If You Sell Your House and Buy Stocks, You Will Go Broke

Cognitive dissonance is brewing as the real estate bulls see rampaging stock bulls as a bigger threat than housing bears.

Recently, with the Chinese stock market rush, stock skyrocketing, ordinary people seem to forget the painful lessons of the past, they rush into the stock market. Last week alone, there are over 166 million people in the venue. Compared to 2007 when the stock index peak at over 6000 points, a week madness comes into play nearly 178 million people, will know that this is what the concept of it!

...A history lesson, once this situation, the stock market often been mad. Experts at this time may have thrown a "sell your house, buy stocks" view, it is incredible!

I never said to sell a home, but for the past couple of years I told anyone who'd listen to buy stocks instead of property in China. Now, I'd cash some of my winnings for gold bars.

Stock market investors who invest most of them thought he was. However, investment and speculation is completely different behavior. When buying a financial product after the product can be kept expect to generate revenue, such as buying stocks, expect interest dividends regularly, this is the investment behavior; if only expected to sell at a higher price, such as stock buy low sell high, it is only speculation. Investment income from the investment material wealth created; and benefits are speculative losses from another speculator. In other words, speculation is involved in a zero-sum game (a loss of money and earn money sum to zero). Investment behavior can create wealth, and speculation does not create wealth, but the redistribution of wealth and transfer it. At the same time, due to investment income focus, the risk is controllable; and the risk of speculation, for ordinary retail investors, since the market is extremely asymmetric information, are not controllable. Further, the nature of the behavior of the same speculation and gamblers. Like casino gamblers always lose to the results, as most of the children to be lost to the retail dealer!

Wait a minute, is he talking about buying stocks or buying houses? The dividend yield on Chinese banks exceeds the rental yields in many cases.

That is the truth. Data show that, even in the mature markets of Europe and America, the long-term speculative retail speculators, 1 earns money, 2 stay even and 7 lose money. In the stock market flourishes almost impossible, from time to time people lose everything!

Currently, A-share market is 56 times the median PE, even if all future earnings are allocated to investors, investors also need to go back 50 years to the present! The GEM PE is already close to 100 it! Not to mention the stock market in China, the proportion of low real corporate dividends! Enter the Chinese stock market investors, the vast majority are not directed at the stock dividend, apparently basically speculation!

Selling your house to buy stocks after a 100% run-up is a bad idea. But if housing is a bad investment and stocks are a bad investment, what does that leave for the Chinese investor?

iFeng: 4000点如果你还卖房炒股 很可能会家破人亡