Real Estate market over stock market

by Tim Broadway

Ditching the market for real estate

From Saturday’s Globe and Mail Published Friday, Nov. 18, 2011 4:25PM EST

Gerry Hogenhout, 53 Occupation Accountant, mortgage broker, financial planner and investment broker.

The Investor

Although he’s a licensed investment broker, ever since the stock market crash of 2008, Toronto-based accountant and financial planner Gerry Hogenhout’s main focus has been matching investors with would-be residential real estate buyers who, because they are self-employed or looking to buy a rental property, don’t qualify for a mortgage through traditional lenders.

The reason? “It evolved due to my complete and utter lack of faith in the stock market,” he says. Ever since 2008, “It’s my belief that the stock market has far too much volatility and increased risk for the average investor.”

His view on fund managers

Being in the business, Mr. Hogenhout regularly was privy to the thinking and perspectives of leading money managers. Yet, while he gives full credit to their insights and intelligence, part of his swing away from the market came from his realization that, “for whatever reason, they couldn’t generate consistent returns.”

Why 2008 changed him

Not only had he planned to restrategize that year, he became concerned at how the advice being proffered from the investment industry was similar to that uttered during previous market downturns, platitudes such as, “Relax, the market will come back.” But Mr. Hogenhout says that building global economic problems make that advice no longer valid. So why the same messages? The reason he says is self-serving, since money managers get some 2.5 per cent on managed money, and banks get a 2.5-per-cent spread on mortgages.

His stock market forecast

“I believe there will be continued turmoil in the stock market as the global financial crisis unfolds. We’ve only seen the tip of the iceberg.” If you can’t deal with increased risk and volatility, he suggests staying out of the stock market. If you can, then he says stick to companies making necessities such as household staples, “what people are going to need for sure.” He also favours dividend-paying stocks. “I’m not much of a fan of growth stocks when the only value is continued growth of the shares. The people I see with good quality stocks who aren’t trying to roll the dice and make a 50-per-cent return should be well-served.”

Best move

Early in 2001, just before the tech bubble blew up, Mr. Hogenhout put leverage to work, putting borrowed capital into a number of tech stocks. “It was very scary, but I went into it with a timing mentality.” In a matter of weeks, Mr. Hogenhout doubled his money and got out. And two months later, the tech wreck began.

Worst move

For Mr. Hogenhout, his worst move is a “coulda, shoulda.” When Nortel collapsed to under a dollar, he was watching it, he says, but his mistake was not buying as much as he could have because it soon roared up, although it later collapsed once more.

Advice

“I do not try to talk people out of staying in the stock market. If you are going to stay in, understand the increased risk and increased volatility that is present in today’s world. If you can’t look at your investment statement without getting upset, avoid it.”

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