Myth 6: Real estate is the place to be

Anyone who lives in a big city like Toronto, Vancouver, Montreal or booming Calgary can be excused for believing this one. House prices in Canada’s urban centres have skyrocketed in recent years. But is this a long-term trend?

In fact, as the graph shows, real estate lags stocks when it comes to performance over the long term. And yet many Canadians have most of their net worth locked up in the family home.

Myth 1 Myth 2 Myth 3 Myth 4 Myth 5 Myth 6 Myth 7 Myth 8 Myth 9

There’s another factor to consider when investing in real estate: mortgages. Often, real estate investors are heavily leveraged, meaning they have borrowed extensively to buy property. This magnifies good returns, but it’s a risky strategy because it magnifies bad returns.

If you’re not comfortable borrowing to invest in a stock, you should think twice about whether you’re comfortable investing in real estate.