There’s a considerable amount of evidence out there that suggests that the millennial generation has it tougher than the Baby Boomers or even Gen X’ers. The home price-to-wage ratio has been moving higher of late, especially in select markets like Vancouver or Toronto, where the thought of millennials buying a home is now considered unrealistic, even laughable.
While some millennial parents may be willing to co-sign on a mortgage with their beloved children, the fact of the matter remains that the “real estate opportunity” that Baby Boomers and Gen X’ers enjoyed is likely all but gone. Sure, signing the dotted line on a mortgage in a market like Vancouver or Toronto may seem like an obvious choice for those millennials who are able and willing; however, one has to weigh the risks and consider real estate as an investible asset class like any other.
Sure, real estate is a more compelling tangible asset. A must-have to start a family, even. And while many of today’s young people still cling onto the dream of home ownership, given today’s dangerous environment, the risks appear to outweigh the tangible benefits overwhelmingly. Millennial parents (Baby Boomers or Gen X’ers) may claim real estate remains a fool-proof (lower-case ‘f’!) investment given how well the investment turned out for them over the course of decades, but many millennials have realized that the circumstances have changed such that the risks of owning physical real estate are no longer worthwhile.
Employment, in aggregate, is more precarious for millennials, and given a lesser degree of purchasing power (lower wages, higher prices for goods and services), it’s not a mystery as to why millennials are spending their money in a vastly different manner than their parents. These millennials are more likely to loosen up their purse strings on comforts and conveniences, as they possess a considerably greater amount of disposable income to spend on discretionary goods and services. It’s shocking how much more financial flexibility you have when you’re not tied down to a mortgage!
Most millennials are still burdened with student debt, however. But unlike mortgage debt, many millennials are positioned to bring their balance sheets back into the green over the near future, and as they do, they’ll have more savings, which will hopefully go toward funding a TFSA early retirement fund!
I can’t emphasize enough just how powerful the effects of compounding can be over the course of decades! You don’t need to invest in the “sexiest get rich play” at a given point in time. Stick with the anti-Bitcoin Fortis, and you’ll be well on your way to an early retirement along with the countless number of millennials who’ve embraced the FIRE (financial independence, retire early) movement.
But you may be telling yourself that Fortis is a retiree stock.
You’re absolutely right: the stock and its underlying business are boring as heck!
But it’s a rock-solid firm that’s pretty much unshakeable given its highly-regulated operating cash flow stream. Over the course of decades, you’re going to run into more than a handful of corrections, bear markets, and crashes. A recession or two and perhaps even a depression are bound to happen. These macroeconomic events would wreak havoc on anybody’s portfolio, but with Fortis and its near-guaranteed 5% in annualized dividend hikes, you’ll be well on your way to early retirement, and the worst of Mr. Market is not going to be able to stop you.
Stay hungry. Stay Foolish.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette owns shares of FORTIS INC. Fortis is a recommendation of Stock Advisor Canada.