Investment tips for today’s homeowners

By Suzanne Sharma | April 16, 2013 | Last updated on April 16, 2013
2 min read

Canadian homeowners must diversify so their homes aren’t the only investment within their portfolios. Otherwise, they risk the same fate as their U.S. counterparts if the Canadian property market dips.

Read: Canadians struggle to be mortgage-free

Bob Stammers, director of investor education at CFA Institute, suggests investing in other asset classes, including stocks and bonds, instead of additional properties so homeowners aren’t weighted towards real estate.

With interest rates so low, they can use the money they would’ve put toward their mortgages to invest in other assets.

“If they invest in other things and they have a problem they can always divest and reinvest back into their homes,” says Stammers.

Read: No housing bubble, says Scotia

Alternatively, low interest rates also offer homeowners the chance to accelerate mortgage payments and become debt-free faster.

He adds advisors should tell homeowners the following:

  • As a homeowner, you’re already an investor. Know what the role of that asset is in your portfolio, and diversify so you aren’t relying on your home as your sole source of retirement income.
  • Stay on top of what’s going on in your local area. If it looks like your neighbourhood might cool off over a long period of time (e.g. there’s a problem with the school system) it might be a good idea to consider selling.
  • Know your exit strategy — this helps you stay emotionally detached in case you need to sell. For instance, perhaps you’re going to downsize before retirement.

Read: U.S. housing surge will help Canada

Suzanne Sharma