Now, when it comes to Buy and Hold forever, I think most people think of bank stocks. So lets see how they have fared over an extended period of time.
Only CBA stands out of the Big 4 and for that reason, everyone who wants to buy a bank stock in ASX flocks to CBA, so it gets to a point when its valuation is now rather stretched.
Yet, CBA has returned just 25% (ex dividend) to date since its March 2015 peak; since March 2015 peak it went nowhere for a good 6 years before resuming its climb. So 25% over almost 9 years + annual dividends. Holders will always say the dividend is good enough to hold. If you bought a house in Sydney, you would have made 107% over the past 10 years, and that excludes the rent. In Melbourne, it would be 81%. If rental yield offsets the dividend, then property outperformed CBA by up to 4 fold.
The picture is entirely different if we look at the other big banks. While 5 year returns (ex-div) for CBA is 58%, it is +30.59% for NAB, +4% for ANZ and -8.91% for WBC! 5 years on, WBC still in the red!
Anyone who bought at the Oct 2007 peak just prior to the GFC crash, would still be down on all the 3 banks, 13+ years on, for NAB Oct07 price was $40.95, now $32.33 so that's still -21% down; for ANZ Oct07 price was $29.86 now $27.77 so that's -7% down, and for WBC Oct07 price was $30.29 now $24.33, so still -19.68% down. These are supposed to be the Buy and Hold stocks to keep for posterity, yet after 13+ years, those who bought at the peak would be between -7% to -21% down.
You get the same outcome with Telstra shares.
People keep these shares for dividends, but the one thing they omit and not say is that their capital returns have been shot, drastically. But they would never sell. They won't even when the nature of banking changes in years to come.
All time view
CBA Stock Price and Chart — ASX:CBA — TradingViewAll time view
NAB Stock Price and Chart — ASX:NAB — TradingViewAll time view
WBC Stock Price and Chart — ASX:WBC — TradingViewAll time view
ANZ Stock Price and Chart — ASX:ANZ — TradingViewBetween stocks and property for the very long term, I can point out several factors why property will win
* Stocks are susceptible/vulnerable to what happens in global market. Property can be too but less so because local demand/supply factors dictate including interest rate policy, migration etc.
* Stocks can be made obsolescence via technology, mismanaged via poor management/governance. You can lose money on stocks even though the overall market goes higher. Entity specific risk is higher in respect of stocks compared to a house
* You can stigmatise a stock but you rarely stigmatise a house. Eg the reason WBC does not enjoy the love is because of the scandal that hurt its franchise, a stock can be shun, and unless a house is where someone got murdered or haunted, you don;t face that with the house
* Stocks are more volatile and is mark to market. Property rarely fall more than 20pc, a severe property crash is a systemic event because it will lead to bank failures so you can say there will be a put that it is not allowed to fail. Unlike houses, stocks can be left to crash and burn with no Govt intervention.
* People need to live in houses, people dont need to own stocks. Demand for houses will be there, demand for stocks is more periodic and cyclical.
* Except for the large risk takers, people are unlikely to put hundreds of thousands or even a million into one single stock, but they have to in respect of a house they buy. Buy the right house, and when it doubles, your wealth improves by a million and stays that way. Buy the right stock and when it doubles, and you don't sell, you could lose it all back and perhaps more.
* Proven so far that housing returns outperform stocks and likely to continue to do so.
