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Mark Hulbert: The Single Best Investment For The Next Decade

TedTed
edited August 2019 in Fund Discussions
FYI: “For money you wouldn’t need for more than 10 years, which ONE of the following do you think would be the best way to invest it—stocks, bonds, real estate, cash, gold/metals, or bitcoin/cryptocurrency?”

That question was recently asked of more than a thousand investors in a recent Bankrate survey, and the winner—by a large margin—was real estate. For every two respondents who answered stocks there were more than three who said real estate is the way to go.

Are these investors onto something? Have financial planners been wrong all these years? For this column I mine the historical data for answers.

On the face of it, the respondents to the survey need to go back to their history books, as pointed out in a recent column by my colleague Catey Hill. Since 1890, U.S. real estate has produced an annualized return above inflation of just 0.4%, as judged by the Case-Shiller U.S. National Home Price Index and the consumer-price index. The S&P 500 SPX, +1.53% (or its predecessor indexes) did far better, outpacing inflation at a 6.3% annualized rate (when including dividends).

Even long-term U.S. Treasury Bonds outperformed real estate, producing an annualized inflation-adjusted total return of 2.7%. Check out the chart below:
Regards,
Ted
https://www.marketwatch.com/story/the-single-best-investment-for-the-next-decade-2019-08-08/print

Comments

  • Lawlar
    In California, any argument that stocks are the better investment, falls mostly on deaf ears. I’ve tried to convince friends and relatives that over the long term stocks are superior. No luck. The reason is obvious. Homes that were purchased for $30,000 in the 60’s are now worth over a million. Along the coastal communities, they are worth many millions. Plus the buyer put only a small down payment (great leverage) on a loan that was tax deductible. And the land owners had a nice place to live. Statistics aren’t as convincing as knowing your neighbor’s home is worth a fortune. If I could relive my life, I’d buy a few homes with ocean views.
  • Old_JoeOld_Joe
    "Homes that were purchased for $30,000 in the 60’s are now worth over a million."

    No, they're definitely not worth over a million. However, they do now cost well over a million.
  • hank
    edited August 2019
    Sorry - but the 10-year time horizon mentioned renders such comparisons useless. Anything can happen over such a short (and random) time span. Everything runs in cycles, and the cycles can be very long. Since they were basically polling investor “expectations”, however, the article has value from that standpoint.

    I’ll say I continue to be amazed by the performance of real estate funds. Maintain a small “nibble” in OREAX - and the danged thing is up 19% YTD (20% after today) - following on the heels of several other good years. I keep expecting it to fall off a cliff - but hasn’t yet.
  • davidrmorandavidrmoran
    edited August 2019
    has good 3y outperformance, but compare with anything else (FRESX, FRIFX, e.g.) for shorter or longer, and not seeing it
  • hank
    edited August 2019
    OREAX tops FRIFX at: 1, 5 and 10 years (per Lipper). I wasn’t touting the fund, just commenting on the asset class overall. As you might recall, I have no brokerage accounts, Just some money directly with a few houses. Actually, now that Oppenheimer has been taken over by Invesco it appears my investment options have broadened quite a bit.
  • davfordavfor
    @hank You commented...
    I’ll say I continue to be amazed by the performance of real estate funds. Maintain a small “nibble” in OREAX - and the danged thing is up 19% YTD (20% after today) - following on the heels of several other good years. I keep expecting it to fall off a cliff - but hasn’t yet.

    It looks like OREAX lost about 6% in 2018 when there was increased concern about rising interest rates. That concern has faded this year. Maybe REITS will continue to make sense as long as we remain in a low interest rate world.....
  • johnNjohnN
    so what is the best plans? buy all these vehicles? I think that is what we have been doing w/ our portfolio and maybe on the right paths. The only thing we are lacking is hard assets like real estates for rent. We have O, Vanguard real estate etf, DRE in our portfolio, one pipeline preferred stock, and several real estate bonds. Many folks may agree that well diversified portfolio is best ways to go forward
  • hank
    edited August 2019
    davfor said:

    @hank You commented...

    I’ll say I continue to be amazed by the performance of real estate funds. Maintain a small “nibble” in OREAX - and the danged thing is up 19% YTD (20% after today) - following on the heels of several other good years. I keep expecting it to fall off a cliff - but hasn’t yet.

    It looks like OREAX lost about 6% in 2018 when there was increased concern about rising interest rates. That concern has faded this year. Maybe REITS will continue to make sense as long as we remain in a low interest rate world.....
    @davfor - Thanks for the dose of reality. I’d overlooked the nasty 2018 swoon in many markets. Also, I tend to use Price’s TRREX interchangeably with Oppenheimer’s OREAX. Nothing to do with which is better - but dictated more by logistics, since I invest directly with both companies. Looks like on March 6 of this year I shifted 100% from TRREX to OREAX (by moving funds around at each house).

    Wish I hadn’t deleted my running list of exchanges from about 5-6 years ago. However, I did buy into OREAX (umm ... maybe 2012 or 2013) after it had sustained a nasty licking. Was really in the cellar at the time. Yes - the falling rates have helped REITS. Personally I suspect they’re overvalued - but sticking to my normal allocation is the plan. You never can call the markets exactly right.

    Regards
  • davidrmorandavidrmoran
    hank said:

    OREAX tops FRIFX at: 1, 5 and 10 years (per Lipper). I wasn’t touting the fund, just commenting on the asset class overall. As you might recall, I have no brokerage accounts, Just some money directly with a few houses. Actually, now that Oppenheimer has been taken over by Invesco it appears my investment options have broadened quite a bit.

    yes, my bad, I shoulda stuck w FRESX only
  • davfordavfor
    edited August 2019
    @johnN said:
    so what is the best plans? buy all these vehicles?
    There is a saying a carpenter told me about 15 years ago when he was helping my wife and I build our first retirement home. It goes "Its kind of hard saying without really knowing." A decade is a long time. So, that saying pretty well answers Mark Hulbert's question about the single best investment for that period of time. Having said that, I would pick my largest portfolio holding, RPGAX, to answer the question. It has a broad multi-asset mandate, a fair amount of investment flexibility, and a top notch management team. That seems like a good mix for facing all the unknowns a decade's worth of crystal ball gazing brings to mind. Thinking more short term and small scale with a "Its A Low Interest Rate World" frame of reference, I just took a small, speculative nibble at MNR a few days ago.
  • AndyJ
    edited August 2019
    Ten years? Debt, equity, and private equity in renewable energy, electric vehicles, the subset of utilities that comprehend the times we live in, energy efficiency, batteries, materials needed for an energy economy makeover, possibly grid managers ... you get the drift.
  • RisklessInSeattle
    As in the past 30 years, demographics will determine the best investments. Millennials outnumber boomers now, and will continue to, even more so in the next decade as the boomers kick the bucket. My picks are: online shopping - Amazon, phones - Apple. Starbucks and Netflix round out my picks.
  • CrashCrash
    edited August 2019
    Lawlar said:

    Homes that were purchased for $30,000 in the 60’s are now worth over a million.

    Zip 91011. My son's grandparents. My first wife moved back in with them, all those years ago, following divorce. They bought at $20,000 in early 1960s and made small expansions through the years. Selling price 2 months ago: $1.9M
  • Old_JoeOld_Joe
    "Since 1890, U.S. real estate has produced an annualized return above inflation of just 0.4%, as judged by the Case-Shiller U.S. National Home Price Index and the consumer-price index."

    "U.S. real estate". "U.S. National Home Price Index".     There you have the joker in the deck . A national real estate index is totally meaningless. With respect to real estate, it's location, location, location. (I believe that I've heard that before, someplace.) Go ahead and show me how the "annualized return above inflation of just 0.4%" is true in zip 941__. Sure thing.

    Garbage in / garbage out. (I believe that I've heard that before also.)
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