This is key – and can painlessly grow anyone’s wealth and net worth to the top of the tree
Renowned economist, banker, teacher, communicator, UNE alumnus Dr Don Stammer said this.
Based on market indices and the reinvestment of any income flows:
One dollar invested in Australian cash in 1900 would today be worth around $259.
If one dollar had been invested in bonds in 1900 it would be worth $924.
If one dollar was invested in shares in 1900 it would be worth around $879,921.
Although the average annual return on Australian shares (11.6% pa) is just double that on Australian bonds (5.6% pa) over the last 124 years, the magic of compounding higher returns leads to a substantially higher balance over long periods. Yes, there were lots of rough periods along the way for shares, but the impact of compounding returns on wealth at a higher long-term return is huge over long periods. The same applies to other growth assets such as property. To grow your wealth you need to have a decent exposure to growth assets. You can’t save your way to wealth.
Now let’s see what property can do – that no other asset class can do. Say we did not begin in year 1900 as above. Let’s say we waited 80 years until 1980, and only then started. That gives the other asset classes a good chance to beat property, doesn’t it?
If in 1980, you bought one property with minimal deposit at the median price back then of $34,700….and waited the average 7 years for it to inevitably double in value.
Seven years later in 1987, once it doubled in value, you borrowed to buy one more property at the new median price of the day, now $62,300.
Then seven years later in 1994, once those two properties doubled in value, you borrowed to buy two more properties at the new median price of the day, now $130,000.
Then, ongoing, every time the properties doubled in value, you borrowed more to double the size of your portfolio – 4 properties, 8 properties, 16 properties etc.
What position do you think you would be in now – today? Here is the answer.
You would own 63 properties worth $56M with a loan of $13.7M…….no misprint.
This is not something unachievable. There are a large number of “normal” people in Australia who own more than 100 properties.
Most people don’t achieve that success because they fall asleep at the wheel, they don’t hold on with focus and last the distance.
It’s not hard – you just have to do something every seven years or so.
The job we have at Canterbury is to stop you falling asleep at the wheel.