chris’ corner - #1

Hi! You may not have heard from me before, but you may have seen my picture on the Porte Rouge website. So before I start with my first blog with Porte Rouge, I think I should tell you a little about myself. I started working for Porte Rouge as part of a work integrated learning program through Lakehead University. As of writing this I am 2 months away from graduating with a Honours Bachelor of Commerce majoring in Finance! What may surprise some of you, being I am with Porte Rouge, is that I am not in the real estate business myself. Instead I tend to focus more on investments in the stock market. Those investments are sometimes are long-term strategic investments, and sometimes they are more…. speculative. I was one of those people that traded Gamestop last year, I spend a lot of time on Reddit forums, such as WSB, and Discord talking about my investments and what companies I am currently looking at. Find me on Discord if you want my username is MorrillLynch!

A lot of people when looking to take their first steps into investments are not too sure where to start. That is alright! There is no 'proper' way - or secret method that provides guaranteed success in investing your hard earned dollars. There are pros and cons of every method of investing out there. TikTok finance personalities may have you think that there is a definitive best way to invest 100% all you have to do is sign up for their emailer or something. Every time I see something like that I think “Well this can’t be that good of a strategy, if it guaranteed the returns they are talking about why are they still working to get me involved? I would be in Cabo drinking Mai Tais with returns like that!” If investing was as easy as those TikTok people make it out to be, why aren’t we all millionaires!? Investing is a beneficial thing, and can create a lot of benefits for you, crazy returns come with crazy risks! My goal for you after reading this, whether or not you are even investing yet, is that you become a little bit more comfortable with the idea of investing and maybe you have a better understanding of what investing space you want to participate in. At Porte Rouge we want to not only help our clients, but provide everybody with knowledge that will help people understand more about the world of finance and investments.

Everyday in life I have found the majority of people are in two schools of thought, invest in the stock market or invest in real estate. Now I may suggest a blend of the two, but what should your main focus be? Well that is a question for you to decide. It is important to note there is no wrong answer! The average return from 1999 till 2020 kind of surprised me, I would have expected the TSX index to outperform the housing market, but that was not the case! The housing market, which I based on 11 cities across Canada, has higher returns than the TSX index. It is worth knowing that the C11 index, which I used to gauge the returns, looked at 11 of Canada’s biggest cities. Location, employment opportunities, and other factors will influence individual house prices, this just looks at the Canadian housing market as a whole.

Average Returns (1999-2020)

In the graph below you can see the volatility of the TSX index compared to the Canadian housing market. I may be getting a bit ahead of myself, what even is volatility? Well, the stock market and real estate market showcase volatility quite well. The TSX has a line that looks as though it may have been drawn by a kangaroo! while the housing markets line is much flatter. With the housing market you very consistently make very close to 6% every year. With the Stock market your average return may be 5%, but some years you are down -30% and others you are up 30%. The further it is from the average every year - up and down - the more volatile an asset it is. So if you are more concerned with a 'safer' investment, one that is rather consistent year in year out, you may want to focus your attention on real estate. If you have been waiting for prices to drop before you purchase real estate. The drops in real estate are much smaller than the drops in the stock market. that strategy may work better with stock market instead of housing, because of the high level of volatility. There is still no better day than today to start though, compound interest is a magical thing - Einstein’s 8th wonder of the world in fact - your interest earns more interest with age, getting better with age like a fine wine, start planting the grapes today!

Yearly Ups & downs (1999-2020)

One aspect of real estate that requires a certain type of person is the human element of it. The human element may be exactly what you are looking for, you want to have that connection with people around you. You like helping people and want to help them find living space. Or you are someone who likes to invest their money without all of the strings attached. You never get a phone call from a company you own stock in at 4AM saying that there is a water leak, those are the types of phone calls you may be receiving in real estate. The human element has benefits though, with housing prices increasing at a fairly consistent rate, when compared with the stock market.

One of the differences could come in the form of dividends and rents. Your stock portfolio may pay you dividends, usually some sort of percentage of the stock, these payments are quite consistent and will almost always be paid without much concern. Rent on the other hand requires a bit more work. Good tenants that pay consistently and on time, living on your real estate for the long-term are the dream! but it does not always workout that way. Sometimes you have extended periods of time where the property is vacant, or a tenant cannot pay their rent on time. These things happen in the real world and are worth considering before making financial decisions. It is possible to hire a property management company to do all of the human elements of real estate, while you kick back and collect your cheques, but the fees associated with such services come right off the top and could seriously impact your potential for profit.

Real estate can be an exceptionally rewarding avenue of investment. Building relationships and helping to build a community while also growing your income streams. The stock market can also be a great tool for your investments, life gets busy and you can essentially set it and forget it in an index fund. Whatever your concern we are here to help! if you have any additional questions or need an extra set of eyes to help you make your decision we are free to help. Welcome to Porte Rouge!