# Shares or Property?



## shezian

Which do you think is a better investment, shares or property?

My mum keeps telling me that property is the best and l keep saying shares. She sais the bank will always lend you more for property whereas for shares they won't.

She has done very well out of property so l guess she just feels more comfortable with this kind of investing. For me property just seems to be a headache and moves too slow for me. 

What are your thoughts?

Thanks Sue


----------



## Judd

First, I doubt whether you will welcome my comment.

Why care what your mum or anyone else thinks?  I will assume you're an adult so it's your money.  Invest it however you want and in a manner which is comfortable to you with the proviso it's done in a legal manner of course.


----------



## radson

ooh my first post.

Im an investor agnostic and have had property and now have managed funds and shares, looking to purchase some property again. 

Does it have to be an either or scenario. If possible diversification is the key isnt it?? Can you invest in both or do you have to be locked into one or the other. 

You certainly can borrow money from the bank from shares. Im sure comsec would love to lend you some moola at 6.99& fixed. All the benefits of positive or negative gearing without having to figure out depreciation or pay stamp duty etc. 

But yeah property is more tangible, you can see it, inherently more stable...although I love the hypothetical question of what the markets would be like if shares were valued once a year and property 1000 times per day. 

Both property and the ASX and Dow are considered expensive at the moment, but only other options seem to be to park your money in ubank accounts and earn a whopping return 1 percent and a bit above inflation.

If you do have money set aside for property i.e the deposit, and the stamp duty and teh gazillion fees that are leeched of everyone at the beginning of the property buying process , then perhaps you can get a sneaky $100 a month into a managed fund. Im currently with foragerfunds (formerly intelligent investor) and quite like their style. ..or hey if you chuck all your money into shares, how about picking up some A_REITS. to get exposure to commercial property. I have the VAP Vanguard Property index thing happening. Its been steadily increasing and paying a decent dividend too. 

So yeah, not an easy decision and in my opinion be aware of people who are too evangelic about their investment class of choice. 

Good luck.


----------



## Value Collector

shezian said:


> Which do you think is a better investment, shares or property?




In my opinion, having both in a long term portfolio is a good Idea



> My mum keeps telling me that property is the best and l keep saying shares



.

What's her argument for property?

Whats your argument for shares?




> She sais the bank will always lend you more for property whereas for shares they won't.




You can lend to by shares, and the bank can use both shares and property for security.

But why would you want to go in the maximum of debt? I would never choose an asset class just because the bank lends the most to it





> What are your thoughts?




The point of my investment portfolio is to supply me with Cash flow to fund my life style, while growing my capital base and protecting my funds from being eroded by inflation.

To achieve this out come I use both Shares and property, 

The share market is a great way to get exposure to a cross section of businesses, by choosing a mixture of good businesses, you can ensure your share portfolio will see growing cash flow and an appreciation in market value over time.

Owning some property will give you a steady weekly income regardless of the share market fluctuations, your capital value will be protected from inflation, and you should see some market value growth even after inflation as the population grows.

Both asset classes are subject to fluctuations though, and you have to be able to identify value when making purchases, the share and properties market can both offer good value sometimes and terrible value at others.


----------



## Value Collector

radson said:


> ubank accounts and earn a whopping return 1 percent and a bit above inflation.




yep, and if you factor in a 30% tax rate the return is negative.

I much prefer good property and good businesses to cash. 

It fluctuates, but I try not to keep more than 3 years living expenses in cash, any more than that and I am unhappy.


----------



## darkhorse70

Property is crap imo. After you adjust for inflation, maintenance, fees, agents, interest assuming you have a loan you are left with very little. Maybe a couple percent. Given the liquidity of the stock market, the slippage etc and the awesome returns which you can find as well as the more predictable/less volatile id always go for shares. Hey but what do I know im only 21 and have had neither haha.


----------



## ROE

Shares vs Properties it doesn't matter and none is much better than the other 
the key is what you comfortable with and can sleep at night and don't get heart attack over it.

each asset class has its pros and cons there is no clear winner, it comes down to personal preferences
and what you can deal with

All successful investors can make both properties and share works... Price you paid for an asset is more important what it is


----------



## ROE

darkhorse70 said:


> Hey but what do I know im only 21 and have had neither haha.




you definitely got more to learn by just ruling out properties as a no go zone.


----------



## Judd

darkhorse70 said:


> Property is crap imo. After you adjust for inflation, maintenance, fees, agents, interest assuming you have a loan you are left with very little. Maybe a couple percent. Given the liquidity of the stock market, the slippage etc and the awesome returns which you can find as well as the more predictable/less volatile id always go for shares. Hey but what do I know im only 21 and have had neither haha.




Maybe or maybe not.  Whichever is the better I still wonder, given the way the OP has phrased the matter, if the issue of who is to make the decision, the OP or the OP's mum, has been resolved.


----------



## Value Collector

darkhorse70 said:


> Property is crap imo. After you adjust for inflation,.




Inflation is the value of money going down, By owning a Building and land, You are hedging against inflation. Over time you should see your weekly rent and the capital value of the property increasing with inflation (provided you didn't over pay to begin with)



> interest assuming you have a loan you are left with very little



.

That's true with both property and shares, the market average dividend yield is 4.3%, Margin loans are around 6.9%, so a 100% loan will see shares produces negative cash flow.




> Given the liquidity of the stock market,




that's a pro and a con, the liquidity has allowed many people to panic sell, locking in losses at the worst times, when holding would have been the best thing to do. 




> the awesome returns which you can find as well as the more predictable/less volatile id always go for shares.




I agree the returns can be awesome in the share market, I can't see how you can say they are less volatile though.




> Hey but what do I know im only 21 and have had neither haha




hopefully you'll get the chance to own both eventually.


----------



## beachlife

It seems to be accepted that both have similar growth returns and both have similar cash returns by div's or rent, but property has way more expenses and less flexibility.

property has
Much higher stamp duty
higher real estate agent commissions
land tax
management fees
rates
maintenance
tenant hassles
no way to insure against a down turn
very poor liquidity
and if you need a bit of capital back its impossible to sell a portion of it.

Shares are far superior, just no reality TV shows pumping them up.


----------



## Value Collector

beachlife said:


> It seems to be accepted that both have similar growth returns .




I don't think that is the case, I mean a well chosen growth business can certainly grow at a much faster rate than the compounded effect of inflation and population growth would allow a properties price to increase.

I think the benefits of property eg, stability, regularity of income etc mean it is worthwhile having in a mixed portfolio as insurance against a gfc event where share prices and dividends were slashed.

out side of that though well chosen shares should perform better, But its still probably worth owning atleast your own home.


----------



## shezian

Value Collector said:


> Inflation is the value of money going down, By owning a Building and land, You are hedging against inflation. Over time you should see your weekly rent and the capital value of the property increasing with inflation (provided you didn't over pay to begin with)
> 
> .
> 
> That's true with both property and shares, the market average dividend yield is 4.3%, Margin loans are around 6.9%, so a 100% loan will see shares produces negative cash flow.
> 
> 
> 
> 
> that's a pro and a con, the liquidity has allowed many people to panic sell, locking in losses at the worst times, when holding would have been the best thing to do.
> 
> 
> 
> 
> I agree the returns can be awesome in the share market, I can't see how you can say they are less volatile though.
> 
> 
> 
> 
> hopefully you'll get the chance to own both eventually.





Does property double every 10 years? Also, what has property returned over the past 20 years compared to shares? Lastly what  is considered a good return on shares? For me anything over 30% per annum is considered good. Is this to0 ambitious? I know through experience l can achieve this, and maybe this is the reason why property doesn't seem lucrative. Less dealing with the banks, less paperwork, less dealing with tenants, and liquid.


----------



## ROE

shezian said:


> For me anything over 30% per annum is considered good. Is this to0 ambitious? I know through experience l can achieve this, and maybe this is the reason why property doesn't seem lucrative.




if you can make 30% return a year you can be a billionaire in less than a life time 
starting with 30K 

Is this too ambitious?


----------



## RADO

If you are looking at real rate of return, historically shares have had a higher rate of return followed by property, fixed interest and cash. This isn't personal opinion, this is fact. Nevertheless property is still a real good way to invest if you know what your doing.


----------



## RADO

ROE said:


> if you can make 30% return a year you can be a billionaire in less than a life time
> starting with 30K
> 
> Is this too ambitious?




This Fund has achieved those figures http://microequities.com.au/our-funds/deep-value-microcap-fund/?gclid=CjwKEAjwiumdBRDZyvKvqb_6mkUSJABDyYOzyzGGvVRy6y2oNFqllzTGIJf61CJcz-7FRJdtUiLgABoC7Z7w_wcB although they haven't been around for to long, inception date is 2009 and recently they raised their minimum investment amount from 50K to 100K, morning star highly rates them as well.


----------



## Value Collector

shezian said:


> Does property double every 10 years? .




In some 10 year periods it would, you need a compounded rate of 7.2% to achieve a doubling in 10years, If you are counting the total return including rent it would be pretty close to that figure. eg that 7.2% return might be made up of.

3% Inflation based Capital appreciation
3% net rental return after expences
1.2% Actual property value growth due to population growth 




> Also, what has property returned over the past 20 years compared to shares?




Depends on the area and property type. different areas have seen different value growth and different property types see different rental returns



> Lastly what  is considered a good return on shares? For me anything over 30% per annum is considered good. Is this to0 ambitious? I know through experience l can achieve this,




30% per annum is a good return in any one year, But if you could achieve that consistently over decades, that would make you the most successful investor of all time. Warren Buffet is regarded by many as one of the greatest investors of all time, and over his life he has averaged 23% (or there abouts).

You'll have years where your up, others where your flat and some where your down, But if through all that you can average 10 - 15 % across your portfolio, your going to do very well.

If it comes to working out what rate you need to get to live off, be more conservative, do your calculations based on earning 8%, and have a couple of years living expenses and your own home paid off, that will give you a nice buffer.







> and maybe this is the reason why property doesn't seem lucrative. Less dealing with the banks, less paperwork, less dealing with tenants, and liquid




I wouldn't suggest rushing into debt to get property, but once your starting to get a decent net worth, it starts to make sense to have some property, At least your own home.


----------



## Value Collector

RADO said:


> This Fund has achieved those figures http://microequities.com.au/our-funds/deep-value-microcap-fund/?gclid=CjwKEAjwiumdBRDZyvKvqb_6mkUSJABDyYOzyzGGvVRy6y2oNFqllzTGIJf61CJcz-7FRJdtUiLgABoC7Z7w_wcB although they haven't been around for to long, inception date is 2009 and recently they raised their minimum investment amount from 50K to 100K, morning star highly rates them as well.




That funds only been operating since the bottom of the GFC crash, So they have only been around for the Boom part of the boom bust cycle. coming out of the gfc we were in a very target rich environment, there has been years I have made over 100%, It would be silly for me to think this is always going to be the case.


----------



## shezian

Value Collector said:


> That funds only been operating since the bottom of the GFC crash, So they have only been around for the Boom part of the boom bust cycle. coming out of the gfc we were in a very target rich environment, there has been years I have made over 100%, It would be silly for me to think this is always going to be the case.




This 30% return is the average over 25 years. Some years can be as low as 5% and as high as over 120%.
I tend not to trust in investing my money in others as l know there a huge risks in never getting your capital back, and have lost trust in investing with others from previous experience. 

I would love to be able to borrow to invest more into my trading as l know its a fantastic and secure low risk investment. 

Did Warren Buffet make 30% each and every year, or were the returns variable from year to year?


----------



## shezian

shezian said:


> This 30% return is the average over 25 years. Some years can be as low as 5% and as high as over 120%.
> I tend not to trust in investing my money in others as l know there a huge risks in never getting your capital back, and have lost trust in investing with others from previous experience.
> 
> I would love to be able to borrow to invest more into my trading as l know its a fantastic and secure low risk investment.
> 
> Did Warren Buffet make 30% each and every year, or were the returns variable from year to year?



Sorry what does Morning Star Rating mean?


----------



## Julia

shezian said:


> I would love to be able to borrow to invest more into my trading as l know its a fantastic and secure low risk investment.



Oh my goodness,  trading a fantastic and secure low risk investment!!!

I don't know a single successful trader who would say that, let alone someone with minimal experience.

There is no black and white answer to shares v property.  Asset classes are cyclical.  There are periods when property will do far better than shares, when property will flourish in some areas and languish in others, and periods when  the share market will rocket ahead and when it will allow you to lose your money very quickly should you not have appropriate stops in place.

If you have a decent amount of capital and understand how and when to move between asset classes, or when to stand aside in cash, you'd be off to a good start.


----------



## ROE

RADO said:


> This Fund has achieved those figures http://microequities.com.au/our-funds/deep-value-microcap-fund/?gclid=CjwKEAjwiumdBRDZyvKvqb_6mkUSJABDyYOzyzGGvVRy6y2oNFqllzTGIJf61CJcz-7FRJdtUiLgABoC7Z7w_wcB although they haven't been around for to long, inception date is 2009 and recently they raised their minimum investment amount from 50K to 100K, morning star highly rates them as well.




Give your money to them, you soon become a millionaire and billionaire 
we get people like yourself join the forum all the time ... all fire up 30% return, 100% return
they all claim they know some fund did it, know a secret way, know how to trade 

they know it all but put some money on the line and come back in 10 years and tell us you can
do 30% a year  then I believe you ... until then all theory, all stuff of dream... 

and I know most fund including the  one you mentioned ...nothing special about them...they just form at the bottom of the market and buy small caps and spruike 

do you know the term windows dressing   very easy for small fund to do

A little knowledge is a dangerous thing in the stock market


----------



## Wysiwyg

ROE said:


> Give your money to them, you soon become a millionaire and billionaire
> we get people like yourself join the forum all the time ... all fire up 30% return, 100% return
> they all claim they know some fund did it, know a secret way, know how to trade



That's funny. :



> and I know most fund including the  one you mentioned ...nothing special about them...they just *form at the* *bottom of the market* and buy small caps and spruike



I have bookmarked that site as it will be very interesting to see what they do when the market has a deep correction. Have to give them credit for timing the market perfectly.


----------



## darkhorse70

Haha if were going to analyse my comments in detail then I guess ill have to expand on the details... first off I hear alot of ppl around me when taljing about property say my house went or my parents house went up by 100/200k in a few years. When I talk about inflation lets assume your property is a million dollars. So every year regardless your property goes up by 20k compounded. That doesnt count as wealth. I doubt the rent goes up equally to the cost of living year by year but I havent sat down and calculates it so who knows. So thats already slashed. Most people dont take that into consideration. Not rookies anyway. When I said less volatile I meant there is a varoety of stock. Blue chips is what I meant by less volatile. Its not like all stock are as risky as the next. Now when you want to buy property your more than lijely going to have to take out a loan. Its not cheap buying property. A few hundred k or what not. With stock you can invest as much or as little. Now if you turn 20k to 40k thats  100% return. It doesnt matter you still doubled your capital. So you dont necessarily have to get a loan for stocks. The advantages of a liquid market far out weigh an illiquid one. You have the piece of mind you can definately sell. Yes in a panic sell you might lose abit more but with a stop loss and a proper strategy it should already be a calculated risk and that scwnario should be factored in as much as possible.
Obviously you can make money in both but for me the stock markets is much more challenging/thrilling. You can actaully study thousands of diccerent charts/patterns. I ruled it out more so because im more passionate about the stock markets. Plus for example my parents bought my family home for 300k 20yrs ago. We got offered 1.3m 2 weeks ago. Thats like 400% in 20yrs = about 20% a year. Now minus all the renovatoins + interest on the loan and all the other bs that comes with a home lets assume its like 10-15% a year. Every area is different but some comapnies on the stock markets double or triple in a year. Thats what im after haha. Im going to live in my parents house till im 40 if I have to and im going to funnel every dollar I make into the market till I learn how to be a great trader. Then ill buy a house hahaha. Gl man


----------



## RADO

ROE said:


> and I know most fund including the  one you mentioned ...nothing special about them...they just form at the bottom of the market and buy small caps and spruike




Yes nothing special about them... maybe if their average return was 11-12% per annum since inception, than there would be nothing special about them. No Australian retail fund I have seen so far has achieved these results only hedge funds with minimum deposit 500K. Can you name 5 Australian retail funds that have achieved what Microequities have achieved in the same amount of time? BTW 11-12% *per annum, since inception *for an Australian retail fund is still pretty good IMO.


----------



## Value Collector

shezian said:


> This 30% return is the average over 25 years.




Are you saying you have averaged a 30% return over 25 years?

That certainly puts you among the worlds best investors, that means you would have been able to turn $10,000 into $7Million if you compounded your returns.




> I would love to be able to borrow to invest more into my trading as l know its a fantastic and secure low risk investment.




Have you been using leverage up until this point? if so that might explain the high return. If not, then I don't really think you need it.



> Did Warren Buffet make 30% each and every year, or were the returns variable from year to year




Warren has averaged just under 23% over his investment life, some years he has been down 40% others up over 70%, he has not had to many down years in his 60 year career though.

the 23% return has turned $10,000 into Billions of dollars.


----------



## Value Collector

darkhorse70 said:


> When I talk about inflation lets assume your property is a million dollars. So every year regardless your property goes up by 20k compounded. That doesnt count as wealth.




As I said, hedging against inflation is a primary goal when managing capital, Putting capital into a property investment does this quite well over time, Both your income and capital value will be protected compared to have your funds in a term deposit or bond.




> When I said less volatile I meant there is a varoety of stock. Blue chips is what I meant by less volatile. Its not like all stock are as risky as the next.




Look at how the blue chips handled the GFC most dropped by 50%, I call that volatile. and because of liquidity, a lot of people bailed, locking in losses when they should have stayed put.



> Plus for example my parents bought my family home for 300k 20yrs ago. We got offered 1.3m 2 weeks ago. Thats like 400% in 20yrs = about 20% a year. Now minus all the renovatoins + interest on the loan and all the other bs that comes with a home lets assume its like 10-15% a year.




Rookie error!!! you are making a huge calculation mistake here that most people actually make. 

You are subtracting the cost of interest, renovations and other costs, But you have failed to add back all the rent earned / saved. eg the property will generate rental return or it will save you paying rent if you live in it.

the correct calculation to determine profit would be,

  (Current value + 20 years rent)- (buy price + total holding costs)


----------



## Value Collector

RADO said:


> Yes nothing special about them... maybe if their average return was 11-12% per annum since inception, than there would be nothing special about them. No Australian retail fund I have seen so far has achieved these results only hedge funds with minimum deposit 500K. Can you name 5 Australian retail funds that have achieved what Microequities have achieved in the same amount of time? BTW 11-12% *per annum, since inception *for an Australian retail fund is still pretty good IMO.




No one is saying its not good, It's a fantastic return, It has just been noticed that it has come about because they have been swimming with the tide since inception, So we can't take the 30% pa return they have up until this point as a given for the future returns.

Small caps were smashed in the GFC, and over the past 5 years have been recovering, this is a once in a market cycle thing.

eg. a small cap that was trading at $1 pre gfc, that got smashed to $0.15, has probably recovered to $1.20 by now, giving a fantastic result, but that same stock probably won't continue to go up another 8 fold in the next 5 years.


----------



## darkhorse70

Say inflation went up by 2% this year. Now say your prkoerty value and rent total was a return of 10%. You still minus that 2% as the cost of livings increased. My point was that when your return is smaller inflation makes a bigger impact. I havent studied the housing market but so what look at what happened during the gfc. Im assuming house prices got slashed by half or more. Actually I didnt make a rookie error. I remembered that I didnt put that into my calculations when I went to bed but I was cbf getting up to type it haha. But technically my calculation was still right of around 400% because 330% would be 1.3M plus the rent would = around 400%. The stock market has better yields in the long run compared to property. Obviously it becomes more risky. Thats that haha


----------



## darkhorse70

I meant the house market of the US got slashed by half (just guessing)


----------



## Value Collector

darkhorse70 said:


> Say inflation went up by 2% this year. Now say your prkoerty value and rent total was a return of 10%. You still minus that 2% as the cost of livings increased. My point was that when your return is smaller inflation makes a bigger impact. I havent studied the housing market but so what look at what happened during the gfc. Im assuming house prices got slashed by half or more. Actually I didnt make a rookie error. I remembered that I didnt put that into my calculations when I went to bed but I was cbf getting up to type it haha. But technically my calculation was still right of around 400% because 330% would be 1.3M plus the rent would = around 400%. The stock market has better yields in the long run compared to property. Obviously it becomes more risky. Thats that haha




Inflation is not the cost of living rising, its the value of money declining. So the same financial effect that will cause bananas, baked beans and bus tickets to rise will be causing upward pressure on property prices and rents.

Aussie houses prices didn't get slashed during gfc

Did you work out how much rent your parents house would have collected over that period? I bet it adds a lot to the return.

In regards to inflation, it affects things like term deposits, because although a term deposit might earn 4%, you have to add pretty much all of the after tax return back to you capital to maintain its buying power, however a property earning 4% net after costs is pretty much all profit, because any inflation would have resulted in an upward movement in the capital value of the property, so you are hedged against inflation,


----------



## joku

darkhorse70 said:


> Plus for example my parents bought my family home for 300k 20yrs ago. We got offered 1.3m 2 weeks ago. Thats like 400% in 20yrs = about 20% a year. Now minus all the renovatoins + interest on the loan and all the other bs that comes with a home lets assume its like 10-15% a year.




Missing the rent expense of the alternate option as explained above is only the start of your problems. 

Firstly, 300k to 1.3mill is 333% gain. NO that's not "like 400%".

Secondly, even if it were 400%, no that does not = 20% per year for 20 years. Don't ever think in flat non compounding returns for multi year investments. 

20%pa for 20 years would be 3734% return. The house would be worth $11.5 million if that had happened.

Your 333% gain over 20 years is actually 7.6%pa. After inflation, repairs, reno etc it'd be barely above zero, but at least you walk away getting that rent you forgot to factor in effectively for free. In reality, there's prob some minor compounding gain and the whole capital wouldn't have been laid out at the start, so the more relevant ROIC would be higher still. It might not sound great, but the majority do even worse than this in the stockmarket.

Honestly, stockmarket is dog eat dog, a minority of winners take most, a majority of losers walk away with less than they started with. The only time it isn't like that is when people show humility and aim for something like index returns. With poor math, no exp, and a desire to aim for big returns a person has a very tough road ahead before they have even half a chance of being on the winning side of that nasty equation. Most people are better off in property, the remainder have humility, a great adviser, or a combination of years of education, comitment, and market experience behind them together with math ability which is at least a bit above par, ability to think independently and a sound understanding of risk management.


----------



## tech/a

Some great posts by *Value Collector.*

My suggestion is not OR but PLUS

While the financial industries catch cry ( for the inept )
Is *TIME IN THE MARKET*

I'm very much *TIMING THE MARKET.*
Both of them!!!

Not only for maximizing profit and minimizing loss but for 
Other reasons such as those suggested by VC.


----------



## tech/a

tech/a said:


> Some great posts by *Value Collector.*
> 
> My suggestion is not OR but PLUS
> 
> While the financial industries catch cry ( for the inept )
> Is *TIME IN THE MARKET*
> 
> I'm very much *TIMING THE MARKET.*
> Both of them!!!
> 
> Not only for maximizing profit and minimizing loss but for
> Other reasons such as those suggested by VC.




And From *Julia*



> Asset classes are cyclical
> 
> There are periods when property will do far better than shares, when property will flourish in some areas and languish in others, and periods when the share market will rocket ahead and when it will allow you to lose your money very quickly should you not have appropriate stops in place.




I would also argue that it is *very possible* to time both markets!

While it may not be exact tops or bottoms---enough to skew above average returns,and avoid above average losses or draw downs.


----------



## Value Collector

tech/a said:


> While it may not be exact tops or bottoms---enough to skew above average returns,and avoid above average losses or draw downs.




yes, as Ben Graham said, "It's possible to know a man is over weight, without knowing his exact weight, or a woman is old enough to vote, without knowing her exact age"


----------



## darkhorse70

Haha VC I corrected my mistake of 300k being a 400% return. I said it was 300 and a third. I rou ded it off to 400% with rent. It would probably be abit more but I should have realised I was getting assesed haha. I did also say that the US housing market got slashed and not the aussie one. My basic understanding of inflation was that the basket of goods increase because of demand or whatever giving you less purchasing power with the same dollar. You owned me with the compound return haha but you have to remeber I failed my finance subject once (honestly its a bs subject anyway/all formulas haha). Ill give an example. My dad just got a loan for a unit in port stephons for 300k on a loan (I told him to go swlf managed super route but too late) . Rent is expected at 250-300 p/w. Lets say about 15k per yr. Thats 5% return. Now add the gradual increase of the property value at say 5-10%.  Thats a total of 15% minus expenses = 10%.obviously this isnt a good sample as you can find better opportunities, timing etc. You can make 10% in one day on the markets. Obviously youll probably end up giving alot back as well but if you actually are a great trader youll make 10 fold what you can on property. My opinions very biased. We can search the globe and find housing booms and such and good opportunities. Im just basing my response off what ive seen around my and doing simple calculations. I guess im more against property as an option because all my friends and the general opiniin is im going to buy a property, rent it out pay it offf then repeat and be rich. Its so irritating haha. Its like people are not doing simple calculations and have a heard mentality when there are better oppurtunities for the less lazy people out there of they just think abit more.


----------



## tech/a

Oh my.

I note a PHD in theory
and a Masters in rhetoric.

Enjoy your journey---There is a good chance it will be longer than most.


----------



## pavilion103

tech/a said:


> And From *Julia*
> 
> 
> 
> I would also argue that it is *very possible* to time both markets!
> 
> While it may not be exact tops or bottoms---enough to skew above average returns,and avoid above average losses or draw downs.





Exactly. Timing the markets. 

Right now property is the largest capital outlay for poor growth potential (could be negative), and the largest potential downside and greatest potential risk, with small yield. The RR doesn't make sense!

In my opinion it isn't even close to making sense. 

It's not about picking the bottom of the market or the absolute best time to buy, but knowing when it is a good time and when it is a bad time. We CAN know this. 



I don't think it even has to be Property OR shares. 

If market conditions are good for both, invest in both if you like. 
If market conditions are poor for both, step aside and preserve capital (so that you still have some when the opportunities do come around).


----------



## Julia

tech/a said:


> Some great posts by Value Collector.



Agree.  And in other threads also.



tech/a said:


> Oh my.
> 
> I note a PHD in theory
> and a Masters in rhetoric.
> 
> Enjoy your journey---There is a good chance it will be longer than most.



+1.


----------



## Value Collector

darkhorse70 said:


> Haha VC I corrected my mistake of 300k being a 400% return. I said it was 300 and a third. I rou ded it off to 400% with rent. It would probably be abit more but I should have realised I was getting assesed haha..




It was the other guy that broke down your figures, not me. 



> My basic understanding of inflation was that the basket of goods increase because of demand or whatever giving you less purchasing power with the same dollar.




That's the method used to measure inflation, however inflation caused by the money supply inflating eg more dollars being created, in the system. It's the opposite of deflation, which is caused by money supply being reduced.



> My dad just got a loan for a unit in port stephons for 300k on a loan (I told him to go swlf managed super route but too late) . Rent is expected at 250-300 p/w. Lets say about 15k per yr. Thats 5% return. Now add the gradual increase of the property value at say 5-10%.  Thats a total of 15% minus expenses = 10%.obviously this isnt a good sample as you can find better opportunities, timing etc. You can make 10% in one day on the markets.




Hence why I said I like to use both, it is a very comforting feeling knowing you own some good property generating a stable weekly income when your in a gfc event. when directors are cutting dividends, at least I have some rent coming in.

But yes, having exposure to a range of good businesses is great too, hence I also own a bunch of shares.



> Obviously youll probably end up giving alot back as well but if you actually are a great trader youll make 10 fold what you can on property



. 

and that's a big if, the number of people that try and fail is very large, Hence I would never discourage a person from allocating their savings into property and index funds where they will get lower, but far less risky returns over time.



> I guess im more against property as an option because all my friends and the general opiniin is im going to buy a property, rent it out pay it offf then repeat and be rich. Its so irritating haha. Its like people are not doing simple calculations and have a heard mentality when there are better oppurtunities for the less lazy people out there of they just think abit more




I can't see anything wrong with them getting involved in property, Property is a big part of any economy, and there has to be investors involved in property as well as the equities market to make the world go round.


----------



## Glen48

That’s not to denigrate the stunning achievement of so many people being lifted out of poverty. But why do you think so much Chinese money is flooding into Australia through the Significant Investor Visa program?

--Private Chinese citizens can legally only move US$50,000 per year outside the country, under capital control laws. But if you put $5 million into Australian government bonds, you can effectively buy Australian permanent residency. More than 95% of the participants in Australia’s ‘golden visa’ program are Chinese, according to a report in today’s Australian.

--There’s absolutely nothing wrong with a country making itself an attractive place for capital to flee to. But ask yourself why Chinese money is pouring into the country. The Australian reports that the Bank of China is actively and illegally laundering money for wealthy Chinese who wish to get it out of the country and into places like Melbourne and Sydney.

From Money Morning:
--Insiders or members of the Communist Party who see the writing on the wall with the end of the debt-fuelled fixed investment growth model have every incentive to take their private fortunes ”” ill-gotten or otherwise ”” and get them out of the country while the getting is good. Melbourne is the new Zurich and Sydney is the new Geneva.

Chinese are putting 22 Billion in to the USA housing market so it would be reasonable to assume it is happening all over the World.

The word is the Australia Property market will continue to rise and  IR will stay low or go lower as the Feds do all to prop up the market.

I can not see any reason the DOW won't double as investor's pull their money out of Europe and other place with USA perceived to be the safest place to park their money  and big companies split their share to enable MOm and Pop to buy in to the trap.


----------



## notting

China’s state broadcaster CCTV has launched an extraordinary attack which in reality is supposed to be a retaliatory threat to Australia for our display of friendship with Japs PM.  
They are trying to underhandedly threaten us that they will stop buying our bonds and stuff.  They are trying to make us tremble as targets of the next crack down of graft and corruption.  

It's a BS threat.  

China never does anyone favors.  
All they are interested in is making money and gaining power.  They will always buy value no matter what is going on.  It's got nothing to do with their good/bad relations with us.  They try to make out that they are investing in Australia out of some kind of good will.  It is nothing of the sort. We should block them from buying anything of ours with their pretend money.

The time to worry about China is when they are saying nothing or when they are making friendly gestures like what they did the other day in saying they were not Asian expansionists.  That's usually when they are about to invade, incarcerate, pillage and kill everyone.

If they are not expansionists then why are they occupying Southern Mongolia, Tibet, East Kazakhstan and making aggressive grabs in the South China sea.


----------



## Glen48

China has no need to attack Australia, at this stage, when they can legally buy up Aussie property, Farms and mineral lots all with the Feds consent.
 Now the Greens have given Abbott the green light to keep borrowing money with out a debt ceiling it is full speed ahead.


----------



## notting

Glen48 said:


> China has no need to attack Australia, at this stage, when they can legally buy up Aussie property, Farms and mineral lots all with the Feds consent.
> Now the Greens have given Abbott the green light to keep borrowing money with out a debt ceiling it is full speed ahead.




China will never attack any one unless they have overwhelming advantage, they are bullies and cowards.  
In the mean time China will do everything they can to invade us quietly like the 20,000 or so they already have on our land posing as students and immigrants that in reality are foot soldiers who spy and carry out all kinds of covert activities.  
They also try to overrun with investment then enslave you with indebtedness to them and try infiltrate and take government positions.


----------



## Value Collector

Glen48 said:


> But why do you think so much Chinese money is flooding into Australia through the Significant Investor Visa program?
> 
> .


----------



## Value Collector

notting said:


> China will never attack any one unless they have overwhelming advantage, they are bullies and cowards.
> In the mean time China will do everything they can to invade us quietly like the 20,000 or so they already have on our land posing as students and immigrants that in reality are foot soldiers who spy and carry out all kinds of covert activities.
> They also try to overrun with investment then enslave you with indebtedness to them and try infiltrate and take government positions.




Perhaps this would be better in a conspiracy thread, it's not really on topic here


----------



## Huskar

RADO said:


> Yes nothing special about them... maybe if their average return was 11-12% per annum since inception, than there would be nothing special about them. No Australian retail fund I have seen so far has achieved these results only hedge funds with minimum deposit 500K. Can you name 5 Australian retail funds that have achieved what Microequities have achieved in the same amount of time? BTW 11-12% *per annum, since inception *for an Australian retail fund is still pretty good IMO.




AFIC have for 80 years (alright, not 12% for 80 yrs but the still done good) - the best out there in Aussie equities in my opinion..

http://www.afi.com.au/Investment-performance.aspx


----------



## luutzu

Glen48 said:


> China has no need to attack Australia, at this stage, when they can legally buy up Aussie property, Farms and mineral lots all with the Feds consent.
> Now the Greens have given Abbott the green light to keep borrowing money with out a debt ceiling it is full speed ahead.




Was listening to some lecture and it's interesting how the US just taxed the heck out of the British and Japanese investors back in the days. That they lure them in, the Brits invests in rails, the Japs in property and what not... then years later, under some pretext, increase taxes on those and the investors just sold out at losses.

It's pretty amazing the kind of stuff our government could pull and get away with it too.


----------



## ROE

Let them buy up land and farms and properties, load it up, they cant shipped it to China
Down the track we just twit some regulations and laws and they sell back a few times cheaper 
or let you have it back for free 

or if there is war bye bye to your hard asset here


----------



## Value Collector

ROE said:


> Let them buy up land and farms and properties, load it up, they cant shipped it to China
> Down the track we just twit some regulations and laws and they sell back a few times cheaper
> or let you have it back for free
> 
> or if there is war bye bye to your hard asset here




Yep, a 7 year drought should see them dumping the farms they over paid for.

It's funny, people every where are complaining that chinese are buying up our farms, but I don't see these whingers rushing out and paying top dollar to till the soil.

The average aussie farmer is in his 60's, and has work hard his whole life, can you blame him for selling out if some one wants to pay top dollar. 

We need investment in the agricultural sector, and if Gen X and Y don't want to do it, Then let the chinese.


----------



## angellicvoices

Value Collector said:


> Yep, a 7 year drought should see them dumping the farms they over paid for.
> 
> It's funny, people every where are complaining that chinese are buying up our farms, but I don't see these whingers rushing out and paying top dollar to till the soil.
> 
> The average aussie farmer is in his 60's, and has work hard his whole life, can you blame him for selling out if some one wants to pay top dollar.
> 
> We need investment in the agricultural sector, and if Gen X and Y don't want to do it, Then let the chinese.




 True, I always think what would happen to a farm if the owner passes away and no-body wants to continue. There are a lot of farms for sale out there but seems very few want to work on them.  I guess it doesn't get maintained and running a farm is hard work and does cost a lot of time, labour and investments like  new technologies and machineries etc. Even fertiliser and pesticides isn't cheap. Then you got to worry about things like available water and water rights etc. I almost bought a farm once, but realised finding reliable people to work is just too difficult, especially during the mining boom.


----------



## Glen48

As the foreigners buy up our farms the produce wil go back to China because the whole idea is to keep the top brass in power and make sure the peasants are fed and happy.


----------



## angellicvoices

Glen48 said:


> As the foreigners buy up our farms the produce wil go back to China because the whole idea is to keep the top brass in power and make sure the peasants are fed and happy.




 As long as the farmer is happy with what he gets for the farm and the Chinese pay their taxes, they can sell their produce to whoever they want to. I don't believe for a moment that they wouldn't sell to local markets considering the cost of freight these days. Would you prefer seeing a struggling Aussie farmer? Look what happen in Zimbabwe when all the white farmers came and invested in farmland, the country's agricultural economy went up. However look what happened to the country after Mugabe decided to kick the white farmers out, the agricultural industry collapsed.


----------



## Glen48

Ok so you are saying the Chinese government put up a few mill to buy farms,mines etc around the world the the manager can pocket the profits?


----------



## Value Collector

Glen48 said:


> As the foreigners buy up our farms the produce wil go back to China because the whole idea is to keep the top brass in power and make sure the peasants are fed and happy.




Even if the farm / mine is owned by Aussie farmers, the produce will still be sold to the highest bidder, and we already export lots of food.

How is this different from an Aussie starting a factory in china, to ship goods back here?

Australia needs export industries, and even if the farm was exporting 100% of its produce, its better than the land lying fallow, a farm can't operate in isolation, there would be flow on effects into the rest of the economy.


----------



## Value Collector

Glen48 said:


> Ok so you are saying the Chinese government put up a few mill to buy farms,mines etc around the world the the manager can pocket the profits?




Is it just Chinese investors you are worried about, because Australia has a long history of foreign investment, British, American and Japanese have always been large investors. Many of the projects currently providing billions of revenue to Australia would not have got off the ground without foreign investors.

Even Foreign owned projects still generate huge benefits to Australians, 

Taxes, Wages, and a host of services all take a decent chunk of revenue before the owner books a profit and these flow on to the rest of the community.


----------



## Glen48

Value Collector said:


> Even if the farm / mine is owned by Aussie farmers, the produce will still be sold to the highest bidder, and we already export lots of food.
> 
> How is this different from an Aussie starting a factory in china, to ship goods back here?
> 
> Australia needs export industries, and even if the farm was exporting 100% of its produce, its better than the land lying fallow, a farm can't operate in isolation, there would be flow on effects into the rest of the economy.




Agree people making items in China and shipping back here has been going on for yrs, but China can't mine ore and other product Australia has and ship here.
 The total aim of the Chinese fed.s is to keep the population happy so there are no riots.
USA has 70 Million on food stamps  just think what would happen if the Feds stopped food stamps.


----------



## Value Collector

Glen48 said:


> , but China can't mine ore and other product Australia has and ship here.
> .




What's your point?


----------



## Glen48

That China elite are raping the world at any expense, to get what they want to keep the people happy so the corrupt can stay in power.


----------



## angellicvoices

Glen48 said:


> Ok so you are saying the Chinese government put up a few mill to buy farms,mines etc around the world the the manager can pocket the profits?




 You might want to ask own Government why their not doing the same thing as the Chinese and buy up  farms and mines. As long as they're paying taxes on the mines, cant see why anyones should complain, better than unproductive piece of land.  By the way, Taxes benefit us if they continue to run the farm. If your argument is about feeding Aussie grown food to the millions in China, then it is no different from the vegetables that big corporations like Coles and Woolworths import from farms in China to feed Australians. That's why they call it trade, because there will be things we need and things they need. Infact there's millions of foreign multi-nationals in China doing business there. If China collapsed, many businesses in Australia will go with it. I really can't see much of an argument from you.


----------



## Glen48

True as long as the Aussie can get a benefit from the sale and be able to buy what is produced then it is ok but if things turn bad Chinese people will be first and we will be a poor second. 
Then again if you come here with 5 Mill you can buy any thing  with the Fed's ok.
 Which is keeping the Aussie housing market afloat.


----------



## Value Collector

Glen48 said:


> That China elite are raping the world at any expense, to get what they want to keep the people happy so the corrupt can stay in power.




Ok, I think your view of how things are working should probably be in a conspiracy theory thread too.

If you are fine with Americas Exxon Mobil owning 50% of Bass strait oil fields for the last 30 years, But would flip your lid if a Chinese company made a similar investment I think its more of a racial thing.

The fact is if you watch any financial media you will hear constant talk of companies from around the world including Australia making huge investments into china. 

Large parts of the Chinese economy are foreign owned, just this morning I was reading asx listed Collins food report where they said they had 40 Sizzler restaurant franchises in china. Not to mention American majors such as KFC and Mc Donalds, not to mention American owned factories, chemical plants, transport companies etc etc all in china.  

But a Chinese group want to buy an under performing Farm that's turning to weeds from lack of investment and your against it, I really can't see a rational reason why.

Who cares who the investors are, we need investment in Australia.


----------



## angellicvoices

Glen48 said:


> True as long as the Aussie can get a benefit from the sale and be able to buy what is produced then it is ok but if things turn bad Chinese people will be first and we will be a poor second.
> Then again if you come here with 5 Mill you can buy any thing  with the Fed's ok.
> Which is keeping the Aussie housing market afloat.




 If that's the case, maybe you should start a farm and grow your own food instead of crying about how the Chinese aren't going to feed you when times get hard. There's ample amount of reasonably priced land for sale from farmers who want out you know.


----------



## Glen48

If you think selling Aussie property to foreigners and they take 100% of what is produced back to the home country and we get the government imposed duties only is ok, that is your opinion. 

I can't see hungry and unemployed people wandering around a dairy farm watching all the milk etc  being shipped out.


----------



## angellicvoices

Glen48 said:


> If you think selling Aussie property to foreigners and they take 100% of what is produced back to the home country and we get the government imposed duties only is ok, that is your opinion.
> 
> I can't see hungry and unemployed people wandering around a dairy farm watching all the milk etc  being shipped out.





   First of all, your argument is hypothetical in regards to the Chinese selling 100% of the produce back to China. Second of all, you do realise you will be hungry anyway if locals do not want to till the land. Again what is your point?


----------



## Glen48

Just wondering why overseas countries have rulings regarding foreign ownership, like not being able to buy land unless it is in the countries interest such as keeping the building boom going or foreign owners are not allowed to own more than 40% of their own business.


----------



## ROE

Glen48 said:


> If you think selling Aussie property to foreigners and they take 100% of what is produced back to the home country and we get the government imposed duties only is ok, that is your opinion.
> 
> I can't see hungry and unemployed people wandering around a dairy farm watching all the milk etc  being shipped out.




with a stroke of a pen, the government can mandate how and what produce can be exported and fees paid 
and they level the playing fields for other producers.

you are too fearful, take any change as an opportunities rather than threat and you do very well financially 

My field is constantly under threat of going over sea or cheaper labour but I don't take that as a threat I take that as an opportunities for me to expand into other fields where my peers panic and cry and worry all day ..

I end up getting better job and more pay and they slowly lose their job


----------



## Value Collector

Glen48 said:


> If you think selling Aussie property to foreigners and they take 100% of what is produced back to the home country and we get the government imposed duties only is ok, that is your opinion.
> 
> I can't see hungry and unemployed people wandering around a dairy farm watching all the milk etc  being shipped out.




Just like an Aussie farmer, they will sell the produce to the highest bidder.

But lets say your right, and 100% of the produce goes to export, how would Australia benefit.

1, Taxes and duties
2, Staff wages paid to Australians and spent in Australia
3, Transport expenses from farm gate to port, driver wages, fuel, vehicle registrations, vehicle maintenance
4, Supplies purchased from other aussie businesses, eg, fencing, fertiliser, equipment, fuel, electricity
5, secondary processing, eg meat works etc.

Its simple business, no business gets to keep 100% of their revenue. they will lose at least 80% of the revenue to the areas I listed and probably 100 I didn't list, and these will filter through the Aussie economy.


----------



## ROE

The Chinese face the same sh*t as the Japanese did in the 70 and 80 when they bought up land, farm, mines, golf courses and Gold Coast.

The dude that run around panic make no money, the one that took on the opportunities becomes very rich.


What happen now? most of those thing the Japanese sold it back cheaper and the Aussie are laughing all the way to the bank and a long the way some Aussies becomes millionaire and billionaire.

When China hit financial crisis, the fly of capital will go back home so did the Japanese before them 

you dont need to look too far, the equity market can prove that to you those who took the opportunities when there are threat are handsomely rewarded, those who flies to gold got SMASHED


----------



## angellicvoices

Glen48 said:


> Just wondering why overseas countries have rulings regarding foreign ownership, like not being able to buy land unless it is in the countries interest such as keeping the building boom going or foreign owners are not allowed to own more than 40% of their own business.




 By the way are you Filipino? I noticed from your account. I wonder if there are any resentments between Filipino and the Chinese considering most of your arguments are quite superficial and most of them seem filled with emotional anger of some sort. It feels like I am arguing with a racist.


----------



## Value Collector

Glen48 said:


> Just wondering why overseas countries have rulings regarding foreign ownership, like not being able to buy land unless it is in the countries interest such as keeping the building boom going or foreign owners are not allowed to own more than 40% of their own business.




Mercantilism I guess.

Australia has various foreign ownership laws too, some make sense others don't. Foreign ownership is a topic that tends to bring out emotional responses, this can lead to governments bringing in laws based on fear rather than sound rational reasoning.


----------



## Glen48

angellicvoices said:


> By the way are you Filipino? I noticed from your account. I wonder if there are any resentments between Filipino and the Chinese considering most of your arguments are quite superficial and most of them seem filled with emotional anger of some sort. It feels like I am arguing with a racist.




 No you are talk with an Australian who can express his opinion with out fear and was just commenting on the topic however if you know what the future will bring lets us know.


----------



## Glen48

Value Collector said:


> Mercantilism I guess.
> 
> Australia has various foreign ownership laws too, some make sense others don't. Foreign ownership is a topic that tends to bring out emotional responses, this can lead to governments bringing in laws based on fear rather than sound rational reasoning.




True as long as it is a level playing field but fellow Aussies trying to compete against corrupt officials with tainted money in the local property market is a big ask .

However government's want the  property market to stay afloat due to the revenue it brings in.


----------



## angellicvoices

Glen48 said:


> No you are talk with an Australian who can express his opinion with out fear and was just commenting on the topic however if you know what the future will bring lets us know.




 Sorry I asked. By the way, why are you residing there? Are you retired and married to a local Filipino lady? Or are you here in Australia with her?


----------



## Glen48

Semi retired and living alone in Australia.


----------



## Value Collector

Glen48 said:


> True as long as it is a level playing field but fellow Aussies trying to compete against corrupt officials with tainted money in the local property market is a big ask .
> 
> However government's want the  property market to stay afloat due to the revenue it brings in.




corrupt officials with tainted money? 

What are you talking about?


----------



## Glen48

Any one in the world who is corrupt who wants in on Aussie RE.


----------



## Value Collector

Glen48 said:


> Any one in the world who is corrupt who wants in on Aussie RE.




Such as?

Do you really think this is having a large enough effect on Australia's multi Trillion $$$ real estate market to be worth mentioning?


----------



## Wysiwyg

Glen48 said:


> Any one in the world who is corrupt who wants in on Aussie RE.



I think you mean price manipulation. That happens when there is a rush on assets that are increasing/decreasing  in value. The price extends to overbought for a top and extends to oversold for a bottom.


----------



## angellicvoices

Glen48 said:


> Any one in the world who is corrupt who wants in on Aussie RE.




Mate, you don't have to go far to find corruption exists everywhere even in our own backyards. Just read the news you find it in our politicians, union officials, Councils etc. Where I live in Wollongong, ICAC even found a large part of our Council corrupt at one stage.


----------



## Glen48

Does not matter where the money comes from, it all depends on whether corrupt money wraps house prices or not.


----------



## angellicvoices

Glen48 said:


> Does not matter where the money comes from, it all depends on whether corrupt money wraps house prices or not.




 I don't understand you. What is your point? By the way, how do you know if money is corrupt or legitimate?


----------



## Glen48

Easy.... not many peasant/s from overseas countries don't have a spare 5 mill to splash around and Abbott lets any ones one in with money.


----------



## angellicvoices

Glen48 said:


> Easy.... not many peasant/s from overseas countries don't have a spare 5 mill to splash around and Abbott lets any ones one in with money.




 Pointing out a whole group as 'peasants' is pretty derogatory, don't you think? You assume that every single person coming into Australia has 5 million dollars of corruption money is another of your poor assumption. There are many productive groups who have made it in this world without corruption. Of course, you may be alittle envious of their predicament, but doesn't mean you can't start your own innovative business and make some money. I don't understand why wouldn't any Government not want foreign investment. Look at Bali for example, the reason why its so nice is because of all the foreign investment. I personally know a number of Aussies who have started businesses there and they love it. It helps the community whom would otherwise be struggling. China is another country who has around 70% foreign owned companies and its lifted many people out of poverty. Infact Foreign money is more important to us because thats how Australia keeps its deficit in check. Again, I don't understand your arguments, you seem ill informed about how the world works. The world doesn't work on a grandiose sense of self entitlement, you need to work hard to get what you want these days. So relying on the Government and whining about hypotheticals that seem irrational is pointless.  Reminds me of watching one of those Current Affair programs where they promote fear mongering unto the masses to get their ratings up. But honestly, think of the taxes and duties these foreign owned farms are paying. For example, Centrelink money doesn't come out of someone's backside, Libraries and hospitals doesn't pop up out of the blue. Doctors don't grow their own money. Infrastructures don't maintain themselves and you do realise that the hundreds of thousands of civil servants that serve you, has to eat. Old aged pensioners, carers, disability pensions, Medicare all have to be paid. If you rely on any of these services, then perhaps think about how any economy is run.


----------



## Glen48

ok Maybe you can give me a lecture on CDS's and what the future will be.


----------



## DeepState

From FIRB 2012/13 and RBA June 2014:


----------



## luutzu

So is it shares or property?


----------



## Glen48

Shares for sure. Watch the DOW double in the future.


----------



## luutzu

Glen48 said:


> Shares for sure. Watch the DOW double in the future.




Thanks Glen. 

btw, in the wrong hand, money could also buy poverty. 

Like that son of a former Chinese Vice-Premier [?] who bought that mansion in Sydney for $60 million [60? fark].. then set about knocking it down to rebuild something that's probably more Feng Shui friendly to bring in harmony from the East, riches from the West and protection from the North Wind and flowing water signifying constant freshness to the South... hehehe... OK, sometime not poverty, but a laugh for sure.


----------



## Glen48

Yes I just can't understand how some one with that much money can think they are doing the right thing....Guess their ego has to be boosted.
See Hewett had to drop 700k to get a sale   he will need to send down a few ace's to recover that.
Had you purchased share in EMC you would have increased your  wealth by 37,000 %


----------



## DeepState

ROE said:


> The Chinese face the same sh*t as the Japanese did in the 70 and 80 when they bought up land, farm, mines, golf courses and Gold Coast.
> 
> The dude that run around panic make no money, the one that took on the opportunities becomes very rich.
> 
> 
> What happen now? most of those thing the Japanese sold it back cheaper and the Aussie are laughing all the way to the bank and a long the way some Aussies becomes millionaire and billionaire.
> 
> When China hit financial crisis, the fly of capital will go back home so did the Japanese before them
> 
> you dont need to look too far, the equity market can prove that to you those who took the opportunities when there are threat are handsomely rewarded, those who flies to gold got SMASHED




Totally.  Even in Germany, following a savaging in war, had a local market that did remarkably in the 1950s.  The market was nearly totally wiped out, you would have needed a stomach of forged steel and not needed to touch your assets to eat but holders with decade plus timeframes did do well.

The following is partly just to have fun in that I'm not trying to be too serious on this.  On average the statements made above are correct, in my view.  In the following, I'm using gold to illustrate as an extension to the quote, but feel free to substitute this for JPY cash deposits if you like. This is just to highlight that , sometimes, that the answer can be neither.

When the Japanese banking crisis occurred around 1988-1990 (following Oct 1987 and announcements of rate rises in August 1987), it was Japan that was most in crisis and not Australia or elsewhere.  At the time, we had books like "The Toyota Way" and everything Japanese was examined to see why bilateral export performance was so strong (which allows them to buy assets offshore).  Japanese equities were the second highest capitalisation in the world.  

The following shows that property prices did take bit of a hit in Australia and also the US, but it's no economic fabric buster:




Some Japanese did fly to gold as their world collapsed.  The below is gold imports/exports into/from Japan, the big spike was after a very large initiative to bring gold to consumers and opened two-way gold markets in Japan, targeted at retail.  You will notice that, despite an overhang (as the initiative was not well received) net gold imports remained high during the acute crisis period and generally declined thereafter.




Were they wrong to do so?

Here is what subsequently happened to real estate:




...and here is what happened to the share market:




...and here is what happened to the gold price (in JPY):




24 years and counting....

There is probably no need to go into property valuations, debt loads etc...you know them already.  

This is not central case for me. It is a scenario that I find worth considering alongside rosier ones.  It happened and there are an enormous number of reasons why this time, and in this or that market, things are different and that this could not possibly come to pass...


----------



## Value Collector

Glen48 said:


> Does not matter where the money comes from, it all depends on whether corrupt money wraps house prices or not.




Are you saying warps???

If you mean warps, do you really think there is enough corrupt money to warp a $5 trillion market, 

And even if it could, why would your investment decisions be swayed by it, if you were buying a farm would you care if some other guy bought some other farm with corrupt money? Of course not, you would make your decision based on what the farm would produce.


----------



## qldfrog

this issue with the chinese wealth and its effect in Australia on both stock market and Real estate is probably not black and white:
yes the overall % of RE sales is not that big (but often it is done via family member who are residents and so the real figures are probably higher than the official ones), but it is important to consider that even a small extra demand can have a serious effect on a market; 
In the same way that a small excess offer can; a few % of morgage default on the gold coast for example  killed the unit market there in the last few years
So I believe the effect is probably substantial;
Is it really different for the share market especially here in Oz where mining is a huge portion of the ASX?
Either by direct purchase from chinese corporation or via the mining boom, the influence of the chinese wealth on the asx is enormous.
Is it a corrupt influence? Probably by western standard: even based on chinese law for currency transfer, I doubt any RE purchase here by private chinese investor is legal.On the corporate side, accountancy there seems as relaxed as it is for our master of the universe wall street guys.
So what if the chinese economy is rotten and drafts are a way of doing business; well maybe more openly than it is in the western world but they are not the only one; and if i was chinese, i would like a bit of protection of assets by going O/S;
After all, i invest O/S myself for that purpose.Let's just make opportunities as they come, and if you have no expectation, you are not disappointed.My week end morning rant ;-)


----------



## Glen48

Six years since the collapse of Lehman Brothers triggered a financial meltdown, some young adults are more risk averse and view the potential upsides of status and wealth more skeptically than before the crisis, altering the homeownership calculation. It's more than the weight of student loans, an iffy job market and tight credit ”” even those who can buy are hesitant."

Some other fascinating stats from the piece:

    First-time buyers accounted for just 27 percent of May sales, far below the long-term average of about 40 percent.

    Only 52 percent of Millennials in one poll said homeownership is an "excellent long-term investment."

    Three-fourths of them believe the U.S. housing crisis hasn't gone away yet, even though it's been nine years since the peak of the bubble and almost six years since the depths of the Great Recession!

Housing Wire notes that foreign buyers purchased just over $92 billion worth of U.S. real estate in the year ending in March, up sharply from $68 billion a year earlier. A whopping 60 percent of them paid all cash, compared to one-third of domestic buyers.

From Money Morning:

So if this is happening in USA we can assume they are looking all over the world for property, even London market is booming .

I can see another Japanese style boom bust here lead once again  by the Gold Coast.

Looks like the younger  generation are sitting back and taking stock of the situation at least we don't have student loans debt like USA ...yet.


----------



## shezian

Value Collector said:


> Are you saying you have averaged a 30% return over 25 years?
> 
> That certainly puts you among the worlds best investors, that means you would have been able to turn $10,000 into $7Million if you compounded your returns.
> 
> 
> 
> 
> Have you been using leverage up until this point? if so that might explain the high return. If not, then I don't really think you need it.
> 
> 
> 
> Warren has averaged just under 23% over his investment life, some years he has been down 40% others up over 70%, he has not had to many down years in his 60 year career though.
> 
> the 23% return has turned $10,000 into Billions of dollars.




I don't use compounding as some years are up and some are low, so in this situation compounding doesn't seem to benefit. If it was constantly 30% per annum then, yes it would make sense, but that is a dream and not reality. 
Unless you can think of another way l could better my money managment?

Thanks Sue


----------



## Value Collector

shezian said:


> I don't use compounding as some years are up and some are low, so in this situation compounding doesn't seem to benefit. If it was constantly 30% per annum then, yes it would make sense, but that is a dream and not reality.
> Unless you can think of another way l could better my money managment?
> 
> Thanks Sue




I don't really get what you mean.

If your averaging 30% per year, even if it's up and down, you should be able to compound. you don't need a steady rate.

you can put $100 in and it may go like this, and it still equals a 30% compounded return

year 1 - $130 up
year 2 - $200 up
year 3 - $250 up
year 4 - $180 down
year 5 - $210 up
year 6 - $400 down
year 7 - $800 up
year 8 - $700 down
year 9 - $650 down
year 10 - $1078 up



When I said warren buffet averaged 23% per year, that included years when he was down 70%.

Perhaps your not calculating your average return correctly.


----------



## shezian

Value Collector said:


> I don't really get what you mean.
> 
> If your averaging 30% per year, even if it's up and down, you should be able to compound. you don't need a steady rate.
> 
> you can put $100 in and it may go like this, and it still equals a 30% compounded return
> 
> year 1 - $130 up
> year 2 - $200 up
> year 3 - $250 up
> year 4 - $180 down
> year 5 - $210 up
> year 6 - $400 down
> year 7 - $800 up
> year 8 - $700 down
> year 9 - $650 down
> year 10 - $1078 up
> 
> 
> 
> When I said warren buffet averaged 23% per year, that included years when he was down 70%.
> 
> Perhaps your not calculating your average return correctly.





Sorry we do compound yearly but not monthly.


----------



## Value Collector

shezian said:


> Sorry we do compound yearly but not monthly.




So 30% per year should have you sitting on a few million by now.


----------



## shezian

Value Collector said:


> So 30% per year should have you sitting on a few million by now.




Well, it all depends on when you started and how much you started with. Its a long story what happened. But we have pretty much started from scratch as our risk profile was way too high, so since the start of this year we have lowered it, to bring it to a much more realistic levels of an average of 30% per annum. We were making 80% per annum, and found way too risky and lost a fair chunk of out capital, hence now we are starting with only $30,000, feels like its going to take years to get somewhere with this small amount of starting capital. So we have decided that each year it makes money we add that same amount and if it doesn't we don't add. It has to work for itself. We have lost money over the past few years, only because our risk was way too high, now we have halved the risk, so our chances of every losing our capital is near zero. But you can never say never in the trading world.


----------



## ROE

shezian said:


> We were making 80% per annum, and found way too risky and lost a fair chunk of out capital,




How can you be making 80% a year and lose capital?


----------



## Glen48

With IR coming down I can see a new boom in RE and a bigger bubble all we need to know is when will the thing pop.
I am sure IR will come down more as the Feds do all possible to keep the economy afloat.


----------



## shezian

Glen48 said:


> With IR coming down I can see a new boom in RE and a bigger bubble all we need to know is when will the thing pop.
> I am sure IR will come down more as the Feds do all possible to keep the economy afloat.




We trade the currency market. And they have been performing badly in the last 3 years. Hence why we lost money.


----------



## tech/a

shezian said:


> We trade the currency market. And they have been performing badly in the last 3 years. Hence why we lost money.




????


----------



## Value Collector

shezian said:


> Well, it all depends on when you started and how much you started with. Its a long story what happened. But we have pretty much started from scratch as our risk profile was way too high, so since the start of this year we have lowered it, to bring it to a much more realistic levels of an average of 30% per annum. We were making 80% per annum, and found way too risky and lost a fair chunk of out capital, hence now we are starting with only $30,000, feels like its going to take years to get somewhere with this small amount of starting capital. So we have decided that each year it makes money we add that same amount and if it doesn't we don't add. It has to work for itself. We have lost money over the past few years, only because our risk was way too high, now we have halved the risk, so our chances of every losing our capital is near zero. But you can never say never in the trading world.




didn't you say you averaged 30% for decades, even if you only started with $10,000 you would have millions.

When you starting with such a small capital base your own contributions will be one of the fastest ways to help make it grow.

Eg. If you have $30,000 and you save $10,000 your capital has increased by 33%. So having a savings plan is very important at the early stages to give yourself a boost.

I don't think you are a sophisticated enough investor to have an elaborate investment operation, I would probably just suggest putting your funds into an index and concentrate on regularly adding contributions.

It worries me when you say "It feels like it will take years to get some where" because when people are in a rush, or feel like they have to play catch up, they do stupid things. Investing does take years, and the markets will fluctuate, the key is to have an operation that will make money over the longer term despite the ups and downs, an index fund should do this for you.


----------



## Value Collector

ROE said:


> How can you be making 80% a year and lose capital?




I guess they were only counting the good years.


----------



## Wysiwyg

shezian said:


> We trade the currency market. And they have been performing badly in the last 3 years. Hence why we lost money.



Currency markets don't perform badly in a trading context. They are simply prices at any given moment. Traders perform badly (or goodly).


----------



## tech/a

Wysiwyg said:


> Currency markets don't perform badly in a trading context. They are simply prices at any given moment. Traders perform badly (or goodly).




Hence my ???


----------



## Value Collector

Wysiwyg said:


> Currency markets don't perform badly in a trading context. They are simply prices at any given moment. Traders perform badly (or goodly).




Performing badly, Like a lion at the circus. eg not doing what its told


----------



## tech/a

Value Collector said:


> Performing badly, Like a lion at the circus. eg not doing what its told




Clearly I married a Lion.


----------



## shezian

Value Collector said:


> didn't you say you averaged 30% for decades, even if you only started with $10,000 you would have millions.
> 
> When you starting with such a small capital base your own contributions will be one of the fastest ways to help make it grow.
> 
> Eg. If you have $30,000 and you save $10,000 your capital has increased by 33%. So having a savings plan is very important at the early stages to give yourself a boost.
> 
> I don't think you are a sophisticated enough investor to have an elaborate investment operation, I would probably just suggest putting your funds into an index and concentrate on regularly adding contributions.
> 
> It worries me when you say "It feels like it will take years to get some where" because when people are in a rush, or feel like they have to play catch up, they do stupid things. Investing does take years, and the markets will fluctuate, the key is to have an operation that will make money over the longer term despite the ups and downs, an index fund should do this for you.





Index fund?? What is the annual return of investing in that?


----------



## Hodgie

shezian said:


> Index fund?? What is the annual return of investing in that?




Like any other investment which has an element of risk, the return is not a certain or a set percentage.

It is just a simple and low cost way of gaining exposure to the markets average returns.


----------



## Value Collector

shezian said:


> Index fund?? What is the annual return of investing in that?




Well it depends which index you invest in.

Here is a link to the asx 200 accumulation index. it done pretty well over time, Basically with the asx 200 accumulation index you are invested in the top200 companies, and all dividends are used to buy more shares, so the compounding affect can be massive over time. 

http://www.netactuary.com.au/_ref/ref21.aspx?ID=arcsuper


----------



## Value Collector

here is a chart of the all ordinaries accumulation index.


----------



## Julia

That's a good example of how a chart can be a bit misleading.  Because it goes from January to January every five years, it omits the peak during the latter part of 2007 where the All Ords went to 6800 before beginning the great fall of the GFC.


----------



## qldfrog

even so, still great as you can realise you can buy it now at the same price as 7 years ago;
And we are talking accumulative I believe

factor inflation and it is a great bargain to buy now: more than 20% less in real dollars than in 2007.

just a side kick to the perma bull and the figures used in your super website  "calculator"!


----------



## qldfrog

Julia said:


> That's a good example of how a chart can be a bit misleading.  Because it goes from January to January every five years, it omits the peak during the latter part of 2007 where the All Ords went to 6800 before beginning the great fall of the GFC.




Hi Julia,
I believe this is included: the values on the left are not the all ord values, but a reference to the index set at 1000 in 1979. 
I so believe this graph encompass the actual peak.
But as per my previous post different ways to look at it


----------



## Wysiwyg

qldfrog said:


> even so, still great as you can realise you can buy it now at the same price as 7 years ago;
> And we are talking accumulative I believe
> 
> factor inflation and it is a great bargain to buy now: more than 20% less in real dollars than in 2007.
> 
> just a side kick to the perma bull and the figures used in your super website  "calculator"!



Cost to carry the Stock Index is financing costs and tax on fiscal year dividends realised.


----------



## DeepState

Amazing....just a simple chart and so many reasonable conclusions.

Anyhow, here's my 

The chart is an accurate, if rescaled, representation of a portfolio consisting of a broad array of stocks listed on the ASX and weighted according to capitalization (more or less).  It includes reinvestment of cash dividends at ex-date and other reconstructions or corporate activity.  It is largely an achievable result, subject to brokerage and spread, on a pre-tax basis on the basis of some reasonable amount of capital at the outset.

The key issue I see with a chart like this is that 50% falls in the market at more recent dates will look much larger than 50% falls back in the day, when the index level was much smaller.  See for example how irrelevant the Oct 1987 fall looks.  It was hardly irrelevant then.

In charts like this, when used to offer an indication of how returns might feel like, they are often 'log-adjusted'.  By doing this, a 50% fall actually looks like another 50% fall which occurred at a different point in time.

But, VC was trying to illustrate compounding effects, and the representation provided is fair in that regard.


----------



## Value Collector

Julia said:


> That's a good example of how a chart can be a bit misleading.  Because it goes from January to January every five years, it omits the peak during the latter part of 2007 where the All Ords went to 6800 before beginning the great fall of the GFC.




Not really, time along the bottom is Jan every 5 years, But the chart wriggles a lot between those points, I actually think its a monthly chart.

Even if it missed the exact peak of 6800 I can't see how this changes anything, If she was following the strategy I would suggest to her she would have been steadily allocating for years before and continue years after, the peak and crash wouldn't affect the long term results.

I mean the few dollars she allocated at the peak, would be offset by the chance to allocated more dollars at the bottom later on. Even if she started her regular savings plan right before the peak she would do very well.


----------



## Value Collector

qldfrog said:


> even so, still great as you can realise you can buy it now at the same price as 7 years ago;
> And we are talking accumulative I believe
> 
> factor inflation and it is a great bargain to buy now: more than 20% less in real dollars than in 2007.
> 
> just a side kick to the perma bull and the figures used in your super website  "calculator"!




actually that chart finished 18months ago, its much higher now, 3 dividends and 25% price gain.


----------



## Julia

Value Collector said:


> Not really, time along the bottom is Jan every 5 years, But the chart wriggles a lot between those points, I actually think its a monthly chart.
> 
> Even if it missed the exact peak of 6800 I can't see how this changes anything, If she was following the strategy I would suggest to her she would have been steadily allocating for years before and continue years after, the peak and crash wouldn't affect the long term results.



Did you suggest such a strategy?  I haven't read the whole thread.  It rather lost me amongst farms and real estate and claims of 80% gain p.a. yet loss of capital.

As a simple trend follower, I find the omission of a period where considerable profit was made, then the opportunity to hold on to that profit by exiting when the downtrend of the GFC became clear, thus providing additional capital to re-enter with more shares and ergo greater dividend and franking income, when the uptrend resumed, is pretty meaningful.  That's all I was attempting to point out.

So personally I'm not keen on regular allocation of funds irrespective of what the market is doing, but completely respect that others will take a different approach.

Sorry if I've derailed your thread.


----------



## McLovin

Julia said:


> That's a good example of how a chart can be a bit misleading.  Because it goes from January to January every five years, it omits the peak during the latter part of 2007 where the All Ords went to 6800 before beginning the great fall of the GFC.




I'm a little bit confused what you mean by this, Julia? The fall associated with the GFC seems pretty apparent in the chart.


----------



## qldfrog

so basically even in real dollars after 7 years.
Just to put things in perspective.
PS: I am invested in the market but also know not to believe too much in the
"time in the market is the key", and I will not forget the 20+years of stagnation of the Japanese market
Just DYOR.


----------



## Julia

McLovin said:


> I'm a little bit confused what you mean by this, Julia? The fall associated with the GFC seems pretty apparent in the chart.



OK.


----------



## McLovin

qldfrog said:


> so basically even in real dollars after 7 years.
> Just to put things in perspective.
> PS: I am invested in the market but also know not to believe too much in the
> "time in the market is the key", and I will not forget the 20+years of stagnation of the Japanese market
> Just DYOR.




I think to really put it in perspective you've got to look at the preceeding 5 years where it more than doubled from ~19,000 to a peak around ~42,000. Above average returns are really just returns borrowed from the future etc.


----------



## Value Collector

Julia said:


> Did you suggest such a strategy?  I haven't read the whole thread.  It rather lost me amongst farms and real estate and claims of 80% gain p.a. yet loss of capital.
> 
> As a simple trend follower, I find the omission of a period where considerable profit was made, then the opportunity to hold on to that profit by exiting when the downtrend of the GFC became clear, thus providing additional capital to re-enter with more shares and ergo greater dividend and franking income, when the uptrend resumed, is pretty meaningful.  That's all I was attempting to point out.
> 
> So personally I'm not keen on regular allocation of funds irrespective of what the market is doing, but completely respect that others will take a different approach.
> 
> .




Yeah, i suggested that rather than gambling on forex market, she should just put her money into an index and then make regular contributions, 

Yep, I understand your trend following approach, but for those that are less sophisticated I think the regular contributions have value, a set an forget index fund approach is a pretty good way for non professionals to get a market average return without having to watch the market.



> Sorry if I've derailed your thread




Lol, its not my thread


----------



## qldfrog

Your point is taken and in a way forced onto "unsophisticated" investors via super (which is allocated  to the market on a monthly basis).

While being part of the market distortion in Australia, I would agree it could be a good long term value  as a whole if it was more diversified (ex Australia and ex shares/real estate or associated), 
and as long as these people are not paying 5% interest (or much more) after tax dollars for a roof on their head at the same time..
Not the place for this: I know, so back to the thread:

I would also like to add that a spread entry  (dollar averaging) or exit when you need to withdraw is in many way a good thing for risk mitigation and this is easy to implement in shares, much harder in property until such a tool is created.
In France (not aware of the situation elsewhere), a tool exists which allow people (mostly older) to sell their home to a buyer against a life pension amount.
A bit like a reversed morgage but with unlimited potential return (aka until you die) So property in that case can be withdrawn smoothly.
But usually property being not liquid means you have one off events and so increase the risk of a bad timing in a cycle (but you can be a winner).


----------



## Value Collector

qldfrog said:


> But usually property being not liquid means you have one off events and so increase the risk of a bad timing in a cycle (but you can be a winner).




You can get access to property via a managed fund which owns a basket of listed and unlisted property trusts.

I know some wealth management firms, allow you to basically put together your own fund from a range of indexes and other funds.

eg, you can allocate your funds so x% goes to asx index x% international indexes and x% Australian property trusts. 

If you had it set up that earnings were compounded and you steadily contributed say 15% of your wage, I think you will do well over time.


----------



## Value Collector

An Interesting Automated strategy for the defensive investor, suggested by Ben Graham, was to be 50% cash and 50% stock index.

When ever the market moved and made the difference shift by 5%, he suggested rebalancing.

So that way as the market rises, you are steadily selling off stocks at every 5% interval on the way up, increasing your cash holding, and as the market falls you can rebuy at every 5% interval on the way down. 

Your monthly contributions could just be divided 50/50 each way.


----------



## shezian

Value Collector said:


> An Interesting Automated strategy for the defensive investor, suggested by Ben Graham, was to be 50% cash and 50% stock index.
> 
> When ever the market moved and made the difference shift by 5%, he suggested rebalancing.
> 
> So that way as the market rises, you are steadily selling off stocks at every 5% interval on the way up, increasing your cash holding, and as the market falls you can rebuy at every 5% interval on the way down.
> 
> Your monthly contributions could just be divided 50/50 each way.





Thanks for all the information is very helpful. But how does one invest in the index?

Sue


----------



## darkhorse70

Oh yea Value collector I was going to say you owned me haha, my post didnt go through so I wasnt bothered re typing it.


----------



## qldfrog

Value Collector said:


> You can get access to property via a managed fund which owns a basket of listed and unlisted property trusts.
> 
> I know some wealth management firms, allow you to basically put together your own fund from a range of indexes and other funds.
> 
> eg, you can allocate your funds so x% goes to asx index x% international indexes and x% Australian property trusts.
> 
> If you had it set up that earnings were compounded and you steadily contributed say 15% of your wage, I think you will do well over time.



Agree but REITs and funds are mostly office/industrial centric and do not have the same attraction to the average aussie of an IP as a unit/house in a suburb they can drive past;
i do own some REIT, etc but I believe when we ask Shares or Property, Property means the brick and mortar your neighbours just invested in; I would also go and say it probably does not even include industrial properties
(Yet with MUCH higher return than residential)


----------



## qldfrog

Value Collector said:


> An Interesting Automated strategy for the defensive investor, suggested by Ben Graham, was to be 50% cash and 50% stock index.
> 
> When ever the market moved and made the difference shift by 5%, he suggested rebalancing.
> 
> So that way as the market rises, you are steadily selling off stocks at every 5% interval on the way up, increasing your cash holding, and as the market falls you can rebuy at every 5% interval on the way down.
> 
> Your monthly contributions could just be divided 50/50 each way.



Has anyone work on this and tried to see how this would fare in let's say the last 20 years?
alternatively anyone knowing how i could get interest rate on deposit  or a similar index in AB I would be interested trialing this .


----------



## DeepState

qldfrog said:


> Has anyone work on this and tried to see how this would fare in let's say the last 20 years?
> alternatively anyone knowing how i could get interest rate on deposit  or a similar index in AB I would be interested trialing this .




Table F4


----------



## Value Collector

shezian said:


> Thanks for all the information is very helpful. But how does one invest in the index?
> 
> Sue




Pretty much any one offering managed funds will offer an option to invest i to an index, you could go through any of the major banks that offer managed funds, just look for a low cost one, one that charges less than 1% management fee is best.


----------



## Value Collector

qldfrog said:


> Has anyone work on this and tried to see how this would fare in let's say the last 20 years?
> alternatively anyone knowing how i could get interest rate on deposit  or a similar index in AB I would be interested trialing this .




I have never done the figures myself, but I remember reading that it slightly out performed just purchasing the index, the extra return was caused by the rebalancing. Ben graham himself also suggested that letting the cash portion drop to 25% when things got really cheap eg gfc! and letting it rise to 75% when things get really expensive! this would create even large profits! however it opens up the door for mistakes! and if you actually have the skill to value markets you probably wouldn't be using this method to begin with.


----------



## burglar

shezian said:


> ... But how does one invest in the index? ...




Here is one link:
 choice.com.au ... 

Vanguard is the company everyone raves about!


----------



## Julia

Value Collector said:


> Pretty much any one offering managed funds will offer an option to invest i to an index, you could go through any of the major banks that offer managed funds, just look for a low cost one, one that charges less than 1% management fee is best.



Is that 1% on FUM?  If so, say a person has $500,000 to invest, the managed fund hauls in $5000 p.a. just to put the money into an index fund.   Why on earth would anyone pay that when they could invest directly?

Reminds me of a conversation I had quite recently with a financial planner for a full service stockbroker.  He happily related stories about his clients who were quite prepared to pay full service brokerage fees (viz over $100 per transaction minimum) just to not have the responsibility themselves.    He went on to describe with pride that they move clients in and out of companies regularly "depending on what our research department advises."
Translation:  the more transactions we can perform the greater our capacity to milk the client.

Even more happily, he described how the same clients would pay a % of FUM for 'general management of the p/f as well.


----------



## DeepState

Julia said:


> Is that 1% on FUM?  If so, say a person has $500,000 to invest, the managed fund hauls in $5000 p.a. just to put the money into an index fund.   Why on earth would anyone pay that when they could invest directly?.....




....into an ETF which does the same thing.

Australian equities ASX 200 index.  Management fee 0.29%pa.

http://www.spdrs.com.au/etf/fund/fund_detail_STW.html


----------



## qldfrog

DeepState said:


> Table F4



A bit embarrassing but I am a bit lost here:
what do you mean I do not know/could not find in any Amibroker meaning for F54 in that context.
Or did I miss a displayed table in a thread?
It will seem a very dumb question when i have the answer but ..
And thanks Value Collector for the rough idea on return of such a system.


----------



## DeepState

qldfrog said:


> A bit embarrassing but I am a bit lost here:
> what do you mean I do not know/could not find in any Amibroker meaning for F54 in that context.
> Or did I miss a displayed table in a thread?
> It will seem a very dumb question when i have the answer but ..
> And thanks Value Collector for the rough idea on return of such a system.




I am the embarrassed one.  Sorry, I must have forgotten to send an attaching link.  The table F4 relates to a set of data from the RBA and it will contain what you need.

http://www.rba.gov.au/statistics/tables/

In any case, I ran the figures anyway:




ASX 200 TR: 9.68% pa
Ben's 50/50: 7.67% pa
RBA Cash: 5.26% pa


----------



## DeepState

The chart was for monthly rebal to 50/50. Not quite what Ben had in mind, so just an illustration only.  Will check out the real rule another time.


----------



## Value Collector

Julia said:


> Is that 1% on FUM?  If so, say a person has $500,000 to invest, the managed fund hauls in $5000 p.a. just to put the money into an index fund.   Why on earth would anyone pay that when they could invest directly?
> 
> .




Most actively managed funds charge much more than 1%, so less than 1% is not bad, investing directly into the 200 companies in the index would require a lot of transaction fees, and the cost of managing and accounting would be very large.

The whole point of investing in the index is because you don't want to dedicate the time or have the skills to attempt to beat the market return.


----------



## qldfrog

DeepState said:


> The chart was for monthly rebal to 50/50. Not quite what Ben had in mind, so just an illustration only.  Will check out the real rule another time.



Thanks a lot
But that is interesting indeed;
Not surprising but interesting;
really smoothing the curves and the end result is in my opinion quite good for a conservative approach,
I might do a few trial run in Ab and allocate a fixed amount from my portfolio if happy with the results;
I always keep some cash aside just in case, it might be good to have a structured way to do it as an investment strategy.


----------



## Value Collector

DeepState said:


> The chart was for monthly rebal to 50/50. Not quite what Ben had in mind, so just an illustration only.  Will check out the real rule another time.




Nice, it would interesting to see how a 5% rebalance worked compared to a monthly.


----------



## mattsharp

shezian said:


> Which do you think is a better investment, shares or property?
> 
> My mum keeps telling me that property is the best and l keep saying shares. She sais the bank will always lend you more for property whereas for shares they won't.
> 
> She has done very well out of property so l guess she just feels more comfortable with this kind of investing. For me property just seems to be a headache and moves too slow for me.
> 
> What are your thoughts?
> 
> Thanks Sue




They are different, at various times one may be on average better value, but I'll try to steer clear of present valuations.

Generally property:
 * Is easier to understand.
 * Is physical (which is a plus and a minus). One of the positives of this is the above point. Negatively it means you have to insure it against all sorts of physical risks, and it "decays" more obviously.
 * Is less volatile (which means banks will usually allow a bigger LVR if it is used as collateral).
 * Can be used directly if everything goes to crap and you aren't foreclosed on.
 * Wont go to zero.

Shares:
 * Have smaller unit prices (ie. you can buy some shares with $10k, that wont even get you one property). This also means you can usually invest without leveraging yourself.
 * Have smaller transaction costs (ie. brokerage vs stamp duty/selling agent fees).
 * Have very small holding costs (no land tax, rates, maintenance, insurance, strata). This makes it easier to work out the net yield.
 * Are easier to diversify with.
 * Involve less paperwork.
 * Are fungible and more liquid.

Ideally you would have both over your investing lifetime. With both, averages can be misleading (there will be over/underperforming suburbs and designs, there will be over/underperforming companies).

In general I disagree with your mum, both that you can't use leverage with shares, and that being allowed more leverage is a good thing.


----------



## shezian

mattsharp said:


> They are different, at various times one may be on average better value, but I'll try to steer clear of present valuations.
> 
> Generally property:
> * Is easier to understand.
> * Is physical (which is a plus and a minus). One of the positives of this is the above point. Negatively it means you have to insure it against all sorts of physical risks, and it "decays" more obviously.
> * Is less volatile (which means banks will usually allow a bigger LVR if it is used as collateral).
> * Can be used directly if everything goes to crap and you aren't foreclosed on.
> * Wont go to zero.
> 
> Shares:
> * Have smaller unit prices (ie. you can buy some shares with $10k, that wont even get you one property). This also means you can usually invest without leveraging yourself.
> * Have smaller transaction costs (ie. brokerage vs stamp duty/selling agent fees).
> * Have very small holding costs (no land tax, rates, maintenance, insurance, strata). This makes it easier to work out the net yield.
> * Are easier to diversify with.
> * Involve less paperwork.
> * Are fungible and more liquid.
> 
> Ideally you would have both over your investing lifetime. With both, averages can be misleading (there will be over/underperforming suburbs and designs, there will be over/underperforming companies).
> 
> In general I disagree with your mum, both that you can't use leverage with shares, and that being allowed more leverage is a good thing.





I prefer trading to property anyday, after how l see her struggle with banks and tenants, etc etc. But because thats all she knows she feels the most comfortable.


----------



## ROE

shezian said:


> I prefer trading to property anyday, after how l see her struggle with banks and tenants, etc etc. But because thats all she knows she feels the most comfortable.




And there is no trouble in the stock market? 
fraud? bad management? insider trading? pump and dump etc...etc...


----------



## DeepState

Value Collector said:


> Nice, it would interesting to see how a 5% rebalance worked compared to a monthly.




Have just gotten around to do the numbers.

Just two asset classes: ASX200 (accum) and 30Day T-Bills
Period: 18/1/2001 - 14/8/2014 Daily.
Basic strategy is 50/50 between the asset classes

If you do not rebalance, the accumulated value of the portfolio is $247 (starting from $100)

If you rebalance on different thresholds, the figures are as follows:

0% (rebal daily) / 253
1% / 252
5% / 260
10% / 257

The benefit from rebalancing arises through excess volatility in the ASX200 and the fact that the effects of rebalancing are stronger than the trends in the market.  This effect would be more noted if more assets were introduced and these were not very highly correlated to the ASX200 and/or each other.  This period is also notable for its strong trends in both directions, yet a reasonable improvement in performance has been achieved for something which requires very low management.  In sideways markets, the effect is more pronounced.

A chart outlining the 5% example is shown below:


----------



## qldfrog

Thanks RY, so as I understand, this last set is for rebalancing at different thresholds, whenever these are reached, not restricted to monthly check?
potentially in case of a big fall rebalancing more than once in a single month period;
Interesting anyway and showing  here as well the interest of such a "system"


----------



## DeepState

qldfrog said:


> Thanks RY, so as I understand, this last set is for rebalancing at different thresholds, whenever these are reached, not restricted to monthly check?
> potentially in case of a big fall rebalancing more than once in a single month period;
> Interesting anyway and showing  here as well the interest of such a "system"




Hi qldfrog

This analysis rebalances daily.  Hence, it is technically feasible for the thresholds to be hit many times in a month.

Rebalancing is easy. Besides buy-hold, it must be the next simplest "system". You can see there is some benefit arising from just two assets, only one of which could be said to be volatile.  There is more likelihood that it yields a favourable outcome as the time period extends.  It will fail if equities just moves in virtually straight lines in any direction and never reverts.  Possible, but ridiculous in likelihood. It will succeed most when the equity market bounces backwards and forwards in a range of +/- 10% each day.  That will yield incredible profit.  Outcomes in reality will be between the two and favour rebalancing.

BTW, does your field of engineering involve stochastic processes, stochastic control or turbulence in some way?


----------



## qldfrog

DeepState said:


> Hi qldfrog
> 
> This analysis rebalances daily.



Ok my understanding and what i implemented
As discussed previously, I have started to manage separately a token amount that way and this is exactly what is planned
a round figure split in:
50% cash at ubank, 50 % shares: I used asx300(VAS )28.6% and index ex US (VEU)21.6%
The choice was a little biaised (asx 300 and not 200 or all ord and the choice of VEU but that is to manage exposure based on my other invesments)
the system was filled by the 07/08/14 
I will only increment the interest on cash monthly for simplicity.
we will see what happens this is on for the long term


----------



## BeanJumbler

DeepState said:


> Have just gotten around to do the numbers.
> 
> Just two asset classes: ASX200 (accum) and 30Day T-Bills
> Period: 18/1/2001 - 14/8/2014 Daily.
> Basic strategy is 50/50 between the asset classes
> 
> If you do not rebalance, the accumulated value of the portfolio is $247 (starting from $100)
> 
> If you rebalance on different thresholds, the figures are as follows:
> 
> 0% (rebal daily) / 253
> 1% / 252
> 5% / 260
> 10% / 257
> 
> The benefit from rebalancing arises through excess volatility in the ASX200 and the fact that the effects of rebalancing are stronger than the trends in the market.  This effect would be more noted if more assets were introduced and these were not very highly correlated to the ASX200 and/or each other.  This period is also notable for its strong trends in both directions, yet a reasonable improvement in performance has been achieved for something which requires very low management.  In sideways markets, the effect is more pronounced.
> 
> A chart outlining the 5% example is shown below:
> 
> View attachment 59059




Very interesting post, thanks a lot for that.

Just a few questions on how to actually implement the rebalancing.

When you talk about the different thresholds that trigger a rebalance, is it a percentage of deviation away from the *starting value*? e.g. with a 5% threshold when the stock index rises 7% a sell signal is triggered?

Or is the percentage change * relative to the other values*? e.g. the stocks rise 3%, the bonds fall 3%, the gap or difference is more than 5% hence a buy/sell signal is triggered?

If it was a 50/50 portfolio of bonds and stocks, what would happen if both rose 5% at the same time? You sell both?


----------



## DeepState

BeanJumbler said:


> Very interesting post, thanks a lot for that.
> 
> Just a few questions on how to actually implement the rebalancing.
> 
> When you talk about the different thresholds that trigger a rebalance, is it a percentage of deviation away from the *starting value*? e.g. with a 5% threshold when the stock index rises 7% a sell signal is triggered?
> 
> Or is the percentage change * relative to the other values*? e.g. the stocks rise 3%, the bonds fall 3%, the gap or difference is more than 5% hence a buy/sell signal is triggered?
> 
> If it was a 50/50 portfolio of bonds and stocks, what would happen if both rose 5% at the same time? You sell both?




If I said a 5% threshold, it means that the rebal occurs when one/both of the exposures deviates from the neutral point by an absolute value of 5%.  ie. we started at 50%, but sell back to 50% if the weight reached 55%. Otherwise they just drift around.


----------



## qldfrog

DeepState said:


> If I said a 5% threshold, it means that the rebal occurs when one/both of the exposures deviates from the neutral point by an absolute value of 5%.  ie. we started at 50%, but sell back to 50% if the weight reached 55%. Otherwise they just drift around.



my implementation indeed


----------



## BeanJumbler

Cheers!


----------



## haledceb

hey Guys,

I'm 34 and own 7 properties so you can say I'm biased towards property for wealth accumulation, so here's my 2 cents worth if your thinking about investing in property.

First rule: *PROPERTY IS A LONG TERM INVESTMENT* don't invest in property if you want to make a quick dollar, the entry costs are far too high to make any quick money.

*First the CONS:*


As stated before you need substantial money to get started in property- deposit, taxes, conveyancing fees, building inspections
There are ongoing costs involved with property that will impact your cash flow- management fees, insurances, rates, repairs, loss of rent
You may experience years of no capital growth or even worse negative growth
You may get  a horror tenant who could trash the place, not pay rent for months, and in some cases it's very hard to evict them
Your property may be vacant in between vacancies,

*Now for the PROS*
property is a tangible assest and everyone needs somewhere to live
Well bought property WILL increase in value over time
You can improve the value of property throguh renovations
The longer you own property the eaiser it gets
Low interest rates fuel demand for property
There is potential to make a LOT of money in property

I started buying property when I was 18, and now all my properties have considerable equity and are cash flow positive. I'll give you an example of what's possible with a long term view. My last property purchase I used absolutlety none of my own money. I drew out equity from another property for my deposit and costs. The property is also cash flow positive approx. $150 p/w, whilst giving me half a million exposure to the market. If the property market continues to perform at it's current rate, I plan to retire in 3 years and live off my rental income.


----------



## tech/a

I'm a great supporter of property.

BUT

I really believe timing is everything
I started in 1996 and now have 4 of my original 11 
Held free hold. 
In 96-02 you could instantly buy a home without deposit
If you had equity and be positively geared.

Housing rose exponentially

Not so now.
Tenants think you owe them something
Most prices stagnant.

Interest will rise.
Don't forget capital gains tax.

Can't see a lot in housing prices rising . Not for many years.
Everything has reverted to the mean
I think the best opportunity is when housing is BELOW the
Mean swinging to way above it.

The opportunity in my view is in developement and
Quick turnover 12-18 mths.


----------



## againsthegrain

Whats your rough predictions on interest raising techa? So far still falling


----------



## tech/a

7% within 5 yrs.


----------



## haledceb

tech/a said:


> I'm a great supporter of property.
> 
> BUT
> 
> I really believe timing is everything
> I started in 1996 and now have 4 of my original 11
> Held free hold.
> In 96-02 you could instantly buy a home without deposit
> If you had equity and be positively geared.
> 
> Housing rose exponentially
> 
> Not so now.
> Tenants think you owe them something
> Most prices stagnant.
> 
> Interest will rise.
> Don't forget capital gains tax.
> 
> Can't see a lot in housing prices rising . Not for many years.
> Everything has reverted to the mean
> I think the best opportunity is when housing is BELOW the
> Mean swinging to way above it.
> 
> The opportunity in my view is in developement and
> Quick turnover 12-18 mths.




Not any time soon?
Sydney house prices rose 14% last year, that's on the back of 15% the prior year. Who wouldn't want to be the beneficiary of this gain with a 1 million dollar property? 
Property is a simplistic investment which boils down to supply and demand. Property bought in an inner city area *WILL* *never* lose demand, however business conditions dictate whether this demand will translate into price growth.


----------



## qldfrog

haledceb said:


> Property bought in an inner city area *WILL* *never* lose demand,



But offer is variable, I sold my IP in Brisbane (valley/springhill) settling this month not as I was scared by absence of demand per se but new RNA developments are bringing thousands of units within 1km radius..demand is not that elastic and too much offer will collapse a market
inner city or not, youi can always build higher and higher...
Unless of course you invest in a freehold house within an inner city, then yes demand will always be there


----------



## Bill M

I haven't read the whole thread but right now I would go shares rather than property. Both are getting a bit pricey but 5 to 6% gross returns from shares via dividends seems to be a bit better than 3 to 4% from rentals at the moment.

Having said that I'm holding more cash than what I should be, perhaps waiting for that reversal from either side? That would be nice


----------



## tech/a

qldfrog said:


> But offer is variable, I sold my IP in Brisbane (valley/springhill) settling this month not as I was scared by absence of demand per se but new RNA developments are bringing thousands of units within 1km radius..demand is not that elastic and too much offer will collapse a market
> inner city or not, youi can always build higher and higher...
> Unless of course you invest in a freehold house within an inner city, then yes demand will always be there




Snap

Settled on one apartment today!
Looking to sell the other next door ASAP.
(Adelaide).
Don't like apartments. No land.


----------



## haledceb

qldfrog said:


> But offer is variable, I sold my IP in Brisbane (valley/springhill) settling this month not as I was scared by absence of demand per se but new RNA developments are bringing thousands of units within 1km radius..demand is not that elastic and too much offer will collapse a market
> inner city or not, youi can always build higher and higher...
> Unless of course you invest in a freehold house within an inner city, then yes demand will always be there




As far as units go in Brisbane CBD I agree, not so the same story when it comes to land.


----------



## qldfrog

haledceb said:


> As far as units go in Brisbane CBD I agree, not so the same story when it comes to land.




fully agree: that was the point of my last line: 
with house you purchase a limited supply: land, with unit only a fraction of that  and unless considering  block of only a few units which could always be bulldozed, land value is destroyed once a unit is on.


----------



## Mofra

Bill M said:


> I haven't read the whole thread but right now I would go shares rather than property. Both are getting a bit pricey but 5 to 6% gross returns from shares via dividends seems to be a bit better than 3 to 4% from rentals at the moment.
> 
> Having said that I'm holding more cash than what I should be, perhaps waiting for that reversal from either side? That would be nice



Dollar for dollar I prefer shares however property has a huge gearing advantage over equities, both in terms of LVR and interest rates.

I'm paying 4.24% on my IPs (purchased last year a resi ppty with 5.4% gross yield!) yet I pay 7.38% if I draw down on the Margin Loan, > 3% pa difference adds up in the long term.


----------



## Obi wan kanobi

Totally agree that as a vehicle for investing property is better than shares because of the high loan to value ratio achievable (usually 80%) and the lower interest rates charged (currently around 4.3%).   Finance drives the attractiveness of property.  If I could get a similar LVR and interest rates for a margin loan then I'd buy up shares big time.


----------



## Wysiwyg

Bill M said:


> Having said that I'm holding more cash than what I should be, perhaps waiting for that reversal from either side? That would be nice



Nice one Bill you cunning ol' bugger. Share prices have/are reversing so a greater number of shares can be bought for a higher yield per share assuming dividends hold or increase on the stock of choice.


----------



## sinner

The main downside of property investing as I see it, would have to be the reduced ability for compounding. You can really only compound if you sell a property, which is a capital gains event.

Meanwhile, most other financial assets compound at a much faster rate, with stock and bond funds that provide quarterly disbursements and cash savings accounts that compound on your daily balance.


----------



## Bill M

Wysiwyg said:


> Nice one Bill you cunning ol' bugger. Share prices have/are reversing so a greater number of shares can be bought for a higher yield per share assuming dividends hold or increase on the stock of choice.




What a difference a week makes, now the XJO sits on that all important 5684 resistance line. If anything positive happens overseas overnight we will most likely see the XJO head towards 6000. Unfortunately I wasn't on the ball and I didn't buy anything at better prices, so for now I'm still sitting on that cash.


----------



## The Falcon

sinner said:


> The main downside of property investing as I see it, would have to be the reduced ability for compounding. You can really only compound if you sell a property, which is a capital gains event.
> 
> Meanwhile, most other financial assets compound at a much faster rate, with stock and bond funds that provide quarterly disbursements and cash savings accounts that compound on your daily balance.




This is true to an extent, and I have given it some thought. The savvy property investor though will regularly have their portfolio holdings revalued, so they can take advantage of capital growth by drawing down growth equity on a perhaps annual basis for redeployment.


----------



## sinner

The Falcon said:


> This is true to an extent, and I have given it some thought. The savvy property investor though will regularly have their portfolio holdings revalued, so they can take advantage of capital growth by drawing down growth equity on a perhaps annual basis for redeployment.




But what options do you have for redeployment? Certainly not into more houses...this actually highlights another issue of property, and that is "granularity of investment".

You can buy one investment property, or two, but not 1.5, and that mucks with your exposure levels and (as per above) ability to compound effectively.

Especially if house prices are moving during the "waiting between compounding" periods, and you have no way to hedge those movements.


----------



## The Falcon

sinner said:


> But what options do you have for redeployment? *Certainly not into more houses*...this actually highlights another issue of property, and that is "granularity of investment".
> 
> You can buy one investment property, or two, but not 1.5, and that mucks with your exposure levels and (as per above) ability to compound effectively.
> 
> Especially if house prices are moving during the "waiting between compounding" periods, and you have no way to hedge those movements.




Ah, yes you do. The equity drawdowns provide deposits for additional property. It's not exacting, but in a rising market, this has worked for many property investors.


----------



## sinner

The Falcon said:


> Ah, yes you do. The equity drawdowns provide deposits for additional property. It's not exacting, but in a rising market, this has worked for many property investors.




While it may have worked for some, during a specific time period, it's not really a valid *investment* strategy, what you are describing is levered bets on capital gains.

I actually know lots of people that got burned playing the property market prior in Aus to 2008, so to me it isn't the "sure thing" everyone seems to treat it as.


----------



## The Falcon

sinner said:


> While it may have worked for some, during a specific time period, it's not really a valid *investment* strategy, what you are describing is levered bets on capital gains.
> 
> I actually know lots of people that got burned playing the property market prior in Aus to 2008, so to me it isn't the "sure thing" everyone seems to treat it as.




Your point is a separate matter altogether  I was just showing how aggressive property investors compound.


----------



## goponcho

sinner said:


> While it may have worked for some, during a specific time period, it's not really a valid *investment* strategy, what you are describing is levered bets on capital gains.
> 
> I actually know lots of people that got burned playing the property market prior in Aus to 2008, so to me it isn't the "sure thing" everyone seems to treat it as.




Why is this not a valid investment strategy? As in, this strategy needs to have steady capital gains over time?


----------



## GwenRowen

I think investing in stocks is a better option for the long run.


----------



## GDRV614

GwenRowen said:


> I think investing in stocks is a better option for the long run.



I read from some articles that they are about the same in Australia.


----------



## Glen48

House on the Gold Coast beach purchased for $8,500 in 1953 is expect to bring 3 Million,,, the house will have to be knocked down,,Some one wants to work the return??


----------



## InvestSuccess

A lot of the times you are not in control of company's policies, therefore dividends. For instance, if CEO decided to allocate all income to research and development and do not withdraw dividends - most of the times small shareholders can do nothing about it and have to get over it.

Here is more on why property investment is better https://propertyupdate.com.au/8-reasons-why-property-is-a-better-investment-than-shares/

So property is for sure the better choice for small investors who don't have the squad of lawyers by their side.


----------



## Value Collector

InvestSuccess said:


> A lot of the times you are not in control of company's policies, therefore dividends. For instance, if CEO decided to allocate all income to research and development and do not withdraw dividends - most of the times small shareholders can do nothing about it and have to get over it.




Berkshire Hathaway hasn’t paid a dividend since the 1960’s, does that make it a bad investment?

Is there any property that has come close to matching the returns of Berkshire Hathaway?

I think basing your decisions on whether a dividend gets paid or not is a little short sighted.

I would rather construct a portfolio with a range of assets, with good possibilities for grow and income, rather than arbitrarily stick to one asset class.

———
I own property and shares.


----------



## qldfrog

Tell that to Japanese investors


----------



## qldfrog

Real estate is a ponzi scheme based on population growth
Do not fool yourself
I own both RE and shares


----------



## Zaxon

qldfrog said:


> Real estate is a ponzi scheme based on population growth



That is so true.  If the only return ever was from rents, and you knew property values would never increase, I wonder how many people would own property.


----------



## InsvestoBoy

Glen48 said:


> House on the Gold Coast beach purchased for $8,500 in 1953 is expect to bring 3 Million,,, the house will have to be knocked down,,Some one wants to work the return??




9.3% CAGR.


----------



## Triple B

A recent paper dubbed “the rate of return on everything” by The Federal Reserve Bank of San Francisco found anyone investing in Australian shares between 1980 and 2015 would have accrued annual returns of 8.7 per cent, compared with just over 7 per cent for housing.

Some stuff I copied ^


----------



## Smurf1976

InvestSuccess said:


> A lot of the times you are not in control of company's policies, therefore dividends.



That is true but with real estate you are also not in real control of tenants and not in any control of councils or state governments.

For every person who correctly picked 50 years ago that the Gold Coast would end up as what it is today or that anyone would actually want to live near the Sydney CBD there will be countless others who got it wrong. Their upcoming boom area is still mostly farmland or the suburb ended up being famous for all the wrong reasons.

There's a place for both in my view but property isn't a one way bet as many seem to think it is.


----------



## tech/a

Smurf 
It’s the only one I know that has endless success stories 

how often do you bump into people who have made a true fortune from shares
Only shares 
I know of one and he was a Director of Hospitals in the US and was paid within
His packages with Shares lots of them back 30 years ago 
In his short 22 year career he raised from the dead 4 hospitals during his last residency his shares started to go nuts .

I know plenty who have made a good quid but many more who have changed their lives and their families and their families families for a very long time through Property.

Lenders like property.
Property is a great hedge 
Few declines in property last for ever.
More people buy property than shares ( super accepted ) 

The lure of shares to most is the PERCEPTION of quick easy money 
And that 1000% gain on 10k in my opinion.

Don’t get me wrong once you have wealth shares can be great.
In many ways.
But the set up lives! Rare.


----------



## qldfrog

Tech/a
A lot of the past may nor reoccur, just one point:
CGT
We can all agree that the yield on re is pathetic once all side costs are taken into account
So you win is on capital gain on resale but now, a new entrant will see his wins taxed at cgt rules
Which do not take into account inflation...and that is before a Labour win 
A 100k property in 1990 worth 400k now is not a great win you will agree but on resale you will pay 75k to the ato so real resale price 325k after 30y and inflation..bonds would be better...and i do not factor thefact that a30y old buildig is probably ina pitiful state unless more money was put in
Past is not duplicated especially when rules change
I try to divest 2 properties
One ppor will probably take 1 year i guess, second is industrial and has been on the market for nearly 2 years...
I can sell my shares etc in 3 days
Thanks God i do not need the money quick


----------



## Austwide

Triple B said:


> A recent paper dubbed “the rate of return on everything” by The Federal Reserve Bank of San Francisco found anyone investing in Australian shares between 1980 and 2015 would have accrued annual returns of 8.7 per cent, compared with just over 7 per cent for housing.
> 
> Some stuff I copied ^




I have mainly invested in property and believe it to be better than shares. (MY opinion)
I am not sure where the 7% housing return was based on, maybe every property in Australia averaged? Figures can mean whatever you want them to depending on ones methods.

In 1983 l brought my 1st home. 
Cost was $56,000.  
If I compound that at 7% for 35 years as above, it comes to about $598,000.
Over those years I have sub\divided that block and sold half. Not counting that money but the reduced land size, in todays low market, its value is about $750,000.
It also gave me somewhere to live for over 15 years and then earn over $200,000 in rent.

I don't know how to calculate that return, but over $1,000,000 return for $56,000 or is it based on the $10,000 I actually put in? Somehow factor in residence, security for other purchases and sub/div profit.

I don't know if that's repeatable in the future but these figures are in line with other property that I own.

There are 2 drawbacks with property for me.
1 Repairs - not the fix the tap or fence or between tenants type but the odd urgent one, like the switchboard for a block of 7 units blows up at 5PM on a Sat night of a 4 day weekend.

2 Land Tax (Victoria anyway) - $900 3 years ago, $12,000 2 yrs ago, $27,000 last year, this year?

For this reason, I am seriously looking at getting out of property (keep home and maybe Block of units) and putting the proceeds into shares.

My problems with shares was losing over $150,000 in 3 days around year 2000 when the tech bubble burst. I have never quite been comfortable in the market since though I did do a ;ot of things wrong.

So property has been the best by far for me, but new tenant laws, increased taxes, higher entry costs are starting to remove the shine.


----------



## Smurf1976

tech/a said:


> Smurf
> It’s the only one I know that has endless success stories
> 
> how often do you bump into people who have made a true fortune from shares
> Only shares




I don't disagree with what you're saying.

The only real point I'd make though is that skill and luck come into it in both cases.

If someone piled into shares at the bottom following a major correction or they bought inner city properties when they were regarded as undesirable then they'll have done far better than someone who bought technology shares in early March 2000 just in time for the crash or who has a highly leveraged investment in multiple generic apartments in a poorly constructed building clad with rocket fuel.

If for example someone knows a lot about mining and understands drilling reports, geological surveys and so on but knows essentially nothing about property then logically they'd have an advantage investing in mining shares rather than apartments.

If someone has no real knowledge or interest then property should be an easier thing for the average person to get their mind around since the concepts are inherently far more familiar.


----------



## Zaxon

tech/a said:


> how often do you bump into people who have made a true fortune from shares
> Only shares



Personally, I don't bump into many rich people in general.  So my answer is neither property nor shares.  Most wealthy people I know have done it with high paying salaries.

If we broaden out the question further, well a huge perentage of the world's richest people have gotten there through share ownership, not property.  Think Warren Buffett.  Think Jeff Bezos.  OK, so Jeff started a company, but he's probably got the bulk of his wealth through Amazon share price increases, rather than his actual wage - I don't think his CEO's sallary is in the billions.


tech/a said:


> More people buy property than shares ( super accepted )



I'd agree that the average, random person on the street is likely more comfortable buying property than shares.  I think that's likely to change with newer, tech savy generations.  Share investing for them is just a fintech app on their phone.

I disagree with the premise that property is inherently a better investment than shares.  For individual people with specific biases and beliefs, property may well be a better investment for them, personally.


----------



## tech/a

*Lets get REAL*

Let me explain and expand a little.

This is the way I put it in long form to Friends/My Kids and anyone else that is interested.

*MONEY MAKES MONEY
*
*Your not going to go into a bank and get a loan for $500k*
*to buy a share or Shares---wont happen*

*SO.*

You need somewhere to live.

You can leverage your borrowings on a house 5:1 from most lenders.

While over the last 20 yrs there have been 100's % growth a conservative
amount is 3% a year so lets take $500K and you put down your $100K deposit.
and in 10 years your Home is now worth $650K and you can get 80% on your 
Equity. (Better if more growth!) So off you go with your first investment property.

AND

That's without paying down anything off your mortgage. Son has done exactly that 
his maths over 8 years is $50K down Cost $410K now worth $580K Payed Double 
mortgage payments equity now $250K. He can now buy 2 more. (Looking he's 36).

*Rinse and repeat.*

Now depending on Growth you could have 3-15% in any one or so years in a twenty year period.
This is where real *ACHIEVABLE* riches can be found.

The earlier you start here the better---like anything that compounds and leverages.


Sure you can attempt to emulate Buffett if you have enough cash to buy the Company
or buy and build a company as he did---not so many do.

If you believe in Flying pink pigs then go chase them and in 20 years you'll still be doing the 

"Same thing day in and day out *EXPECTING* a different result!"

Be REAL and get REAL results.

People keep bringing up Buffett.
Your *NOT *Buffett and you never will be so be *YOU* and do something 
*YOU* can do.


----------



## tech/a

Lets go a little further

Then you have  say $500K/and 2 X $450K
Thats now $1.4 mill using 3% thats $42K  year 
or if your very carefully chosen suburb rises 8%
$112K so every 5 Years rinse and repeat.

Buy the time your my age you sell off a heap and freehold
as many as you can your home FIRST!

*NOW YOUR TALKING.

Cant be done--dreaming--I didn't pass leaving and 
a dumb ass like me did it!

in 21 years!*


----------



## Skate

*Disclaimer*
I hold Shares & Investment properties (Commercial & Residential)

*Bowl of fruit*
Most argue that comparing investment vehicles (shares verses real estate) is like comparing Apples & Oranges but to me it more like having a bowl of fruit. Yes, I do have favourites when it comes to fruit & investment vehicles. So why do people think that property investments are better than shares?

*Why?*
Because they don’t see the volatility of property prices on a daily basis.

*Houses & Commercial real estate are illiquid*
Real estate has two price points - the purchase price & the sale price. Most times the sale is at a higher price than what they paid for it some years earlier so they are fooled into believing that property has high returns and very little volatility. The major hurdle is that you can’t just sell a bedroom if you need a few dollars or sell whenever prices decline. This is an "all or nothing type of investment".

*Stocks are liquid*
Unlike the stock market, people are forced to hold on to their investment for many years. It's a pity because share traders are normally emotionally driven & they tend to buy & sell at the worst time thus believing the returns of their property investments to be higher than returns from the market.

*Suite of investments*
I think investing in property might not be the worst idea for many investors, even though the actual returns of properties are lower than we might think as the cost of ownership has ongoing costs that has already been discussed.

*So what is the decider between property or shares?*
Your risk profile is normally the deciding factor selecting one investment over the other - just lets say, your risk profile certainly matters when it comes to investing.

Skate.


----------



## tech/a

Ok So lets dig a bit deeper.

$100K down on $500K property---Property Rises 3% thats $15000--or 15% on our investment.
Lets say it Raises 8% thats $40,000 or 40% on our investment.
You have been really astute and gain 20% thats $100,000 or 100% on our investment.

All of these and perhaps a few less% in a year and often over 20% if held 10 or more
years or you get lucky.

If we had $1,400,000 in our example with 3 properties at say age 38 
Now do the figures!

That's a lot of capital to continue to be your banks best friend.

Money *DOES* make money.
Don't underestimate this you always have *tangible asset* which lenders love!
The bank doesn't want the capital appreciation on their asset--you get it--*how goods that!*


----------



## noirua

Should you seek to invest in London property and you want something reasonable then $3 million to $20 million is what you will probably need.


 This was once a garage.
At just eight feet wide, this unique house is squeezed in beside its neighbours in leafy Twickenham.
Priced at £549,550.


This one-room rainbow-fronted studio is all about location.
Situated in the heart of Chelsea, it has huge potential as a home or office space. But be warned, the property doesn’t currently have a kitchen.
But then who needs a cooker when you live between the bustling restaurants and cafes on the King's and Fulham Roads?
The shops and museums of South Kensington are all within walking distance, too.
Price £395,000


----------



## divs4ever

Smurf1976 said:


> The only real point I'd make though is that skill and luck come into it in both cases.




 i have found the best skill  is to know when you are lucky ( and so take out some cash  , and NOT do precisely the same thing again )

 just ordinary selection skill  let's you make repeatable gains  ( but they make be smaller ones , but more often  isn't so bad in the long run )


----------



## Value Collector

tech/a said:


> *Lets get REAL*
> 
> Let me explain and expand a little.
> 
> This is the way I put it in long form to Friends/My Kids and anyone else that is interested.
> 
> *MONEY MAKES MONEY*
> 
> *Your not going to go into a bank and get a loan for $500k
> to buy a share or Shares---wont happen
> 
> SO.*
> 
> You need somewhere to live.
> 
> You can leverage your borrowings on a house 5:1 from most lenders.
> 
> While over the last 20 yrs there have been 100's % growth a conservative
> amount is 3% a year so lets take $500K and you put down your $100K deposit.
> and in 10 years your Home is now worth $650K and you can get 80% on your
> Equity. (Better if more growth!) So off you go with your first investment property.
> 
> AND
> 
> That's without paying down anything off your mortgage. Son has done exactly that
> his maths over 8 years is $50K down Cost $410K now worth $580K Payed Double
> mortgage payments equity now $250K. He can now buy 2 more. (Looking he's 36).
> 
> *Rinse and repeat.*
> 
> Now depending on Growth you could have 3-15% in any one or so years in a twenty year period.
> This is where real *ACHIEVABLE* riches can be found.
> 
> The earlier you start here the better---like anything that compounds and leverages.
> 
> 
> Sure you can attempt to emulate Buffett if you have enough cash to buy the Company
> or buy and build a company as he did---not so many do.
> 
> If you believe in Flying pink pigs then go chase them and in 20 years you'll still be doing the
> 
> "Same thing day in and day out *EXPECTING* a different result!"
> 
> Be REAL and get REAL results.
> 
> People keep bringing up Buffett.
> Your *NOT *Buffett and you never will be so be *YOU* and do something
> *YOU* can do.



I have a $750,000 Margin Loan and also have borrowed over $1,000,000 via using self funding installment warrant minis.

(the installment warrants allow you to borrow 70% of the value of the shares you are buying in some cases, and that’s without credit checks, loan applications or anything else, and no weekly payments either, the dividends just pay back the loan)


----------



## lilly87

I would say both if you have enough financial resources.  Invest in at least one extra property (or two) and the rest leave for investing in biotech companis, genetic engineering companies, surely technical companies and all companies with a great potential for future growth. I am trying to this right now. I must admit that is difficult to do, but not entirely impossible. It just needs time and patience, and certainly good cash.


----------



## MovingAverage

Personally, I'm happy to be getting out of property right now. Have offloaded two IP's in Sydney over past two years.


----------



## wayneL

MovingAverage said:


> Personally, I'm happy to be getting out of property right now. Have offloaded two IP's in Sydney over past two years.



I'm in the market for a PPOR ATM, yeah pretty crap timing I know.

But anyway, taking to the RE agents, tonnes of investors are using the seller's market to GTFO, pursuant to COVID experience and pending law changes here in the Soviet Republic of McStalinstan.

FWIW.


----------



## MovingAverage

wayneL said:


> I'm in the market for a PPOR ATM, yeah pretty crap timing I know.
> 
> But anyway, taking to the RE agents, tonnes of investors are using the seller's market to GTFO, pursuant to COVID experience and pending law changes here in the Soviet Republic of McStalinstan.
> 
> FWIW.



I really do wish you all the best on your search for a PPOR--it's tough no doubt.
My last place (Sydney inner west) went to auction early Nov--hardly any stock on the market at the time and very strong buyer demand. Got a very sold price and happy. Fast forward 1 month to this weekend and every investor and his dog has put their IP on the market--AFR was reporting today that last weekend's clearance rates in Syd (and Melb) had dropped 20% as the FOMO factor cools, yields are dropping  and more stock coming on the market. Glad I'm out of IPs (for the time being)


----------



## wayneL

MovingAverage said:


> I really do wish you all the best on your search for a PPOR--it's tough no doubt.
> My last place (Sydney inner west) went to auction early Nov--hardly any stock on the market at the time and very strong buyer demand. Got a very sold price and happy. Fast forward 1 month to this weekend and every investor and his dog has put their IP on the market--AFR was reporting today that last weekend's clearance rates in Syd (and Melb) had dropped 20% as the FOMO factor cools, yields are dropping  and more stock coming on the market. Glad I'm out of IPs (for the time being)



I've got till May until this lease runs out. I'm pretty sure we will be able to renew at at the absolutely ridiculous rent.... I basically lube up every Friday. (10 acres with in 35 minutes of the city... Huge house, way too big for us, but lucky to have been able to secure).

On the plus side, business is going swimmingly, so I can afford the lube.

Question is whether to wait a bit or jump in... There is a compelling case for each scenario.


----------



## MovingAverage

wayneL said:


> Question is whether to wait a bit or jump in...



Each to their own, but if its your PPOR I reckon you just buy when you can...forget trying to time market pullbacks. In the long run your PPOR will come out on top


----------



## wayneL

MovingAverage said:


> Each to their own, but if its your PPOR I reckon you just buy when you can...forget trying to time market pullbacks. In the long run your PPOR will come out on top



Well, yes I do tend to agree, but in our estimation, almost every property we are looking at is 2 to $300,000 over the odds.

At this stage in our lives once we buy, we will probably never sell ever again, so price probably not that relevant... But... I could use that 300 grand to derive a whole shitload worth of income, once I even become too decrepit to do my job, or come to my senses.


----------



## MovingAverage

wayneL said:


> But... I could use that 300 grand to derive a whole shitload worth of income



very good point


----------



## Value Collector

wayneL said:


> Well, yes I do tend to agree, but in our estimation, almost every property we are looking at is 2 to $300,000 over the odds.
> 
> At this stage in our lives once we buy, we will probably never sell ever again, so price probably not that relevant... But... I could use that 300 grand to derive a whole shitload worth of income, once I even become too decrepit to do my job, or come to my senses.




Out of interest, to preserve your capital for generating income, would you consider a 30 - 50 year triple net lease?

Eg, if a financier was willing to purchase your dream forever home, and lease it to you on a 30 or 50 year lease, with a property inspection only every 5 years, at a rent that was only 75% of the current market rent, but that increased each year with inflation.

But in return for the rent being only 75% of market rent you had to cover the costs such as rates, insurance and Maintenance for the term of the lease as if you owned the property.

Is that deal something that would appeal to people?


----------



## MovingAverage

Value Collector said:


> Out of interest, to preserve your capital for generating income, would you consider a 30 - 50 year triple net lease?
> 
> Eg, if a financier was willing to purchase your dream forever home, and lease it to you on a 30 or 50 year lease, with a property inspection only every 5 years, at a rent that was only 75% of the current market rent, but that increased each year with inflation.
> 
> But in return for the rent being only 75% of market rent you had to cover the costs such as rates, insurance and Maintenance for the term of the lease as if you owned the property.
> 
> Is that deal something that would appeal to people?



Is that a similar model to some EP countries?


----------



## Value Collector

The reason for the above deal, is that I have been trying to think of ways in which a long term synthetic bond could be made that’s income increases with inflation and the capital is also protected from inflation (because it’s underwritten by the properties land value which should increase with inflation over the 30 years).

The tenant for his part, would get the stability as if she owned it, but didn’t actually have to sink a chunk of capital it at the start.


----------



## Value Collector

MovingAverage said:


> Is that a similar model to some EP countries?



I am not sure, it’s just something I have been thinking about, I like real estate as a place to store capital that I won’t need for maybe 30 years, because it’s a natural hedge against inflation.

But I don’t really enjoy land lording, eg dealing with constantly changing tenants and realestate agents etc.

So I have been thinking about whether it’s viable to either do buy and lease back deals (like the one I described above) with people in their 60’s who want to unlock their capital while also living in their home as they always have or even maybe new home buyers who are in their 40’s or 50’s willing to sign 30 to 50 year leases.

So I would secure my self a hassle free inflation hedged income for my life, and then when I am in my 70’s or earlier if the tenants pass away, I can start selling off some of these properties that are nearing the end of their term and have may Capital returned.


----------



## wayneL

Value Collector said:


> The reason for the above deal, is that I have been trying to think of ways in which a long term synthetic bond could be made that’s income increases with inflation and the capital is also protected from inflation (because it’s underwritten by the properties land value which should increase with inflation over the 30 years).
> 
> The tenant for his part, would get the stability as if she owned it, but didn’t actually have to sink a chunk of capital it at the start.



I guess that pretty much mirrors the European model of tenancy, if I'm not wrong.

From my point of view it would entirely depend on my view of the capital gain of such properties in relation to inflation.

I think in a deflationary or a stable scenario it would be a great deal for the renter. I think bright 2 the baby boom it would have been a stunninglu good model for all parties concerned.

But it could be that in an inflationary environment but it might be a bad model... 

It is my opinion that over the long term that the only way out of the current conundrum is inflation, perhaps hyperinflation, in spite of *possibly near-term depressionary pressures.

I do think that the holding of hard assets will be the go, going forward.







Value Collector said:


> I am not sure, it’s just something I have been thinking about, I like real estate as a place to store capital that I won’t need for maybe 30 years, because it’s a natural hedge against inflation.
> 
> But I don’t really enjoy land lording, eg dealing with constantly changing tenants and realestate agents etc.
> 
> So I have been thinking about whether it’s viable to either do buy and lease back deals (like the one I described above) with people in their 60’s who want to unlock their capital while also living in their home as they always have or even maybe new home buyers who are in their 40’s or 50’s willing to sign 30 to 50 year leases.
> 
> So I would secure my self a hassle free inflation hedged income for my life, and then when I am in my 70’s or earlier if the tenants pass away, I can start selling off some of these properties that are nearing the end of their term and have may Capital returned.



I think the game of landlording is changing and about to change a whole lot more.

I in my most humble opinion, I think it is going to get a whole lot more **** for both tenant and landlord, at least and WA as these legislative changes come through.

For me at this stage in my life, I think owning stacks up as the better option, even without the prospect of capital gain.

I really think that I would prefer to gear myself up with financial instruments rather than property to be honest (assuming that I may have half an idea of what the hell I am doing)

For me the transaction costs of property and the lack of mark-to-market is a massive negative.


----------



## qldfrog

wayneL said:


> I guess that pretty much mirrors the European model of tenancy, if I'm not wrong.
> 
> From my point of view it would entirely depend on my view of the capital gain of such properties in relation to inflation.
> 
> I think in a deflationary or a stable scenario it would be a great deal for the renter. I think bright 2 the baby boom it would have been a stunninglu good model for all parties concerned.
> 
> But it could be that in an inflationary environment but it might be a bad model...
> 
> It is my opinion that over the long term that the only way out of the current conundrum is inflation, perhaps hyperinflation, in spite of *possibly near-term depressionary pressures.
> 
> I do think that the holding of hard assets will be the go, going forward.
> I think the game of landlording is changing and about to change a whole lot more.
> 
> I in my most humble opinion, I think it is going to get a whole lot more **** for both tenant and landlord, at least and WA as these legislative changes come through.
> 
> For me at this stage in my life, I think owning stacks up as the better option, even without the prospect of capital gain.
> 
> I really think that I would prefer to gear myself up with financial instruments rather than property to be honest (assuming that I may have half an idea of what the hell I am doing)
> 
> For me the transaction costs of property and the lack of mark-to-market is a massive negative.



And do not forget annual fees on RE.depreciation weaf and tear, out of fashion,rates and soon land tax


----------



## MovingAverage

Value Collector said:


> I am not sure, it’s just something I have been thinking about, I like real estate as a place to store capital that I won’t need for maybe 30 years, because it’s a natural hedge against inflation.
> 
> But I don’t really enjoy land lording, eg dealing with constantly changing tenants and realestate agents etc.
> 
> So I have been thinking about whether it’s viable to either do buy and lease back deals (like the one I described above) with people in their 60’s who want to unlock their capital while also living in their home as they always have or even maybe new home buyers who are in their 40’s or 50’s willing to sign 30 to 50 year leases.
> 
> So I would secure my self a hassle free inflation hedged income for my life, and then when I am in my 70’s or earlier if the tenants pass away, I can start selling off some of these properties that are nearing the end of their term and have may Capital returned.



Yes, what you’re suggesting is somewhat similar to what they do in a number of European countries. I know home ownership is engrained in the Australian dream—but reality is home ownership will never be an option for a lot of Australians and this will only get worse (not better) in the future. Realestate is a finite resource and with an ever increasing population that is obsessed with living near the three capital cities on the east coast something has got to give.

We have a private housing rental system that is relatively focused on short term leasing and occupancies. It is generally very difficult to get long term leases (many years) in most parts of Australia—12 month leases seem to be the de facto standard. I think this lack of security over long term rental accomodation is a contributing factor to driving folks into buying their own homes.

I often wonder whether we in Australia need a shift of focus to start thinking about serious long term rental arrangements along the lines of what you are suggesting. Similar systems have worked well across Europe for a very long time—in fact I have a friend in Germany who has been in a 50 year lease for many decades and that lease can be passed on to other family members if need be.


----------



## qldfrog

And the latest from Labour in Victoria





						Windfall gains tax — frequently asked questions | State Revenue Office
					

Exemptions and exclusions 	Rezonings and valuations 	Selling a property 	Deferring a windfall gains tax liability 	Paying your windfall gains tax liability 	Grouping and aggregation 	Objections Exemptions and exclusions  Are there any exclusions or exemptions from windfall gains tax?   There are...




					www.sro.vic.gov.au
				



The love of Australians for RE might quickly fade....


----------



## Value Collector

qldfrog said:


> And the latest from Labour in Victoria
> 
> 
> 
> 
> 
> Windfall gains tax — frequently asked questions | State Revenue Office
> 
> 
> Exemptions and exclusions 	Rezonings and valuations 	Selling a property 	Deferring a windfall gains tax liability 	Paying your windfall gains tax liability 	Grouping and aggregation 	Objections Exemptions and exclusions  Are there any exclusions or exemptions from windfall gains tax?   There are...
> 
> 
> 
> 
> www.sro.vic.gov.au
> 
> 
> 
> 
> The love of Australians for RE might quickly fade....



Looks like residential property is exempt, But the looks of it to me the biggest losers will be owners of rural property that have their land rezoned.

Traditionally it’s been a good investment to own some rural land on the fringe of a city, growing some pineapples or grazing some cattle for 30 years while you wait for the city to expand so you can sell for a big capital gain and retire.

Now it looks like in Victoria the government wants to tap into these land owners retirement fund, with the thinking that the capital gain is being generated by the governments rezoning, so they want 60% of any gain.

————————

There is a bad side effect here, the tax is calculated and payable when the rezoning happens, but can be deferred until the property is either sold or for 30 years.

So if the rezoning happens in 2025, there is going to be a strong incentive for the land holder to put off actually selling the land for as long as possible. Because as long as he continues to hold beyond that rezoning date he still has a large untaxed capital amount growing in his favour. So it could actually restrict future available land supply, and force property prices higher.


----------

