There is a widespread perception among Asian cultures that real estate investing is safer and more trustworthy than stock market investing, and that stock market trading is intrinsically riskier. The financial preferences of many Asians are shaped by this viewpoint, which has strong historical and cultural origins.
Historical Context:
Understanding the historical backdrop that has influenced these views throughout time is crucial to comprehending the Asian viewpoint on investment. Many Asian nations have experienced periods of economic hardship, political instability, and even war, which have left a lasting impression on the national memory and influenced views about money issues.
Several Asian countries have had tremendous economic expansion in the late 20th century. Unfortunately, it’s also had its share of financial catastrophes, including wars and social unrest. All of these experiences reinforced a cautious approach towards financial investments, instilling a preference for tangible assets like land and property.
Another aspect that probably just doesn’t include Asian societies, it most likely includes most countries outside of the US. It’s that most stock markets are incredibly volatile and potentially manipulated. If the US market experiences a couple of days of 1% moves, it’s mayhem. 2-3% single day moves are not unheard of in Asian markets. I don’t blame folks for not trusting the financial markets if that was my only choice.
Cultural Preference for Real Estate:
Real estate, with its tangible nature and perceived stability, aligns well with these values. Furthermore, owning land has strong cultural importance, representing status, safety, and wealth. Unlike stocks and other financial instruments, real estate provides a physical asset that can be seen, touched, and managed directly. It’s way easier to point out Uncle Bob has 5 houses and collecting rent versus Aunty Mary who might own 20,000 shares of AAPL. This tangible nature provides a sense of security and control over one’s investment, mitigating the fear of market volatility and uncertainties.
Real estate, particularly residential properties, is viewed as a stable long-term investment that can provide rental income or be passed down through generations. This aligns with the desire for generational wealth transfer, a common objective across many Asian families. It’s also seen as a significant milestone and a symbol of social status.
Takeaways:
Real Estate investing certainly has its merits. I remember the Forbes richest people list back in the 90s were always real estate tycoons. It was not until a man by the name of Bill Gates that broke that model. Fast forward to 2023 and the richest man, Elon Musk, doesn’t even own a house.
If you’ve read any of my other articles, you’ll know that I’m a big believer in investing in the S&P500 index. An average of 10% returns a year is no joke. There’s a reason why the US Markets are the largest and most trusted in the world. I always say that when the US market sneezes, the majority of the world catches a cold. I’m not advising against real estate investing. I’m encouraging financial literacy and the broadening of investment knowledge that can help make informed decisions that align with their financial goals, while embracing the potential benefits of both the stock market and real estate investing.
