Here's a sample portfolio.
If we assume that he invested $100K in the beginning (2005), is it correct that if he sold his entire portfolio and the end of 2009, he would have received $121,394?
Seems like a rather mediocre ROI to me. Would it not make more sense to invest this $100K into real estate? I think the return will be more than 4%/year on the average for real estate. Or am I missing something?
First, yes, I think your calculation is correct.
Next, on your more controversial second question, two points:
Recognize that you're benefiting from hindsight in making your assessment about the returns from real estate (presumably Canadian) being better than the "mediocre" portfolio returns. In 2005 you could not have known that in advance. And today, you also can't say what the future will bring.
If one were to invest $100K entirely in real estate, as opposed to a diversified portfolio with multiple asset classes, one would be taking a much larger risk due to being concentrated in a single asset class. What if real estate seriously tanks? Then the whole $100K suffers much more than if real estate were but one component of the portfolio.
The entire point of investing in a diversified portfolio of cash, stocks (domestic and foreign), bonds, and real estate (via REITs, which are one piece of the portfolio you mentioned) is to reduce risk. Chasing returns alone can be foolhardy.
I suggest you research the following subjects:
Does 2009 look like you'd have made a profit looking back 4 years? The portfolio from your link looks great in hindsight.
