Gold (as Real Estate)

It is interesting that one of the best performing asset classes over a period of time has been gold. To some extent this is simply a reflection of economic instability, uncertainty and pessimism. The bounce in performance is largely on a relative basis compared to other asset classes. As an asset class it performs well when investors become “nervous”.

Hard assets are worth more. Commodities are worth more, as long as there is a market for them.

Inherently, real estate is worth more. This arises out of fundamental analysis, and is not a reflection of recent prices or current trends.

Using fundamental analysis, an investor might be well advised to look to opportunities in a market which has suffered recently. In that regard, the stock market should be an ideal place to start. The difficulty with the stock market is that some companies will simply disappear forever. Nortel, once the biggest and best hi-tech company in Canada and the largest capital company in Canada is now worth nothing. It filed for bankruptcy. The same thing happened to GM and Chrysler.

However, real estate, even low quality real estate is always worth something. It offers lower rewards but also less risk. But over the longer term, it offers the excellent performance. What if you purchased the worst piece of real estate in Toronto, 5 years ago, 10 years ago, 20 years ago?

And, remember, gold the best performing asset class once was “real estate”.

Brian Madigan LL.B., Broker

Leave a Reply

Your email address will not be published. Required fields are marked *