know that the general inflation in the same period was 15.5 times, or 3.2 percent per year from 1932 to 2015.
According to Schiller, the governing factor is supply and demand, the more demand for residential property, the large companies meeting demand immediately, and so prices stopped rising. A US study compiled by Bankrate. com last month, in contradiction to the idea of investing in real estate, showed that revenue in investment in the stock and bond market over the past 100 years was more than 10 percent a year. There is no real estate investment that exceeded the amount invested in Microsoft shares, Walmart, Berkshire Hathaway and Del, especially with reinvesting returns in the same stock.
It is true that the real estate is attractive but at the same time represents a financial and social responsibility and needs maintenance, and pay fees and taxes, unlike stocks that give the return on the day of ownership of the stock. On the other hand, those who own shares in a company are already part of that company.
The purchase of the Kuwait Buildings Company means owning part of the Avenues project, for example, and so with National Bank shares. But you cannot manage your part of the stock, while you rely on yourself, or your representative to manage the property directly in a proper manner while investing in stocks does not require any effort. There is also no minimum amount to pay if we want to invest in equities. In the real estate, there is a minimum required to pay, and this is not within the potential of many. The investor’s need for cash is almost immediately met when investing in stocks, but with real estate, the sale is more complex. The borrowing against the stock is much faster and easier than borrowing against the property, and of course a majority of these things make the stock more attractive than the real estate, but on two conditions, that the stock markets in the concerned country is advanced, and the manipulation of corporate management is almost non-existent. Therefore, the idea of investment in stocks are not suitable for application in corrupt countries, and do not benefit in the short term. I certify the validity of this study from my personal and continuous experience and monitoring of the capital markets from the beginning of the seventies of the last century.
By Ahmad Al Sarraf