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Ending March 6, 2026

The Members Message 

In the Australian investment landscape, a recent property boom has created a generation of investors who are "overly bullish" on real estate .  Conversely, stock market enthusiasts point to the historical reality that markets trend upward over the long term .

 At Total Money Management, we believe in moving beyond the "one is better than the other" narrative .  To build lasting wealth, you must peel back the marketing and assess both investment vehicles against data-driven principles .  

Understanding the Core Differences: Liquidity, Leverage, and Costs

 Comparing a single physical property to a stock portfolio is inherently difficult because their underlying characteristics and behaviors differ significantly . 

Liquidity and Transaction Costs

•  Stocks: Offer high liquidity; if "shit hits the fan," you can exit or rebalance your position almost instantly . 

•  Property: Known for extremely low liquidity and high transaction costs .  You cannot sell "a bedroom" or "the pool" to raise cash during a downturn; you are either all in or all out . 

The Power of Leverage

•  Property: Leverage is real estate’s primary advantage .  You can control a $500,000 asset with a $50,000 deposit; a 10% growth in value effectively doubles your initial investment . 

•  Stocks: While margin loans exist, they are less common and carry the risk of "margin calls," which can be devastating in a volatile market .  

Risk Management: Moving Beyond Recency Bias

Real risk is not just a fluctuating price on a screen; it is the permanent loss of capital . 

Recency Bias and the "Tide"

 Many Australian investors suffer from recency bias, assuming property only goes up because it has done so for the last 20 years .

•  Systemic Risk: Property values are highly correlated with bank lending .  When banks stop lending or interest rates rise significantly, the "momentum" breaks and the market rolls over . 

•  Idiosyncratic Risk: This is the specific risk related to a single property—such as structural defects, bad tenants, or a specific suburb's decline—rather than the market as a whole . 

3. The Financialization of Property (1980 to Present)

 To understand current prices, we must look at the "greater financialization" of property that began around 1980 . 

The Deregulation Shift

 Before 1980, property was primarily viewed as a home, not a financial asset .  With deregulation and the rise of mortgage-backed securities, property became a collateralized asset for banks to generate massive loan books .

•  Bank Incentives: For a bank like CBA, 60% of the loan book is mortgages .  They are incentivized to keep the cycle moving . 

•  The "Barber" Rule: Like a barber who always says you need a haircut, real estate agents and brokers have a financial interest in encouraging you to buy, regardless of whether it is a good time in the cycle . 

The 8 Principles of Objective Assessment

 At Total Money Management, we assess every investment through a framework of 8 principles to stay "cold-blooded" and data-driven .

Systematic Approach

 Both asset classes benefit from a process, but property requires larger capital and carries higher specific risk .  You must have an "if this, then what" plan before buying .

Market Cycles and Mean reversion

Get access to our FREE course and learn about Market Cycles

In the Total Money Management framework, recognizing market cycles is essential for moving past the "buy and hold" myth .  Every asset class, whether the Australian property market or the global stock market, moves in waves of expansion and contraction .

The Psychology of the Cycle

•  The Bull Market Trap: During an upswing, rising prices create a "winning streak" mentality that makes it difficult for investors to see the "rough seas" or "markdown" ahead . 

•  Recency Bias: Investors often incorrectly assume that because an asset has performed well for the last 20 years, it will continue to do so indefinitely . 

•  Mean Reversion: History shows that "trees don't grow to the sky"; overpriced assets eventually revert to their long-term average . 

The Leverage Cycle in Property

 Property cycles are uniquely tied to the leverage cycle .

•  Lending Correlates to Price: Property prices rise when banks are willing to lend more money and expand credit . 

•  The Breaking Point: When interest rates rise or banks tighten lending standards, the momentum breaks and the market can "roll over" . 

•  Historical Warning: The Melbourne land boom of 1882 serves as a classic example of a cycle that went too far, taking until 1952 to recover in real terms . 

Strategic Cycle Management

 By understanding cycles, you can avoid making "dumb decisions" with large amounts of capital .  A systematic investor uses a framework to stay objective when the general population is either overly bullish or irrationally fearful .  Instead of rushing in due to social pressure, you assess the yield and the risk-free rate to determine if the current cycle stage justifies the investment  

The Power of Rebalancing: Why Stocks Have a Strategic Edge

While many investors focus on which asset class has the highest "average" return, at Total Money Management, we argue that the ability to rebalance is the single greatest advantage an investor can have .  This principle is the key to surviving multiple market cycles and consistently growing wealth .

The Rigidity of Property

 The primary drawback of physical property as an investment vehicle is its inflexibility .

•  All or Nothing: You cannot sell "half a house" or a single bedroom when you've made a $300,000 gain . 

•  Transaction Friction: Even if you decide to sell to capture profits, the process is slow and carries massive transaction costs that eat into your realized gain . 

•  The "Bite" Problem: It is very difficult to "take another bite" of your investment once you have sold, as you are once again facing high entry costs and market timing issues . 

The Strategic Agility of Stocks

 In contrast, a stock portfolio offers a level of agility that allows you to act like a "cold-blooded" professional investor .

•  Partial Liquidity: Unlike property, you can sell half of a position—like Warren Buffett recently did with Apple—to take money off the table while remaining in the game . 

•  Protecting the Downside: By cashing up a portion of your portfolio when a sector feels "expensive," you protect your overall wealth from a potential market crash . 

•  Averaging Down: When a market falls, having spare cash allows you to buy more at a lower price.  This lowers your average cost per share, bringing it closer to the current spot price and positioning you for a faster recovery when the cycle turns . 

Asset Allocation in Action

 The goal of rebalancing is to maintain your target asset allocation .  If your stocks have a "crazy run," they will eventually represent a larger percentage of your wealth than you intended, increasing your risk .

•  Selling Strength: Rebalancing forces you to sell a portion of your "winners" while they are high . 

•  Buying Weakness: It provides the capital to buy into undervalued sectors or hold cash (earning 5–6% interest) while waiting for the next opportunity . 

 "The stocks-cash rebalance is the way to make money. It is a systematic process that beats a simple 'buy and hold' strategy over the long term because it accounts for the inevitable downside of every market cycle."

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