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Should I Invest My Inheritance in Stocks or Real Estate?

Oct 27, 2018


As the Baby Boomer generation ages in Canada, we’re seeing inheritances being passed down on a greater scale as the years pass. Boomers started to hit that magic age starting in 2015, so we’re about three years in.  With the new influx of cash, inheritance recipients must decide how to invest it. Recently I’ve received a number of calls about it. “Hey Jeff, I received this inheritance, and I’m not sure what to do. Should I buy a place and rent it out, or should I invest the money in stocks?”

If that’s your question, I’ll tell you what I tell them; it depends.

The fact is, I can’t really render an opinion and give advice until we talk. Even then, my advice is not as a financial advisor, even if I did nearly pursue that career and even if I have sought such investment vehicles myself. After watching both markets for decades though, I do have some helpful insights that can furnish your decision.

My Client’s Story

“What should I do, Jeff?” they asked.

“Great question. Let’s sit down and chat about your goals and expectations and see what kind of investment would be better for you.” I said.

So we sat down over coffee, where I found out how much money they were needing to manage, what their goals were, where they were at financially, and we came up with a plan. In their particular case, they had sold whatever real estate they’d owned and were renting, so this could be the chance for them to buy a property for themselves or to rent out. “Just remember to factor in Capital Gains Tax,” I said. Capital Gains Tax is a tax property owners pay when they sell for a profit. It’s tricky and has various loopholes and rules which I won’t go into here, but it’s something to definitely consider when buying a property you plan to eventually sell.

Choosing Between Finance and Real Estate

Decades ago, when I was choosing my career path, I knew it would be one of two things: financial planning or real estate sales. Both appealed to me a great deal, and I was knowledgeable about both. What tipped the scale for me was the solidness of real estate compared to the volatility of the financial world. I liked the idea that a person could invest in real property, where it’s bricks and mortar, something they could see and touch and point to; no matter what the market did, it belonged to the owner. Financial assets on the other hand, could lose their value overnight, or even turn to debt in a wild market free fall.


Real Estate Verses Market Share

If you buy real property, you have a real piece of property. 

In money markets, you’re essentially buying how everyone is reacting based on the trading of the day. Few people in the money market world think as rationally or invest as methodically as Warren Buffet. Mostly, and at the risk of over simplifying, it’s the buying and selling of fear and greed, (not my words) which results in placing one’s portfolio at the mercy of unpredictable, volatile markets.

The real estate market on the other hand, is much more predictable. Even with the occasional correction over the last number of decades (yes, I’m including the 1980’s interest hike.), the Canadian market has been stable. Lending rules have ‘lent’ to that as well, keeping us from experiencing a meltdown like the US experienced in 2006-2008. Truth is, Canada’s stability in the banking industry is the envy of the international neighborhood.

All that to say that when you invest in a real, brick and mortar property, the expectation of its continued increase in value is a reasonable one. Real estate is not a volatile market, and not highly reactive to the trends as money markets are. Investment in stocks come and go, in the world of real estate, land is in limited supply.


I’ll say one more thing about money markets versus real estate: not everyone needs a Mutual Funds portfolio or NASDAQ shares, but everyone needs to live somewhere.


What Will You Do?

In my client’s scenario, investing in real property was the best option.  But this isn’t a one size fits all thing. Investments need to be made to best suit your lifestyle, goals, and expectations.

The best advice I can give is to ask a few professionals for their advice. Ask a real estate agent. Then ask financial expert. Say, “If I gave YOU that chunk of money, what would you do?” and see what kind of advice you get with each professional.


So let me ask you; if you had $50,000 dropped in your lap today, what might you invest in?

Category: Interests

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