Spoiler alert: Bitcoin is the clear winner at an 80% annual return, with āVenture Capitalā a distant second at 27%.
The S&P 500 is at #6, where Lori and I have all our 401(k) money, averaging a 13% annual return.
And then, almost near the bottom, a little better than Gold but worse than Bondsā¦.there's real estate! A paltry 5.4% annual return over the last decade.
That means if you paid $1 million cash for a house ten years ago, it would be worth $1.7 million today. That sounds about right.
But darn, it appears there was a much better return on almost every other investment?
Well, before you sell your properties and buy Bitcoin, consider this. They left out a part that they ALWAYS leave out, and it drives me nuts, because without this data, you can't truly assess a good versus bad investment.
Real estate is the only investment you can do with borrowed money.
If you paid cash, yes, that 5.4% annual is your profit. But if you got a loan, like most of us do, your return is exponentially bigger.
How much bigger? Well, it depends on how much you put down.
If you put 20% down, with 5.4% appreciation, after ten years, your effective annual return is 57%.
Now we are #2 behind Bitcoin. That was easy.
Of course, I'm disregarding the costs of owning the home (repairs, taxes, mortgage interest, etc.), but also not including the benefit of housing, which you would be paying for anyway.
And I'm not including the property paydown. On a 30-year loan, in 10 years, you will pay down 16% of the balanceāthat's money in your column, too.
And another thing - real estate is the only investment you control. Every other investment on that list is ābuy and pray.ā The technical term for this is āspeculating.ā
Once you "invest," you have zero control. But you can paint, add a bedroom, or do whatever you want with a house. You can push that 5.4% higher and higher.
