Had a doubt. If you have held property, you have built some
form of wealth, even if we factor in inflation. Will property
make you richer or will shares make you richer? It really comes down to how
you're measuring richness. The leverage is where people love the property. However,
with leverage, it only works when the asset goes up. So why didn't
I buy property? What was it that about it that I didn't agree with
in terms of getting rich, so to speak? is the fact that I had...
I'm Lloyd James Ross, seven-figure investor and entrepreneur, and I've helped
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financial freedom. It's time to make your money work for you. Will
Australian property or shares make you rich? Very
controversial topic here. I dare say we're going to have some
fights in the comments, maybe some love too, but usually
fights. So if you've got an opinion on this, I'd love you to share it in the
comments below. And if you're enjoying this video and any of our other videos, hit the sub button,
share this with a friend, because we're going to talk about all the things you're thinking
about. Well, that's what my intention is with this episode. So will Australian
property or shares make you rich? So let's define
what we mean by rich. In my opinion or my
experience, rich is someone who's got money and time.
That's why it's got my little hat there, time rich. I've always
tried to become time rich rather than just rich. And because if
you have all the money and no time, are you truly wealthy? So
we have to understand that's the definition we're talking about when we talk about
becoming rich. Now, without question, if
you have been living under a rock, you would not
know this, but if you haven't been, which most of you wouldn't have been, which
is great, you would know that Australian property has
just been on an absolute tear. It's been growing very,
very strongly, arguably for probably 50 years. And
for all the reasons, I've got other videos on this that I've done, go check them out as to
why that's happened and why I believe it will not
continue to happen as it has. Without question, especially in
the last few years since COVID, we've seen property values skyrocket by
65%. So, without a doubt, if you have held property, you
have built some form of wealth, even
if we factor in inflation, right? Now, I understand that the
Australian dollar has lost value through inflation over that time as well. So,
the real returns of property aren't, you know, the 7.5% to 8% that people
think that they are. However, By all accounts, it's been
a hedge against inflation, and it's also been, there's
been nominal returns that have made people wealthy. Here's why.
Leverage. That's really why. It's where you
use the bank's money, you put in a cash equity deposit into
the property, and you're making, say, five
to 10 times you know, five
to 10 X returns on your cash deposit. So of course
it's made people on paper richer,
monetarily richer. So your net worth would have gone
up, but has that made you richer in time? Or
have you been someone who's just been working for the last 20, 30, 40 years
just to pay the mortgage, just to build your portfolio, and
are you still slogging it away, commuting every single
day in two to three hour traffic just to build this portfolio? Because
to me, that ain't rich. But
without a doubt, It's difficult to say that people haven't
built nominal net worth returns in property in the last 10, 15, 20, 30 years
in Australia. And by all accounts in most places in the world, but particularly
in Australia, because we have currently policies in
place from government and the tax legislation and
seemingly the cultural adoption of the fact
that property is the only way to build wealth. But the reality is there's other
ways to build wealth. And it's how I've built wealth because it turns out I've
never owned property. certainly not directly, perhaps
for a little bit of time, but not really at all. Even though I'm
a property lawyer, I've cut my teeth
in property development, I worked for the largest developer in the world for many years, and
then I also ran a property investment and planning and marketing business for
seven years with my dad. And
so my whole background, I'm also a fully licensed agent, I've got a full real estate
license, still effective, I had it for, since I was 20. So it's
like 22 years I've been a fully licensed. I've been in
and around the property industry a long time. So why didn't
I buy property? What was it that about it that I
didn't agree with in terms of building wealth or getting rich, so
to speak, is the fact that I had to get debt and
a lot of it. But also, the
thing that you don't have with properties is not liquid. And so
for me to be rich or wealthy is someone who can have what's called
optionality, someone who can have agility, someone where
you have the ability to grab cash, create opportunity and
not bolt yourself to a death pledge for
30 years. So for me, wealth and being rich is
someone who has choice and options. So for me, I didn't
realize, I didn't think that owning a property was gonna give me any wealth, sorry,
give me any options or give me any choice. And in that sense, I
thought this is really not the game I want to play. So what
alternatives were there? I mean, I didn't really want to put my money into term deposits.
I didn't really want to speculate on gold or precious metals. And
I certainly, if you follow me for long enough, you know that I don't
really want to touch cryptocurrencies. It's funny, actually, someone asked
me to come on the show, and they said, Lloyd, I can see you're all about cryptocurrencies. I want to
come and talk about it. I'm like, well, you obviously haven't watched the show. So
I didn't want to speculate. So I needed to understand
what other assets do I want to invest in. And then I came across, actually,
what happened was I was in an airport one day, and I heard about a guy called
Warren Buffett. This is many years ago. I was probably only 20. at
the time and it's just 22 years ago. And don't
forget, I live in like the mecca of property. I
live on the Gold Coast in Australia, which is like everyone,
you either, there's this funny joke here. If
you're successful in the Gold Coast, you're either in drugs or
real estate. Anyway, so obviously a
lot of people have created a career in real
estate in the city. So you've got to understand that's where I live. So I have
all these external forces. family forces, peer
forces, peer pressure, news, career progression,
et cetera. All the little things I was doing. I was in the lion's den when it comes to
property. But I heard that there was a guy called Warren Buffett who did things differently. And
I needed to understand shares. So I'm like, well, what am I going to do? So I grabbed a book called
The Snowball. It was the very first book on shares that I ever read. And it's still one
of my favorite, if not my favorite biography on business or
biography on someone ever. And it's a biography of
Warren Buffett. And what I understood from that book was there was a penny
drop moment. It just struck me when I read the book. I was like, ah, I understand. So
when I'm buying shares, I'm buying shares in a business, but we can
actually find businesses that are high quality selling for a lot less than they're
worth. So by all accounts, I could find dollar bills
and buy them for 50 cents. And that was a more fun
game for me to build wealth or get rich because
I had a science I could follow. I could see, I
could understand that, see improperty. it's not necessarily always
an auction driven market, right? So you don't have full price disclosure,
you don't have, it's
very highly negotiated deal making, okay? So
what that means is, is you don't get, and because the market's not liquid,
you don't get a lot of really mispriced real
estate. Generally speaking, it's very, it oscillates very
close to its fair value. Whereas in the stock market, because
it's liquid, because it's an auction driven market purely, and because
a lot of people are uneducated in the space, you get
some really ridiculously good deals. And so you
can buy pieces of business assets that are truly like
marked way down. And so when I discovered that,
I thought this is a better game for me to play. And I could start playing
with small money. I didn't have to get any debt. And
by all accounts, the richest people in the world held stock in
public companies. And to this day, like Larry Ellison
just became the richest man in the world, like last week. He
is the major owner of Oracle, and he surpassed
Elon Musk to become the wealthiest. So I'm like, who else is the wealthiest? And I looked at
the list, there's like 12 or 13 top wealthiest in the world. And if you go down the list,
you can see that there's Larry Ellison, you can see there's Elon Musk, you
can see Jeff Bezos, you can see Larry Page, Sergey Brin, they
created Google. And you can see Bernard
Arnault, he is the owner of LVMH, right, Louis Vuitton. You
see Warren Buffett in there, you can see Steve
Ballmer. Steve Ballmer wasn't even the owner of Microsoft, he was the CEO
for a while. But And Mark Zuckerberg is there who owns Meta, right?
Started Meta. So if you look at this list, all of them own a
large percentage of their public company, meaning they are the largest shareholders
of those businesses. And they all pretty much own single stock portfolios.
So isn't that interesting to see that the wealthiest people in the world, the richest in
the world, actually didn't get there through real estate. They got there through
owning shares in a public company. Yes, by all accounts, I know. I
know. And you're going to put in the comments, yeah, Lloyd, but they have steerage and
ownership and they can, I get it. irrespective. Steve Ballmer
didn't. He didn't create Microsoft. He just held a single stock portfolio, I
imagine, for a long period of time. He is now actually
wealthier than Bill Gates, who started Microsoft for
various reasons, because Bill's given away a lot of his wealth to charity. So
if you look at that, then why would I play a game
where the richest people in the world play and then I was going to go
and play this real estate game? It didn't fit with me.
You can definitely build wealth and
get rich with stocks. Certainly
with real estate, the key to that is the leverage, right? So if we
look at how to get rich in real estate, it's a steady asset, income
to service alone, banks are prepared to lend on it, you can use other people's
money, highly leveraged, but you want to be buying near a city, near infrastructure,
in a mature market, and you want to hold it for long periods
of time. Yeah, you don't make as much money if you're chopping and
changing and transacting real estate all the time because of stamp duty, transaction costs, etc,
etc. So By
all accounts, that's how you build wealth and property. But will that continue in
the future? I don't think so. And if you want to understand my
positioning on that, go and check out my previous video on is
Australian property overpriced, because you'll see why I
explain four metrics as to why I think it is. So go check out
that video. The reason why I prefer
stocks to get rich is because I can buy dollar bills for 50 cents.
Let me give you some examples. Just quickly, if you're ready to take control of your finances
but feel stuck on where to start, I have a solution. My
book, Money Buys Happiness, simplifies investing and
wealth building with practical steps to help you achieve financial peace.
Get your copy via the link in the show notes and let's get your money working for
you. Now back to the episode. The smaller banks
in America Started to go broke They
they held their bond
portfolios were positioned such that when rates started to go up
in America, it started to make them insolvent. And
so a couple of them went insolvent. In fact, there was some of the biggest insolvencies
three years ago in American banking. And it was
in the news. However, what happened was all the bigger banks that are
too big to fail, the ones that were bailed out during the 2008 GFC, they
did it, they weren't insolvent. But what happened is the entire banking industry
got hammered. So because these smaller banks were
being insolvent, it dropped the share price of all the bigger banks. And
so one of the banks that I held, I bought during the GFC Bank
of America, it fell from about $47 to about $24. And
so I loaded in half a million dollars into that position, because the
understanding is that One, it wasn't insolvent. Two,
America was not going to let the Bank of America go broke because
they didn't before and they won't again. Warren Buffett was a major shareholder. Other
super investors were buying shares at the same time. Lee Liu, who
was Charlie Munger's protege, who Charlie Munger, who's Warren
Buffett's business partner, said, Lee Liu is the only one I've ever given Munger money to
to manage. He gave him $80 million and he turned it into $800 million. So
Lee Liu bought like, in fact, it was about, I
think it was about 20, 30% of
his portfolio. It might have been 20% of his portfolio put into Bank of America. So
understanding these signals, I shifted in half a million. And
of course, over the course of about 12 months, it went back up
to around about $45 a share. And so it was an easy $250, $300,000. It
was the fastest $300,000 I think I've made for a while. It was just
quick. in
terms of an undervalued security. So you can see that
there's those opportunities out there. I mean, more recently as well, like even
last night, I was looking at our Baba portfolio and we've been DCA
into that at over seven figures in that one stock. And
I think by all accounts, that should You never really
know what's going to happen with the world, but it seems like it's taking China's
share from NVIDIA now. And I believe personally, I mean, it's
not financial advice, please don't go and buy it. I'm just trying to explain some examples here.
There's really no reason why we shouldn't see that potentially 5X.
So I should be able to make about 4 to 5 million out of
that one position. And again, you may disagree
in the comments. In fact, you're going to disagree in the comments. Go do it.
You notice on all my videos, I reply to every single comment. You notice that?
And that's actually me. It's not a VA. I actually go
and read all the comments. My friends are like, you're a psycho. You go read
all these comments. Some of them are brutal. I don't care. It doesn't hurt
my feelings. You're allowed to have your opinion. I'll come and fight
you in the comments. I don't care. Or I'll love you in the comments. Whatever. But
let's engage in the comments. If you don't agree with me, put it. If you agree with me, great. And
those who agree, thank you. It's nice to get some love. But I
was in bed like last night. I was replying to all the comments. So
this is some examples of how to build wealth in shares. I
have mentioned before too that if you're not into finding individual securities and
most people aren't equipped to do that. You have to educate yourself
and I'm interested in it, right? I love to read balance sheets and income statements
and cash flow statements to relax. So
if you're not that way inclined, yeah. Buying individual stocks
is going to be not the best option. But you can certainly dollar
cost average, for example, into some sort of index fund. And if
you look at, and I've shared this example before, I'm sure, there was a guy,
Gary Bruce, I think his name was, he bought the LA Lakers. This
is going to prove the power of investing in an exchange traded
fund like the S&P 500 over a long period of
time to get rich compared to property. This is why I'm explaining this concept to
you. So Gary Boos bought the LA Lakers in 1975, I believe it
was, for $67 million. A lot of money. He
recently sold it, what's that, 50 years later, he
sold it for $10 billion.
And I often ask people, would you love to have those returns on
your money? They're like, yeah, that'd be amazing. I mean, he put $67 million,
he got $10 billion. Oh, I would love to do that. I'm like, well, that's fantastic that
you'd love to because you can. They say, how? I say, well, If
Gary had to put $67 million into the S&P 500 index
fund in 1975 and held it, he would have close
to $12 billion, so without any effort. So
that's the power of compounding in shares. That's the American
economic machine in play. So it's
very difficult to suggest that always historical returns, either
in property or in shares, are going to repeat in the future, right?
history is a good, it's the only indicator we have of
what may happen in the future. So if I had to bet on
what would make me the richest, I mean, I feel like I'm
playing the games that will make me the richest, not just in money,
but in money and time. Because I don't have to
manage tenants, I don't have to, I mean, I just, I
know you get a property manager, please don't put that in the comments. But I
just feel it's simpler to scale with
ownership of shares in companies and even an ETF
when you're making business profits. And also as an entrepreneur, it's a
lot more It's a lot,
it feels better to be able to access funds quickly,
particularly if you're in opportunities. Like if I want to start a business and I need to find 10, 20, 30, 50, 100,000, like
we bought a laundromat like, I don't know, a
year ago or something. And I had to secure that with about 200, maybe
it was 140,000 cash to secure that for part of the lending to borrow. So
if I didn't have access to that, which I could have hit a button, sell
some shares, boom, right? Whereas if you got a property, certainly
you can use it as security with equity, which is super popular in Australia. However,
if it's not for something like a business acquisition and you need it for something else like a
health emergency or whatever, it's just harder
to get it quickly. You can get it with an equity loan, but you're
at the mercy of the banks then. And I don't want to be at the mercy of anyone, particularly a
bank. And so I just prefer to have liquidity. So
if I think about what opportunities there are in the share market for
owning great companies at great prices, holding for long periods of
times and compounding at a very high rate. In fact, if you look at the compound rate
of shares versus property, prima facie absolutely
can't be disputed. Shares outperform property,
period. They just do. But
the leverage is where people love in property. However, with leverage,
It only works when the asset goes up. So if
we went through, say, for example, some sort of correction in
the property market, all of a sudden you wouldn't like leverage, let me tell you.
You would dislike it very much because your
losses are amplified with leverage too. Now, can you find
leverage in the share market? Yes, you can. You can find ETFs that are slightly
leveraged or automated for you. But again,
you don't have to do that to get the returns. So to summarize this,
to really nail this, will property make you richer or
will shares make you richer? It really comes down to how you're
measuring richness. Because for me, I mean, I'm sitting here,
what is it? I don't know what day of the week it is. This is a Thursday today. I'm cruising here,
came in the car, hang out with the guys here. And I
woke up when I finished sleeping today. What a novel concept, huh? Wake
up when you finish sleeping. And I'm time rich. I'm
doing what I want to do when I want to do it with the people I want to do it with. So
I'm not the richest person by money and there's so many people that
own property that are richer than me, like tons. Like some
grandmas that just sat on their house in Vaucluse, they're like 20 times
richer than me, right? But they still like aren't rich in
their mind because they're stuck to a job that I don't like. They
don't travel. Like we just went heli-skiing last week in Queenstown. Go check out
my Instagram profile. You might find a reel in there. And it was just because my
friend asked me, he actually did a pitch. He
did a PowerPoint presentation and pitched us. So we
said, yes. Right. So that to me is like someone who's
rich can do both make money, have
time. And I just feel like shares are
just so, give me so much more optionality. than
property. And that's why I feel personally that
shares are a way to make you richer
too. So that's my position on it. What do
you think? I'd love to know. How did you get rich? Put in the comments. Was
it property or was it shares? And what are your feelings about this?
Pop in the chat, pop in the comments and you'll know that I'm coming. I'm going to reply then personally. So
Thanks for engaging. Hope you've enjoyed the episode. If you've enjoyed this and I've imparted any
wisdom to you in this, then share this with a friend, hit the sub button,
and I'll see you in the next episode. Thanks for listening to Money Grows
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