A Very Misleading Chart

It looks like a no brainer to put all your money in the SP500 but the chart omits some very important elements...

?? Learn: What is the #1 Asset Class?

When you see this chart, it seems like a no-brainer to just invest everything in the S&P as it’s clearly the number one asset class.?

This chart is great if you’re a financial advisor who only sells stocks.? But the numbers are a bit misleading.?

Let’s take a closer look at the real estate sector. This chart only shows real estate appreciation.?

It does not include the other elements of real estate investing such as rental income and financial leverage. Let’s add in those factors and see what types of results we get.

Summary of Real Estate Rental Strategy vs. S&P 500 Investment (2014-2024)

1. Real Estate Investment (Rental Strategy)

• Initial Investment: $100,000 (20% down on a $500,000 home in 2014)
• Mortgage Terms: $400,000 loan at 4.5% interest over 30 years
• Monthly Mortgage Payment: $2,027 (principal + interest)
• Home Value (2024): $1,198,973 (Metro PHX 9.14% annual appreciation over 10 years)
• Equity in Home (2024): $878,616 (after mortgage paydown)
• Total Mortgage Payments Over 10 Years: $243,240
• Rental Income: $25,000/year (5% yield) for a total of $250,000 over 10 years
• Maintenance Costs: $5,000/year (1% of home value), totaling $50,000 over 10 years
• Net Rental Income: $200,000 after subtracting maintenance costs

Real Estate Investment Summary (2014-2024):

• Home Value in 2024: $1,198,973
• Remaining Mortgage Balance: $320,358
• Closing Costs (6%): $71,938
• Net Proceeds: $806,677
• Total Cash Invested: $143,240 (down payment + mortgage payments - rental income)
• Return on Investment (ROI): 463.2%

S&P 500 Investment (2014-2024):

• Total Future Value: $402,471 (including initial investment and additional annual contributions of $4,324)
• Net Proceeds (after capital gains tax): $363,587
• Total Cash Invested: $143,240 (matching the real estate cash flow)
• Return on Investment (ROI): 153.8%

Final Comparison (2014-2024):

• Real Estate (Rental Strategy): $806,677 in net proceeds, 463.2% ROI
• S&P 500: $363,587 in net proceeds, 153.8% ROI

For the period, real estate puts $443,000 more cash in your pocket (minus any taxes).

To be fair this includes the big run up in prices after covid.? What if we look at a longer period and include things like the 2008 market crash?

Real Estate Rental Investment (2004-2024):

• Home Value in 2024: $1,458,879 (5.5% appreciation rate)
• Remaining Mortgage Balance: $213,867 (adjusted to 2004 interest rates)
• Closing Costs (6%): $87,533
• Net Proceeds: $1,157,479
• Total Cash Invested: $265,604 (down payment + mortgage payments - rental income)
• Return on Investment (ROI): 335.8%

S&P 500 Investment (2004-2024):

• Total Future Value: $1,014,603 (including initial $100k investment and additional annual contributions of $8,280)
• Net Proceeds (after capital gains tax): $902,253
• Total Cash Invested: $265,604 (matching the real estate cash flow)
• Return on Investment (ROI): 239.7%

Final Comparison:

• Real Estate: $1,157,479 in net proceeds, 335.8% ROI
• S&P 500: $902,253 in net proceeds, 239.7% ROI

The real estate investment provides higher net proceeds and ROI due to leverage and rental income, while the S&P 500 offers strong returns with a simpler, more passive strategy.

Key Takeaways:

Over the long term, rental real estate will provide higher net proceeds, tax deductions and includes passive rental income as an additional cash flow source.

But…it depends on timing and all the work you have to do, interest rates, etc.

The S&P 500 investment is simpler and more liquid, with less management effort required compared to real estate.? But..it can also lose value pretty quickly and can be highly volatile.

Both assets have done well.

Build a mix of both into your overall financial plan but don’t believe the chart that shows the SP500 is the clear winner. It is not.

?? Chart: US business earnings soared since 2020...

The expansion that started in the second quarter of 2020 is so far among the best since the aftermath of World War II ... let that one sink in!

?? Productivity: Turning Challenges into Opportunities for Personal Growth with Reframing

How often do you find yourself stuck in a negative loop, focused on the difficulties of a situation?

One of the most powerful ways to break free from that mindset is through reframing—the art of looking at challenges through a new lens.

Reframing isn’t about ignoring the reality of a problem, but rather about finding a perspective that empowers you to see it as an opportunity for growth.

Here’s how you can apply this technique to your own life, inspired by the work of NLP experts like Steve Andreas and Damon Cart:

Steps to Reframe Any Challenge:

1. Identify the Challenge: Pinpoint what specific situation or problem is causing stress or frustration. Be clear and concise about what it is.
2. Acknowledge the Feeling: Before reframing, it’s important to validate how you’re feeling. Ask yourself, "What emotions are coming up? How is this situation impacting me right now?"
3. Ask Empowering Questions: Shift your focus by asking questions like:
4. What is this challenge teaching me?
5. How can I grow from this experience?
6. What opportunities can arise because of this?
7. These questions prompt your brain to search for positive outcomes rather than dwelling on the negative.
8. Explore Alternate Perspectives: Imagine how someone else might view the situation. Ask yourself:
9. How would I feel if I were an outsider looking in?
10. What would a mentor, role model, or even a future version of myself say about this?
11. Shifting perspectives helps you see that your initial view might be limited.
12. Reframe the Language: The words you use to describe your experience shape how you feel about it. Instead of saying, "This is impossible," try reframing it to, "This is difficult, but I’m learning how to manage it."
13. Find the Positive Intention: Every negative emotion or situation has a potential positive intention behind it. Ask yourself:
14. What is this challenge trying to protect or teach me?
15. Is there something I’m avoiding that I need to address?
16. Create a New Narrative: Now that you’ve explored other perspectives, reframe the situation in a way that aligns with growth. Instead of seeing it as a setback, view it as a stepping stone to becoming more resilient, skilled, or knowledgeable.

Example in Action:

Let’s say you’re facing a tough project at work that feels overwhelming. Instead of thinking, “I can’t handle this,” reframe the situation by asking yourself, “How can this project help me develop new skills that will benefit me in the future?” This shift from anxiety to opportunity changes the way you engage with the task.

Reframing is a powerful mental tool. When you change your perspective, you can transform how you react to life’s challenges. The result? More growth, less stress, and a stronger ability to handle whatever comes your way.

?? Concept: ?A Simple Asset Framework

?? Resources:

??? Financial Planning

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Thank you for?reading!