Get off the mutual fund rollercoaster:
Real Estate key to investment success.
Equity funds, currency trading, small-cap investments, gold -- where can you best put your money these days? The Canadian Standard & Poor's Indices Versus Active Funds Scorecard (SPIVA), which measures fund performance against the TSX composite, indicates that since 1999, only 35 per cent of Canadian equity funds beat the index. For small-cap funds, over the three- and five-year periods, only about one-third outperformed their benchmark. Ok, really, that's just "economist-speak" for what most of us have found out the hard way -- mutual funds aren't always what they are cracked up to be.
What was once the darling of our retirement plans has been steadily falling out of favour. According to a Maclean's magazine report, mutual fund net sales in 2004 were half what they were in 2001, less than a third of the level they were in 1997. While people are pulling enormous amount of money out of equity investments -- $3.7 billion last year -- sales are still exceeding redemptions by $14.7 billion. Why are we still buying into this? Because mutual funds seem easy. The pitch says specialized financial knowledge and extensive research are not required, except when was the last time you were actually pleased with -- or for that matter, really understood -- all those annual statements you get in the mail?
In today's market, real estate investments can generally produce returns in the 20 to 50 per cent bracket, although I've seen a number of deals yield up to a 100 per cent return. What's more, real estate isn't a shaky gamble involving incomprehensible numbers on a balance sheet. It's a physical and stable asset that will appreciate over time and provide cash flow as your mortgage depletes. There's something to be said for the security of being able to touch your bricks-and-mortar investment and know you're not relying on some Enron-style accounting for dividends.
Yes, structuring your real estate portfolio, no matter how large or small, should be handled by a professional. You'll need help from someone with the experience to facilitate funding, structure your purchase offers and ensure your decisions fit well with an overall investment strategy. But property and mortgages are generally much more familiar concepts than EBITA's on a balance sheet or what effect a strong Yen has on trade volumes. You'll definitely need guidance, but a real estate investment professional won't be speaking an entirely foreign language.
Still, people hesitate getting into real estate mostly because of the frightening false impression that it, like polo and yachts, is an arena only for the already wealthy. Investment purchases can be made with as little as 10 per cent down and there are a variety of creative financing options to bolster your buying power. I've seen a number of successful investors start with a minimal amount of funds or even the disregarded equity in their home and convert this, literally, into a flourishing empire. People may not start calling you "The Donald," but you'll be building a solid net worth on a stable foundation.
Carmen Campagnaro
President & Founder
Pro Funds Inc.
905-842-7011 or toll free 1-888-330-3866 for out of town clients.
Pro Funds Inc. and R/E Active Mortgage services all of Canada and the U.S.
www.profunds.ca
Note from Paul Ferri, Sales Representative, RE/MAX Unique Inc. Brokerage
"We would be pleased to work jointly with Carmen and clients in identifying and selecting suitable real estate investments."
www.YorkvilleAgent.ca
