From comparison I get the following picture:
Buying real estate is often used because you can use the banks credit as leverage. Hence with 0 own capital and a 100% financing the own capital rentability goes to infinity. So good so far some of my friends were able to pull it of. The 12% above the 100% for all the paperwork they paid using own capital because otherwise (112% financing) the bank askes for securities which they did not want to give.
They get a overall rentabilty of 4-5%pa, not too bad. However using the same principle and with much less hustle (administration, maintainance, tenants,...) the world economy has risen so far 7.5%pa on average with a average inflation of 2%. This includes all the crazy crashes and up and downs.
So now, why should i not apply the principle to lend money for say 10years+ and invest it in a MSCI all world etf? As far as I see it, the only risk is if the global economy fails.
So my questions to the all you experts:
- To get an idea how realistic the worst case is: How would real life look like if world economy stagnates over a 10year average period?
- This portfolio is one of the most diversified, maybe adding 10% MSCI Developing Countries and the risk is spread across all sectors in all countries. Am i overseeing something?
- Why is barley somebody doing it, but the same principle is done regularly with real estate? I see it that buying a real estate would be the equal to only one unit of one sector of one country in my portfolio. Am I wrong??
Edit: I don't want to use leveraged ETFs because with daily equalizing the variabilty kills the winning (100units +10%-10%+10%-10% => is only 98)
Submitted February 14, 2017 at 03:46PM by geppetto123 http://ift.tt/2kumPdv
