# What type of trading would suit my situation?



## mattryanshares (12 December 2010)

Hi Im Matt and im new.

Im looking at getting into shares and at the moment im thinking Blue chip long term growth type scenario?
Im 40 own my home have a job offshore oil and gas that earns 200 to 300 k a year. Down a bit thanks to the gfc. As such i dont really want income as i pay to much tax already.
I spend 4 to 6 months away from home and sometimes have no access to the internet. Im know my self and i need a vested intererest to read info and as such start the learning process. 

My intention is to buy some shares purely so i have to learn more, im prepared to make some mistakes then start reading about blue chip shares and then maybe look at daytrading when im home in 12 months or so??

Good plan or stupid??

Ive bought 9k worth of woodside, rio, bhp, woolworths, metcash, lynas, Iron ore holdings in the last 2 weeks up $70 haha but its been good as now im here and im reading and im fired up. 
Im getting 14k in the next few days from a suspended fund and another thats been doing nothing for atleast 12 months. Should i just bank that and read more or is there some more blue chips i should stick it on???

I understand somepeople are probably rolling there eyes but im trying to be open and honest and any thoughts would be greatly appreciated.


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## So_Cynical (12 December 2010)

mattryanshares said:


> I understand *somepeople are probably rolling there eyes* but im trying to be open and honest and any thoughts would be greatly appreciated.




Well you got that bit right 

-----------------------

Matt i get the impression that you have some serious excess money and the need to play with it and yet little time and ability to give you expectations of a positive outcome...i feel a disaster coming on.

With all that money rolling in from your day job, have you considered a simple, easy, conservative investment strategy? (oh yeah you did that already)..in general we cant give financial advise on this forum, so im reluctant to comment on your stock selection and timing..however as you have already found out, timing is all important and yet you decided over a 2week period to just jump into WOW, RIO, MTS etc...good luck.


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## jersey10 (12 December 2010)

the chartist growth portfolio may suit what you need

i understand they are starting an autotrade facility soon which may also suit you being unable to access the internet at times


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## mattryanshares (12 December 2010)

So_Cynical said:


> Well you got that bit right
> 
> -----------------------
> 
> ...




I wasnt actually asking what shares to buy but more what approach to take??

IE, to be a day trader dont worry about it as you spend to much time away from the computer when your at work??? It takes years to learn and you only get half a year each year to use what youve learnt??

IPO's??

Futres????


Ive taken or am attempting to head down the blue chip route going after growth???

I have no mentor or anyone i can turn to personally for advice. Ive had bad experiences with financial advisers and i believe its impossible to pick a good one. Its still just a roll of the dice???


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## FxTrader (12 December 2010)

mattryanshares said:


> Im looking at getting into shares and at the moment im thinking Blue chip long term growth type scenario?
> Im 40 own my home have a job offshore oil and gas that earns 200 to 300 k a year. Down a bit thanks to the gfc. As such i dont really want income as i pay to much tax already.



Hello Matt and welcome. Not a bad job you have there mate, any openings?  If I were you, I'd be putting the maximum contribution of 50k a year into super (self managed of course) to help lower that tax bill and in 20 years (unless the laws change) you can draw that out as tax free income.



> My intention is to buy some shares purely so i have to learn more, im prepared to make some mistakes then start reading about blue chip shares and then maybe look at daytrading when im home in 12 months or so??



Forget about "blue chip" stocks and making mistakes as a path to learning the hard way and get a financial education, be prepared - it will save you many thousands of dollars. Check out Roger Montgomery's blog and read his book "Valueable" as a start to investing in equities.

As for day trading, this is one of the faster ways to separate you from your money. The best day traders I know do it as a profession, not a hobby. Avoid wading in shark infested waters where professional, very experienced traders are the only one's making money. Day trading is a very different skill to value investing.

Since you are doing well financially I suggest you attend Tate & Bedford's mentoring program. It will be one of the best investments you can make for now.


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## So_Cynical (12 December 2010)

mattryanshares said:


> I wasnt actually asking what shares to buy but more what approach to take??
> 
> day trader
> 
> ...




You have to find a approach/strategy that your happy and comfortable with, so you need to get your head around the different types of trading/investing.

First up day traders trade and investors invest...usually 2 different things both with many different approaches, on the whole its prob safe to say that people will tend to invest before they trade as trading requires a steeper learning curve and a greater time commitment.


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## pixel (12 December 2010)

1. Talk to a good tax accountant.
2. Have him/her explain your options: e.g. discretionary trust; tax advantages/ disadvantages of being a trader as opposed to investor; postponing CGT; ...
3. Those $9K - is that $9K/stock? or $9K spread across 7 stocks?
4. Why did you pick those 7 to buy exactly at this time?
5. Why did you choose to be so overweight in resource stocks?

Try and figure out those reasons (answer 4 and 5), then look at a simple chart, wheer each of those stocks have been and where they're now. I don't suggest you become a chartist or pay shiploads of money for a charting/ analysis package. Try http://www.incrediblecharts.com/ - it's free - and only look up the daily price chart for each stock; then compare your reasons to buy against the factual outcome.
Come back and tell us your conclusions. Will be interesting ... 

PS: FxTrader has covered some other points I was getting to. I especially concur re: Louise Bedford.


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## Wysiwyg (12 December 2010)

Seems to be in a hurry to do it. From my experience, a cautious & deliberate approach is more beneficial to learning about this game because it gives you, over a period of time, an experience of stock price movement. Throwing money at stocks without a written & proven trading plan nor understanding is a surefire way to burn cash, though this may be what you inwardly crave.
I can tell you I have been part/fulltime "learning" for around 7 years and there is much to learn.


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## hotqld (12 December 2010)

Trading using monthly charts could suit you, where you look at your stocks once a month and put in your buy and stop loss orders?








mattryanshares said:


> Hi Im Matt and im new.
> 
> Im looking at getting into shares and at the moment im thinking Blue chip long term growth type scenario?
> Im 40 own my home have a job offshore oil and gas that earns 200 to 300 k a year. Down a bit thanks to the gfc. As such i dont really want income as i pay to much tax already.
> ...


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## Julia (12 December 2010)

So_Cynical said:


> Well you got that bit right



Well, I wasn't rolling my eyes at all.  Matt was being candid about his approach and apparently aware that it may have been less than perfect.  So he's asking for some guidance.  Seems reasonable to me.

Matt, I'm in the camp of suggesting you get some education before you start buying anything.  The sort of random 'poke a stick at a stock and buy it' lacks any sort of logic.

It may seem horribly basic but if you haven't worked through the education modules on the ASX website, and you continue to just throw money at so called blue chips without any comparative analysis or price consideration, you're pretty much destined to lose money.


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## pixel (12 December 2010)

Julia said:


> if you haven't worked through the education modules on the ASX website, and you continue to just throw money at so called blue chips without any comparative analysis or price consideration, you're pretty much destined to lose money.




Onya Julia,

I keep forgetting the free education on asx.com.au
Simply because it wasn't nearly half as good and elaborate when I got my grounding.


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## IB12 (12 December 2010)

My impression is you're a long term investor who doesn't want to lose sleep daily on positions. Otherwise you're a position trader who might hold positions over days to months. 

So look for long term fundamentals. Or long term technicals. You're definitely not short term orientated or a scalper. 

Other than that, you can either put it in an index fund or let a fund manager manage your money. Both of which would be objectionable by many on this forum.


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## johenmo (12 December 2010)

If I wished to be invested in shares and didn't have internet access for periods of time then I'd need to find someone or something that can do it for me.  Of course, it depends on how long these periods are.  It would cost.

An autotrade facility may be of benefit but that depends on the details.  You could use a full service broker - my FIL does - who has the authority to sell - his does now after getting caught in the 70's.  The comment about speaking to a good tax accountant is a good first step - that's what I'd do.  That would be money well spent.  Your action also depends on what currency your pay is in.

Look through ASF re books (can take them with you when offshore) to read.

Otherwise you could go for property and become a slum landlord.


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## poverty (12 December 2010)

+1 for contributing the max to super pre-tax, and also for maxing out spouse contributions if you have a non-working wife.


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## IB12 (12 December 2010)

poverty said:


> +1 for contributing the max to super pre-tax, and also for maxing out spouse contributions if you have a non-working wife.




Problem with super is that you can't pull it out unless you hit 65. Now that's not a huge problem if you're in your 40s. But if you're in your 20s or 30s, geez ... that's a long time before drinks.


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## Julia (12 December 2010)

IB12 said:


> My impression is you're a long term investor who doesn't want to lose sleep daily on positions. Otherwise you're a position trader who might hold positions over days to months.
> 
> So look for long term fundamentals. Or long term technicals. You're definitely not short term orientated or a scalper.



With respect, IB12, I doubt the OP would have any idea what you're talking about here.  On another thread, the poster suggested he was daunted by the jargon.  I think that's understandable.  

I'd be very surprised if Matt knows the difference between a fundamental and a technical approach, ditto what a position trader or scalper is.
Hence my suggestion that he should get some very basic education before doing anything at all.



IB12 said:


> Problem with super is that you can't pull it out unless you hit 65. Now that's not a huge problem if you're in your 40s. But if you're in your 20s or 30s, geez ... that's a long time before drinks.



Agree absolutely.   The way governments are going with deciding to regulate pretty much every breath we take, if I were under 40 I wouldn't be putting a cent more than I had to into Super.  I believe the day is not far off when the government (if it's still Labor) will dictate that a certain, probably quite large proportion, of everyone's Super must be channeled into a lifetime annuity.

i.e. you will not have access to the lump sum but will be forced to take it as an income stream, thus reducing the likelihood of your blowing the lump sum and then accessing the Age Pension.

Super is a great investment for those near or in retirement, hugely tax advantaged, but imo it's a big risk for young people.


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## IB12 (12 December 2010)

Julia said:


> With respect, IB12, I doubt the OP would have any idea what you're talking about here.  On another thread, the poster suggested he was daunted by the jargon.  I think that's understandable.
> 
> I'd be very surprised if Matt knows the difference between a fundamental and a technical approach, ditto what a position trader or scalper is.
> Hence my suggestion that he should get some very basic education before doing anything at all.




Well I tend to see the glass half full, and don't assume that the OP is stupid, quite the opposite really if he is what he says he is. 
I'm sure he can work out what I'm saying.


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## FxTrader (13 December 2010)

IB12 said:


> I'm sure he can work out what I'm saying.



What you're saying leads Matt nowhere IB12, what he needs is a roadmap to help him on the path to self education so he can discover what type of investor he wants to be, hopefully an informed and well read one in the end. He clearly has no idea at this stage of his journey and is just dabbling in the equity market.


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## ParleVouFrancois (13 December 2010)

Matt given your limited access to the internet for large portions of time I would restrict my investments were I in your situation to safer companies. Safer doesn't necessarily mean so called "blue chips" but instead it means investing in companies that have a much larger fundamental value than their current trading price. 

These companies can be found in a variety of ways, but most are time consuming. Shares, like any other form of wealth generation, take alot of time and effort to become proficient at. I read somewhere that the estimated time to become proficient in anything is about 10,000 hours, whether that is shares, music, arts, or anything. 10,000 hours is a long period of time to devote to a single subject, and if you're pulling down cash like that from a legit job, imo I probably wouldn't even bother (cash at bank might be good enough for me ). However each to their own, good luck with the investing, and remember to not buy into a "get rich quick scheme". 

PVF.


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## Sir Osisofliver (13 December 2010)

FxTrader said:


> Hello Matt and welcome. Not a bad job you have there mate, any openings?  If I were you, I'd be putting the maximum contribution of 50k a year into super (self managed of course) to help lower that tax bill and in 20 years (unless the laws change) you can draw that out as tax free income.






poverty said:


> +1 for contributing the max to super pre-tax, and also for maxing out spouse contributions if you have a non-working wife.




-1:10 to the power of 50

Don't do this. 




mattryanshares said:


> Hi Im Matt and im new.
> 
> Im looking at getting into shares and at the moment im thinking Blue chip long term growth type scenario?
> Im 40 own my home have a job offshore oil and gas that earns 200 to 300 k a year. Down a bit thanks to the gfc. As such i dont really want income as i pay to much tax already.




Therefore you need to look at a negatively geared strategy.  WHilst the ability to do so in shares is possible, the volatile nature of the asset cass means that your risk protection is highly important. Don't do something in this area if you don't know what I mean. You may wish to look at property as a means of creating a negative gearing scenario.

You should also be speaking to a good accountant and get some financial advice regarding structures. Look at what types of companies of trust structures will work to minimise your tax liability. At that level of income there are several things you can do.







> I spend 4 to 6 months away from home and sometimes have no access to the internet. Im know my self and i need a vested intererest to read info and as such start the learning process.
> 
> My intention is to buy some shares purely so i have to learn more, im prepared to make some mistakes then start reading about blue chip shares and then maybe look at daytrading when im home in 12 months or so??
> 
> Good plan or stupid??



 I'd go with the words uneducated about the realities of the situation rather than a considered and careful approach to wealth creation.  







> Ive bought 9k worth of woodside, rio, bhp, woolworths, metcash, lynas, Iron ore holdings in the last 2 weeks up $70 haha but its been good as now im here and im reading and im fired up.
> Im getting 14k in the next few days from a suspended fund and another thats been doing nothing for atleast 12 months. Should i just bank that and read more or is there some more blue chips i should stick it on???



 Whilst I can't give advice.... what harm is there in banking it? As opposed to the potential harm of choosing incorrectly







> I understand somepeople are probably rolling there eyes but im trying to be open and honest and any thoughts would be greatly appreciated.




Good Luck

Sir O


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## FxTrader (13 December 2010)

Sir Osisofliver said:


> -1:10 to the power of 50
> Don't do this.




You say this without any justification whatsoever about super contribution and then you posit "Whilst I can't give advice..."

Sounds like advice to me and potentially very bad advice at that.  And then you drop in more advice about negative gearing and buying into negatively geared property in a declining market to minimize tax! You should probably stick by your own declaration "Whilst I can't give advice..." since your "advice" here is so obviously biased and narrow in scope.

What Matt needs is investor education and a financial plan at this stage of his journey, not biased, blinkered advice on creating "structures" to minimize tax.


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## Sir Osisofliver (13 December 2010)

FxTrader said:


> You say this without any justification whatsoever about super contribution and then you posit "Whilst I can't give advice..."
> 
> Sounds like advice to me and potentially very bad advice at that.  And then you drop in more advice about negative gearing and buying into negatively geared property in a declining market to minimize tax! You should probably stick by your own declaration "Whilst I can't give advice..." since your "advice" here is so obviously biased and narrow in scope.
> 
> What Matt needs is investor education and a financial plan at this stage of his journey, not biased, blinkered advice on creating "structures" to minimize tax.




*Sigh*

My views on Superannuation on these boards have been stated before...a lot.  Must I repeat myself....again?????? Must I justify everything again????

In anything OTHER than a SMSF, go look at the 2003 senate inquiry into super, specifically the report by PWC into superannuation that colated that the *real rate *of return for superanuants is less than 1% - Does this sound like a worthwhile investment vehicle to you?

In the same report an estimated 33% of contributions was taken in the form of administration fees, taxation etc etc. That would be a 33% sensitivity withdrawal...go have fun with that. Once again...is this a good investment vehicle?

In a SMSF he is dependent upon his own expertise as to his level of return. He is also limited in that his ability to use gearing to enhance his return is severely limited in a superannuation environment.  If you are at all interested go compare ungeared rates of return with geared rates of return and then tell me he'd be better off. Still want to tell me it's a good investment vehicle?

Then there is the point that he's 40 so another 15+ years before he can access the money.  In the 2010 Intergenerational report by 2050 there will be 2.7 people working for every 1 retired as opposed to our current situation of 5:1   Do you think that the incumbent government will allow us to continue with superannuation in it's current format or that it will be made more restrictive in the future so that we don't take all out money out, blow it and then be on the public teat? As Julia referred to there as moves to make a MANDATORY annuity part of every super fund (Self Managed or not).

Need I go on with my reasoning? I can if you would like.



> And then you drop in more advice about negative gearing and buying into negatively geared property in a declining market to minimize tax!




Funnily enough I do believe I said "you may wish to look" rather than  "you should go do". See one is a *suggestion* guiding him towards educating himself and the other is *advice*. Can you see the difference? 

I mention property because it is a less volatile asset class than shares for the purpose of negative gearing. I find your comment that it's a declining market interesting. Is it a declining market around the whole country or just in your area? Please tell me where your property is that is declining in price over the longer term so I don't buy any there. Perhaps the entire country isn't a homogenous one and different areas behave differently depending upon factors that drive their price? Of course that might just be my view which is biased and narrow in scope as we know.


Cheers

Sir O


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## mattryanshares (13 December 2010)

pixel said:


> 1. Talk to a good tax accountant.
> 2. Have him/her explain your options: e.g. discretionary trust; tax advantages/ disadvantages of being a trader as opposed to investor; postponing CGT; ...
> 3. Those $9K - is that $9K/stock? or $9K spread across 7 stocks?
> 4. Why did you pick those 7 to buy exactly at this time?
> 5. Why did you choose to be so overweight in resource stocks?




9k over the 7 stocks.
Woodside because i've worked on and off for them for the last 10 years in australia and i believe there at the top of there game with safety, engineering an all that. 
BHP because there a house hold name
RIO because i think china will buy there iron ore for another 20 years.
Metcash my wifes pick cause her dads FI said it was good
Woolworths as above.
Lynas because i read about them and figured it sounded promising
Iron ore holdings because i think iron ore will be in demand for a long time and worst case rio or bhp may buy there reserves.




FxTrader said:


> Hello Matt and welcome. Not a bad job you have there mate, any openings?  If I were you, I'd be putting the maximum contribution of 50k a year into super (self managed of course) to help lower that tax bill and in 20 years (unless the laws change) you can draw that out as tax free income.
> 
> 
> 
> Since you are doing well financially I suggest you attend Tate & Bedford's mentoring program. It will be one of the best investments you can make for now.



My job is a oil field saturation diver. If you can handle living in a tin can with 3 other blokes for a month do a course and see how you go. Its not for everyone hence the pay check! Course will take you 6 months cost 50k and then you'll need 4 to 10 years experience to get the good coin!!
Ill look into tates??


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## mattryanshares (13 December 2010)

Thanks again to everyone elses replies. But please dont argue on my behalf. Im happy to hear everyones point of view and even peoples view that differ from anothers.

This post and website is a great tool for people like myself and bluntly honest answers are what i need to hear. You wont offend me and i greatly appreciate the time it takes to post to another flash in the pan investor/ trader who knows bugger all!!!



Education is obviously the key and just being here has made me keen to do that. 
Im definitely throwing darts in stock selection but that was the point. Its made me write this post, its made me look at the market and its made me get interested. 

Ithink im suited to investing and ive read some of buffets book ages ago and i think i like the idea of trying to find under priced stock and buying and hanging on to.

Thanks again and please feel free to keep offering advice, good and bad because it gets us all thinking!!


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## FxTrader (13 December 2010)

Sir Osisofliver said:


> My views on Superannuation on these boards have been stated before...a lot.  Must I repeat myself....again?????? Must I justify everything again????



Honestly, I have no interest in reviewing your views on super since your bias against it is all to obvious, whatever the arguments. Advising against super contribution, as a blanket statement, is irresponsible financial advice IMO.



> In anything OTHER than a SMSF, go look at the 2003 senate inquiry into super, specifically the report by PWC into superannuation that colated that the *real rate *of return for superanuants is less than 1% - Does this sound like a worthwhile investment vehicle to you?



I am an advocate for people getting a good financial/investor education and managing their own investments both inside super (SMSF) and outside of it. So stats on industry/retail super performance are of little interest to me other than as a curiosity.



> In a SMSF he is dependent upon his own expertise as to his level of return. He is also limited in that his ability to use gearing to enhance his return is severely limited in a superannuation environment.  If you are at all interested go compare ungeared rates of return with geared rates of return and then tell me he'd be better off. Still want to tell me it's a good investment vehicle?



Sorry but you're demonstrating your ignorance here with respect to the leverage options available in super that include CFDs, warrants, options, and (shock/horror) borrowing to invest in property. So you can't buy shares on margin, that hardly classifies SMSF as a "severely limited" environment. Given the general lack of sophistication of investors, limits on some kinds of borrowing make sense. Speculation is prohibited but the definition of this is vague and elastic.

SMSF imposes a type of discipline on the investor that's not rigorous enough IMO. Investment strategies should be much more robust and detailed than that required by regulation.

Your forecast the future of super regulation is pure speculation and should be regarded as such. The gov't continues to provide incentives for self funded retirement and this trend will likely continue since gov't funded pensions in the future are likely to be contstrained for reasons mentioned.



> I mention property because it is a less volatile asset class than shares for the purpose of negative gearing. I find your comment that it's a declining market interesting...



 Tell that to the hundreds of thousands of bankrupt American property investors pal. The cracks are already apparent in the Australian property bubble, the bursting of which will likely be ugly.  Negative equity + negative gearing = bankruptcy for many. Ignore the warning signs at your financial peril.


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## Sir Osisofliver (13 December 2010)

FxTrader said:


> Honestly, I have no interest in reviewing your views on super since your bias against it is all to obvious, whatever the arguments. Advising against super contribution, as a blanket statement, is irresponsible financial advice IMO.




Nice FX so just remind me which of us is biased and narrowminded again? I am suggesting, not advising. For the vast majority of people I *suggest* that adding the maximum they possibly can (which is what you suggested) to their superannuation when they are an unsophisticated investor is not beneficial to their net wealth over the longer term. Feel free to disagree here...I won't mind.







> I am an advocate for people getting a good financial/investor education and managing their own investments both inside super (SMSF) and outside of it. So stats on industry/retail super performance are of little interest to me other than as a curiosity.




Cool



> Sorry but you're demonstrating your ignorance here with respect to the leverage options available in super that include CFDs, warrants, options, and (shock/horror) borrowing to invest in property. So you can't buy shares on margin, that hardly classifies SMSF as a "severely limited" environment. Given the general lack of sophistication of investors, limits on some kinds of borrowing make sense. Speculation is prohibited but the definition of this is vague and elastic.



 Perhaps I wasn't clear. AT THIS TIME his choices in realtion to gearing within a smsf are severely limited. Or do you suggest as a newbie with his vast levels of experience he should invest in CFD'S Warrants or Options? 

In relation to purchasing property, Yes the amendments to the superannuation act state that from 7th July 2010 he can purchase real property in his super fund. 1 property...Only one property. And under some pretty tight restrictions....

So just lets think about this... If he buys a property in his super fund, and the superfund pays off say half of the property by the time he retires.... What are his options now?  Can he take the property as a pension payment? - No

Can he use the unused equity in the property as security to purchase another property? No - (This one is the killer by the way - if he can't use this asset as a parent asset he is severely limited in leveraging the growth in this asset to purchase another asset - IE no ability to compound his returns).

If the property when paid off is more than 5% of the value of the fund does he breach in-house holding rules?  Probably (Which means he'd be forced to sell the property at that time).


I am still considering whether to recommend to clients whether to use this or not.  It may just be more trouble than it is worth.







> SMSF imposes a type of discipline on the investor that's not rigorous enough IMO. Investment strategies should be much more robust and detailed than that required by regulation.
> 
> Your forecast the future of super regulation is pure speculation and should be regarded as such. The gov't continues to provide incentives for self funded retirement and this trend will likely continue since gov't funded pensions in the future are likely to be contstrained for reasons mentioned.




Yes they do. Wonder why they need to bribe you to do so? Wonder why they brought in borrowing (under limited circumstances) into superannuation?  Have you actually ever compared super to other forms of *investment* over long term time frames.   I have. It doesn't compare. As for speculation regarding the future, yes you are right I am speculating that in the future there will be changes to superannuation that I do not like.  Since that has already happened I'm pretty sure it'll happen again.







> Tell that to the hundreds of thousands of bankrupt American property investors pal. The cracks are already apparent in the Australian property bubble, the bursting of which will likely be ugly.  Negative equity + negative gearing = bankruptcy for many. Ignore the warning signs at your financial peril.




Hey nice way to avoid my comment about a homogenous market. Of course I'd be a prick if I pointed out that _"Your forecast [of] the future of property pricing is pure speculation and should be regarded as such. The population growth and density characteristics continues to provide upward price momentum for real estate investors and this trend will likely continue ...."_ : So I won't do that.

I will however say that property if purchased correctly is negatively geared for only a relatively short period of time. Is your impending disaster likely to happen before or after the property becomes positively geared?

Cheers

Sir O


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## FxTrader (13 December 2010)

Sir Osisofliver said:


> For the vast majority of people I *suggest* that adding the maximum they possibly can (which is what you suggested) to their superannuation when they are an unsophisticated investor is not beneficial to their net wealth over the longer term.



What I suggested is what I would do with such an income. Since there are contribution limits each year and if one intends to self manage after appropriate research and education, then accumulation of a certain *portion* of one's income each year (depending on age) in an SMSF is a wise decision IMO.  In hindsight, I wish I had contributed more to super when I was 40 than I did.



> Perhaps I wasn't clear. AT THIS TIME his choices in realtion to gearing within a smsf are severely limited. Or do you suggest as a newbie with his vast levels of experience he should invest in CFD'S Warrants or Options?



No, you were not clear and I would never recommend a novice trade such instruments but thanks for the silly rhetorical question anyway.  

Thanks for the recap on the pitfalls/limitations of property investment in an SMSF. Since I agree that it's probably not a wise decision for most people to do this there's no need to discuss further.



> Have you actually ever compared super to other forms of *investment* over long term time frames.   I have. It doesn't compare.



A curious question given that the few forms of investment I can't undertake in the SMSF I do outside of it. So your point is a moot one.



> As for speculation regarding the future, yes you are right I am speculating that in the future there will be changes to superannuation that I do not like.  Since that has already happened I'm pretty sure it'll happen again.



Well the gov't is never going to make everyone happy but the progressive changes to super legislation have been, for the most part, improvements.



> Hey nice way to avoid my comment about a homogenous market. The population growth and density characteristics continues to provide upward price momentum for real estate investors and this trend will likely continue ...."



There are other threads on the forum discussing the state of the property market in Aus, best if you post your rosy forecast there.


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## mattryanshares (13 December 2010)

Ive got a couple of dueling pistols if you want to borrow them???


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## Sir Osisofliver (14 December 2010)

FxTrader said:


> What I suggested is what I would do with such an income. Since there are contribution limits each year and if one intends to self manage after appropriate research and education, then accumulation of a certain *portion* of one's income each year (depending on age) in an SMSF is a wise decision IMO.  In hindsight, I wish I had contributed more to super when I was 40 than I did.
> 
> No, you were not clear and I would never recommend a novice trade such instruments but thanks for the silly rhetorical question anyway.




Ok FX I will say that for an experienced and consistently returning *short term trader* the super environment in pension phase *cannot be beaten by any other structure*. It's great, its fabulous even.  

So why don't I recommend that all my clients do it?

a) Because not everyone can become an experienced and consistently returning short-term trader.
b) Because as a general rule people become *more* risk averse the older they get and short-term trading is viewed as a high risk activity.
c) Because who wants to be chained to a desk for good portion of the day instead of fishing/golfing playing with the Grandkids etc activities when they are retired?

That's not an exhaustive list either but I'm sure you get the idea. Most people when they retire seem to want to just have the money sitting in a very safe investment providing them with an income sufficient for them to enjoy their retirement. The thirty + years of being unable to gear (except through highly specialised instruments requiring considerable expertise) means 30 years of potential compounding on that money that you will never get back.  ERGO for the NOVICE putting maximum amounts of money into super = not something I would suggest. Generally when you tell a novice to do this...it ends up in the tender care of a "professional adviser" IE parasite. Hence my "don't do this" comment.



> Thanks for the recap on the pitfalls/limitations of property investment in an SMSF. Since I agree that it's probably not a wise decision for most people to do this there's no need to discuss further.
> 
> There are other threads on the forum discussing the state of the property market in Aus, best if you post your rosy forecast there.




Sooo any comment about the important bits which you ignored?

a) future movements in price are *pure speculation on your part* - which is what you lambasted me for doing....

And 

b) When your impending disaster will occur. 

And

c) Is it a disaster of the same magnitude if the property is positively geared?

Cheers 

Sir O


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## Sir Osisofliver (14 December 2010)

mattryanshares said:


> Ive got a couple of dueling pistols if you want to borrow them???




Sorry Matt it just raises my hackles when someone implies that I give bad advice.

Sorry if it's been hijacking your thread

Cheers

Sir O


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## Julia (14 December 2010)

Sir Osisofliver said:


> Ok FX I will say that for an experienced and consistently returning *short term trader* the super environment in pension phase *cannot be beaten by any other structure*. It's great, its fabulous even.



Why the emphasis on the 'short term trader'?  There's no reason a different type of strategy, even buy and hold if that's what the investor is comfortable with, isn't also 'fabulous' in pension phase. 



> So why don't I recommend that all my clients do it?
> 
> a) Because not everyone can become an experienced and consistently returning short-term trader.
> b) Because as a general rule people become *more* risk averse the older they get and short-term trading is viewed as a high risk activity.
> c) Because who wants to be chained to a desk for good portion of the day instead of fishing/golfing playing with the Grandkids etc activities when they are retired?



I may have missed something in the preceding posts which has declared anyone using Super has to ipso facto be a whizzbang short term trader, but I suspect the current argument is doing little to enlighten the OP.


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## FxTrader (14 December 2010)

Sir Osisofliver said:


> Ok FX I will say that for an experienced and consistently returning *short term trader* the super environment in pension phase *cannot be beaten by any other structure*. It's great, its fabulous even.



A grudging concession on your part, but your focus on just short term trading in pension phase is misplaced. I know several investors who have accumulated significant sums in super through contribution and essentially buy and hold strategies. To prepare for pension phase you should accumulate a significant sum, quite hard to do if the only contribution is the compulsory employer levy.

I actually enjoy trading, am not "chained" to the desk all day and not interested in being put out to pasture on a golf course like a retired race horse.  

My 80yr old father fits your description of retiree, every few months he hunts around in the U.S. market for his next CD purchase, gets 2% return on his money (banks must be safe after all) and can only afford to go out a couple times a month - no trips to the golf course for him. He also bought a home in the U.S. 6 years ago which is now worth $250k less than he paid for it yet he still has a $300k mortgage (real estate always goes up does it not). His net worth, thanks to real estate is *0*. Share that all to common picture with your clients.

Advise your clients as you will, but gearing is a double edge sword - it magnifies gains and loses. 30 years of gearing into property has paid off in the past, the future is another story.

What you should tell your clients is, get an education in investment principles and give them a roadmap on how to proceed with this education, not just "don't do this."



> a) future movements in price are *pure speculation on your part* - which is what you lambasted me for doing....



Hardly, since it's not my speculation but the forecast of many reputable sources. Believe what you will, but if you believe that Aus property prices are not in bubble territory then your not paying attention to trends and market cycles. Keep buying those properties though since Aus property surely can only go in one direction, up and up. LOL


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## tech/a (14 December 2010)

FxTrader said:


> A grudging concession on your part, but your focus on just short term trading in pension phase is misplaced. I know several investors who have accumulated significant sums in super through contribution and essentially buy and hold strategies. To prepare for pension phase you should accumulate a significant sum, quite hard to do if the only contribution is the compulsory employer levy.




More importantly your "Significant sum" should supply passive income as well as a hedge against the dreaded inflation.



> I actually enjoy trading, am not "chained" to the desk all day and not interested in being put out to pasture on a golf course like a retired race horse.




To me trading is as boring as watching paint dry while listening to a commentary of a chess game.Your right in that you can "these days" basically set and forget ---- even set a system fund it and forget!  



> My 80yr old father fits your description of retiree, every few months he hunts around in the U.S. market for his next CD purchase, gets 2% return on his money (banks must be safe after all) and can only afford to go out a couple times a month - no trips to the golf course for him. He also bought a home in the U.S. 6 years ago which is now worth $250k less than he paid for it yet he still has a $300k mortgage (real estate always goes up does it not). His net worth, thanks to real estate is *0*. Share that all to common picture with your clients.




Maybe in the US.
But 6 yrs ago his AUD was worth 50c I find it very strange that someone his age would have been buying R/E in the US. Particularly that he has been double hit---hes way worse off that you depict.(I smell a story made to order!)



> Advise your clients as you will, but gearing is a double edge sword - it magnifies gains and loses. 30 years of gearing into property has paid off in the past, the future is another story.




The future will tell the exact same story as it did 30 yrs ago and did 30 yrs before that. We haven't had a good dose of inflation yet and when we do you had better have your money ANYWHERE else than a bank!



> What you should tell your clients is, get an education in investment principles and give them a road map on how to proceed with this education, not just "don't do this."




Disagree---not everyone wants to become a financial expert many are willing to pay for that expertise---just as most of us dint want to become a doctor---and many try with results commensurate with experience and knowledge!




> Hardly, since it's not my speculation but the forecast of many reputable sources. Believe what you will, but if you believe that Aus property prices are not in bubble territory then your not paying attention to trends and market cycles. Keep buying those properties though since Aus property surely can only go in one direction, up and up. LOL




Some are in bubble territory.
Some aren't.
Demand is still high and like Trading there are different Property strategies which suit different periods in a cycle.
Now its selective development (What I do along with running a civil construction company).

I think the passive income aspect of setting up a Super package has in this argument (discussion) been over looked.


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## FxTrader (14 December 2010)

tech/a said:


> To me trading is as boring as watching paint dry while listening to a commentary of a chess game.Your right in that you can "these days" basically set and forget ---- even set a system fund it and forget!



My routine is that I trade maybe 3-4 hours a day scattered between market sessions with about 1 hr of market analysis at the start.  Staring at charts is boring no doubt, however I don't do that much, use alarms and read most of the time.




> Maybe in the US.
> But 6 yrs ago his AUD was worth 50c I find it very strange that someone his age would have been buying R/E in the US. Particularly that he has been double hit---hes way worse off that you depict.(I smell a story made to order!)



He's always lived in the U.S. tech/a and his dream was to retire in Hawaii. He has but not exactly with the life style he hoped for. He made money in property throughout his lifetime (that's all he ever invested in like many in the U.S.), but did not plan for a black swan event.




> The future will tell the exact same story as it did 30 yrs ago and did 30 yrs before that. We haven't had a good dose of inflation yet and when we do you had better have your money ANYWHERE else than a bank!



A bold prediction and I am sure boom and bust cycles will continue. The bust is still playing out in the U.S. and after the Chinese stop building empty cities and roads to nowhere we shall see how the Aus economy, based significantly on digging minerals out of the ground and selling them to the Chinese, holds up.




> Disagree---not everyone wants to become a financial expert many are willing to pay for that expertise---just as most of us dint want to become a doctor---and many try with results commensurate with experience and knowledge!



True enough, but I'm not advocating for expert status, just financial/investment literacy. Sure you can pay "experts" to manage your portfolio but my interaction with them indicates they are only experts in products they advocate that generate a commission. No doubt Storm clients thought they were dealing with experts, but then if you're not financially literate there are Storm like entities all over the place happy to separate the naive and poorly informed from their money.



> I think the passive income aspect of setting up a Super package has in this argument (discussion) been over looked.



Perhaps, I have touched on this aspect of super investment but then if one has little interest in self education then SMSF is not going to be of much benefit, probably the opposite.


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## Sir Osisofliver (14 December 2010)

FxTrader said:


> A grudging concession on your part,



 Er no - I've said that before actually. 



> but your focus on just short term trading in pension phase is misplaced. I know several investors who have accumulated significant sums in super through contribution and essentially buy and hold strategies.




Cool...compared to what?  You see without a comparison your statement is... meaningless. I know someone who deposited $1,000 into a 30 year term deposit and ended up with over a million dollars. Was that a good idea?  You can't answer that question because you have no idea of what rate of return it could be compared to. Similarly your statement that you know people who have accumulated significant sums in super through buy and hold strategies has no basis of comparison. You are not comparing apples to apples. You only have one apple.

Superannuation in its current format for the vast majority of superannuants restricts their ability to *compound gains*. IE the example I gave you already in relation to Property in a Super Environment.  You are comparing a straight line equity growth, 1 asset growing over 30 years, compared to an exponential compounding line, multiple growing assets over 30 years. In ANY comparison over the longer term the exponential line will *vastly* outperform the straight line.

Is that clear? 







> To prepare for pension phase you should accumulate a significant sum, quite hard to do if the only contribution is the compulsory employer levy.




Your making a huge false assumption here. When we retire what do we want? We want an income that is independent of our personal self exertion - a passive income stream to support us when we no longer have our employment income to support us. Your assumption is that Super is the only environment in which we can/should do this. Since super restricts our ability to compound our gains, we need to compare our real rates of return within super, with our real rates of return outside of super. Even after tax the lack of the ability to compound our gains loses every time. Straight line versus exponential compound line.

The only time this is beaten within super is when we use a system that internally compounds. IE a short-term trading strategy. It's only then that the taxation benefits within super outweigh the taxation detriment outside super. 

Clear?


> I actually enjoy trading, am not "chained" to the desk all day and not interested in being put out to pasture on a golf course like a retired race horse.



 Great! I'm happy for you. I enjoy it too.  I suggest however that we are not the norm. 







> My 80yr old father fits your description of retiree, every few months he hunts around in the U.S. market for his next CD purchase, gets 2% return on his money (banks must be safe after all) and can only afford to go out a couple times a month - no trips to the golf course for him. He also bought a home in the U.S. 6 years ago which is now worth $250k less than he paid for it yet he still has a $300k mortgage (real estate always goes up does it not). His net worth, thanks to real estate is *0*. Share that all to common picture with your clients.




Ok three things. 

1) I'm very sorry to hear about your Fathers financial situation. Needless to say your father doesn't fit my description of a self-funded retiree. I hope you can see why.

2) Australia is not China, UK, or Mongolia either. Your comparisons between us and the U.S. are of _limited_ use. It's like me saying don't invest in the Australian share market over the last 30 years because of what's happened in Japan's share market.

3) I can stack your father's example with plenty of opposing examples. What now? You're taking a single data point and drawing a conclusion from it and emotionally investing significance.



> Advise your clients as you will, but gearing is a double edge sword - it magnifies gains and loses.




Which means we use risk management techniques to control our losses....which is the part that a lot of people don't do. 







> 30 years of gearing into property has paid off in the past, the future is another story.



 Yeah yeah the sky is falling I get it we're all going to end up eating each other when the world ends. You're not doing your side of the debate any good by fearmongering. 







> What you should tell your clients is, get an education in investment principles and give them a roadmap on how to proceed with this education, not just "don't do this."




Yeah well we are also an RTO and request our clients do courses before we engage as their advisers, so we already do that.







> Hardly, since it's not my speculation but the forecast of many reputable sources. Believe what you will, but if you believe that Aus property prices are not in bubble territory then your not paying attention to trends and market cycles. Keep buying those properties though since Aus property surely can only go in one direction, up and up. LOL




Cool.  Source me up. Give me data, stats and fact that you're basing your argument on rather than opinion. I'm not contending that property *In Australia* only goes up.  As you've pointed out property is cyclical and has trends. So what may be bubble territory in Sydney for example may not mean a rats **** in Darwin, which is subject to a completely different set of drivers.  Which is kinda similar to my example of not buying shares in Australia because Japan's share market has been declining for 30 years.

Cheers

Sir O


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## tech/a (14 December 2010)

Mind you I have one rule (for myself) with Money matters.
If I cant control it then I dont get involved.
While not fail safe as I have to deal with Banks and Debtors I have avoided the temptation of a Quick Fleecing (Err buck!).

Im suprised your father wasnt in the position after investing in property for so long to be well geared---enough to supply passive income.
I have friends in the US who have taken a hit if they sell now but who are generating excellent income from apartments and some Commercial property.
The aim always was and in their case is to supply passive income.

Their kids however arent too happy with the slashing of their property holding values!
They need to be educated in passive income!


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## Trembling Hand (14 December 2010)

Sir Osisofliver said:


> The only time this is beaten within super is when we use a system that internally compounds. IE a short-term trading strategy. It's only then that the taxation benefits within super outweigh the taxation detriment outside super.




Sir O what sort off short-term trading strategy are you talking?  I thought trading was not allowed, my type of trading that is, as its deemed to be carrying on a business which isn't allowed within super.


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## tech/a (14 December 2010)

Trembling Hand said:


> Sir O what sort off short-term trading strategy are you talking?  I thought trading was not allowed, my type of trading that is, as its deemed to be carrying on a business which isn't allowed within super.




If its not your principal means of income then could it not be seen as "investment" of funds in the Super Fund.

Investment in property is also limited to established property and you cannot take out a loan to improve the property either. You must use funds generated by the Fund (Talking SMSF).
LVR is 65% so your limited here as well.


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## Sir Osisofliver (14 December 2010)

Trembling Hand said:


> Sir O what sort off short-term trading strategy are you talking?  I thought trading was not allowed, my type of trading that is, as its deemed to be carrying on a business which isn't allowed within super.




Sorry TH - not exactly sure what it is you do. Mind you there have been some changes recently so it might be worth checking again with a tax lawyer (Which I am not). 

Plain 'ole equity system seems to work just fine.

Cheers

Sir O


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## FxTrader (14 December 2010)

Sir Osisofliver said:


> You are not comparing apples to apples. You only have one apple.



What do you want here, a detailed analysis of the equity trading and contribution profile? Could they have made more by trading on margin? Perhaps, but if anyone has all their eggs in one basket it's the property bulls you herd with.



> Superannuation in its current format for the vast majority of superannuants restricts their ability to *compound gains*. IE the example I gave you already in relation to Property in a Super Environment.  You are comparing a straight line equity growth, 1 asset growing over 30 years, compared to an exponential compounding line, multiple growing assets over 30 years. In ANY comparison over the longer term the exponential line will *vastly* outperform the straight line.



Hmm, more condescending waffle, as if I don't understand the difference between linear and exponential growth.  If the price of an equity is growing 15%/yr, is it compound or linear growth? Give me a break.



> When we retire what do we want? We want an income that is independent of our personal self exertion - a passive income stream to support us when we no longer have our employment income to support us. Your assumption is that Super is the only environment in which we can/should do this.



Not at all, what I'm saying is that super should be a component of a wealth creation strategy for a variety of reasons. 



> Since super restricts our ability to compound our gains, we need to compare our real rates of return within super, with our real rates of return outside of super. Even after tax the lack of the ability to compound our gains loses every time. Straight line versus exponential compound line.



Repeating your error that there is no componding effect of investment within super. The borrowing limitations within super does have an impact on returns if you only invest in instruments like equities where leverage requires a prohibited loan facility or where you want to pyramid into property investment by borrowing against existing (on paper) housing equity. I can leverage an investment 100:1 (or more) in and ouside of super if trading is allowed for that asset class in my investment strategy.

You seem to be an advocate of the power of OPM (the banks) - the false security of would be property millionaires. The familiar refrain, I own 10 income producing investment properties. The reality, I owe the bank 2 million dollars but in another 5 years I hope to owe the bank 10 million dollars by buying another 20.  But wait, if the property market falls 10% and/or you lose your job can you still make the mortgage payments? Do you sell into a declining market?



> The only time this is beaten within super is when we use a system that internally compounds. IE a short-term trading strategy. It's only then that the taxation benefits within super outweigh the taxation detriment outside super.



Sigh, more nonsense.



> Australia is not China, UK, or Mongolia either. Your comparisons between us and the U.S. are of _limited_ use. It's like me saying don't invest in the Australian share market over the last 30 years because of what's happened in Japan's share market.



We exist in a global economy, do you not understand the implications of this.  Do you think Australia would prosper without a robust Chinese economy? 



> I can stack your father's example with plenty of opposing examples. What now? You're taking a single data point and drawing a conclusion from it and emotionally investing significance.



Actually, my father's situation is mirrored by *millions* of Americans (outnumbering the entire Australian population actually). Worse yet, many have been forced out of their homes and survive only on gov't subsidy. At least he has a pension and interest income to survive on. Many of these hapless souls thought as you do, property is a reliable wealth creation vehicle. It's actually a confidence game and the game is up in the U.S., Ireland, England etc. Of course Aus will always be immune to such a shock.  LOL



> Which means we use risk management techniques to control our losses...



Really, and just how do those geared up property investors risk manage their way out of another GFC event.  Hang on to those investment properties for dear life and wait for an upturn or sell them into a declining market and hope for a decent price that covers your loan payments for a time.

There is a key difference between the U.S. mortgage market and ours.  In the U.S. most of the housing loans were non-recourse, so if you can't make the payments you leave the keys on the doorstep and walk away. The bank gets the property and you lose the loan and your credit rating.

In Aus, no such luck. You can leave the keys behind but the bank has legal recourse to recover losses against your assets. So a significant downturn here is even more potentially devastating to the "I own 10 investment properties" crowd.


----------



## Sir Osisofliver (14 December 2010)

FxTrader said:


> What do you want here, a detailed analysis of the equity trading and contribution profile? Could they have made more by trading on margin? Perhaps, but if anyone has all their eggs in one basket it's the property bulls you herd with.




What I'd really like is for you to stop holding up irrelevant bits of data as important to try and bolster your debate. First you talk about a buy and hold portfolio of stock within super and I'm pointing out that the data is only useful if you can compare to data *outside* super, and then for some reason I can't fathom you introduce both trading and a different asset class to try to obfuscate my point that without that comparison you're not making any useful statement. What's hard to understand here?



> Hmm, more condescending waffle, as if I don't understand the difference between linear and exponential growth.  If the price of an equity is growing 15%/yr, is it compound or linear growth? Give me a break.




You did it again! One data point doesn't have any meaningful way to compare it to another. I don't know if your mythical data point of 15% is compound or linear growth - because you only have one data point. I don't know if your 15% was within super with no gearing, within super and with gearing, outside super with no gearing or outside super with gearing.  Get it? 







> Not at all, what I'm saying is that super should be a component of a wealth creation strategy for a variety of reasons.



 So what, are we just differing as to size then?  You think it should be a major part of wealth creation? I think it should be a minor part of wealth creation because of the difficulties involved? 







> Repeating your error that there is no compounding effect of investment within super. The borrowing limitations within super does have an impact on returns if you only invest in instruments like equities where leverage requires a prohibited loan facility or where you want to pyramid into property investment by borrowing against existing (on paper) housing equity. I can leverage an investment 100:1 (or more) in and ouside of super if trading is allowed for that asset class in my investment strategy.




This isn't about you FX. I've already said that Super is a FABULOUS investment vehicle for a trader. YOU are a trader, but you FX, are *not* the OP. The vast majority of investors wouldn't know how to use that level of gearing. To achieve a geared approach they need to do so through *flexible* gearing arrangements with appropriate risk management and the gearing arrangements in super are restrictive and require a level of expertise that is outside the capability of the majority of investors. You said it yourself _"I would never recommend a novice trade such instruments but thanks for the silly rhetorical question anyway." _


> You seem to be an advocate of the power of OPM (the banks) - the false security of would be property millionaires. The familiar refrain, I own 10 income producing investment properties. The reality, I owe the bank 2 million dollars but in another 5 years I hope to owe the bank 10 million dollars by buying another 20.  But wait, if the property market falls 10% and/or you lose your job can you still make the mortgage payments? Do you sell into a declining market?




Soo FX is risk management only applied to equities? If the bank says you have the equity to buy a $500,000 house, is that the size of the house you buy? Do you gear yourself to the maximum you possibly can or do you use a reserve to protect the integrity of the asset? You never did answer my question as to what your view was if the properties were *positively* geared. If the market falls 10% and you lose your job and the rent you receive covers all the interest payments and more IE a passive income stream that can support you when you are not working....then what? 







> We exist in a global economy, do you not understand the implications of this.  Do you think Australia would prosper without a robust Chinese economy?




Actually I wrote a big long thing here and then decided I'd prefer to have you explain it to me, but here's a hint. Why didn't we descend into economic chaos when twenty years ago big bad China was exporting minerals rather than importing them?







> Actually, my father's situation is mirrored by *millions* of Americans (outnumbering the entire Australian population actually). Worse yet, many have been forced out of their homes and survive only on gov't subsidy. At least he has a pension and interest income to survive on. Many of these hapless souls thought as you do, property is a reliable wealth creation vehicle. It's actually a confidence game and the game is up in the U.S., Ireland, England etc. Of course Aus will always be immune to such a shock.  LOL



 You seem to think I've said somewhere that property always goes up, and will continue to do so ad infinitum. I haven't said that. Can Australia have a property bubble? Of course no country is immune. So why didn't every American who had a mortgage lose their house? What makes them so special? Could it be that they were not *overgeared*? That they used risk management techniques on their property portfolio? Nah I bet they were just lucky. So how many people fit into that category? More than the entire population of Australia? 







> Really, and just how do those geared up property investors risk manage their way out of another GFC event.  Hang on to those investment properties for dear life and wait for an upturn or sell them into a declining market and hope for a decent price that covers your loan payments for a time.




Why sell? My ideal holding period for any quality asset be that property or shares is *forever.* There has to be a damn good reason for me to sell a core equity position or a piece of property. If it's earning me more money than it costs me, what's my motivation for selling the asset? None of my employment income goes towards paying my mortgages, so losing my job doesn't impact me. 







> There is a key difference between the U.S. mortgage market and ours.  In the U.S. most of the housing loans were non-recourse, so if you can't make the payments you leave the keys on the doorstep and walk away. The bank gets the property and you lose the loan and your credit rating.
> 
> In Aus, no such luck. You can leave the keys behind but the bank has legal recourse to recover losses against your assets. So a significant downturn here is even more potentially devastating to the "I own 10 investment properties" crowd.




Oh yes I'm well aware that U.S. has non-recourse loans and we don't I'm sublimely sanguine about it.

Cheers 

Sir O


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## FxTrader (14 December 2010)

Sir Osisofliver said:


> ... I'm pointing out that the data is only useful if you can compare to data *outside* super...



How would you like to compare Sir O? If I buy stock ABC inside or outside of super and hold it for 5 years (discounting use of margin lending outside or tax benefits inside super) what other factors exactly do you suggest would affect a significant difference in the rate of return between them? If you want complex modelling based on variable use of margin vs the tax benefit of holding then selling the stock within the fund vs taking a loss on a margined position and one that's not margined etc. you must be joking.



> You did it again! One data point doesn't have any meaningful way to compare it to another. I don't know if your mythical data point of 15% is compound or linear growth - because you only have one data point. I don't know if your 15% was within super with no gearing, within super and with gearing, outside super with no gearing or outside super with gearing.  Get it?  So what, are we just differing as to size then?



Let me simplify it for you because you missed the point.  Assume no gearing or tax impacts.  If stock ABC held in a SMSF goes up 15% in year 1, 10% in year 2 and 20% in year 3 what is the compound rate of return? Not linear is it, what does the equity curve look like to you, a straight line?



> You think it should be a major part of wealth creation? I think it should be a minor part of wealth creation because of the difficulties involved?



Your putting words in my mouth. How major or minor a part of one's investment portfolio super investment should comprise depends on individual circumstances. However, for a significant number of people, it's the only way to compel them to save toward retirement in a disciplined way. Those of us who know how to use super to maximum advantage find it's benefits significant indeed.



> This isn't about you FX. I've already said that Super is a FABULOUS investment vehicle for a trader. YOU are a trader, but you FX, are *not* the OP. The vast majority of investors wouldn't know how to use that level of gearing. To achieve a geared approach they need to do so through *flexible* gearing arrangements with appropriate risk management and the gearing arrangements in super are restrictive and require a level of expertise that is outside the capability of the majority of investors.



A puzzling argument. The calculated use of flexible gearing, proper risk management, position sizing and the like are indeed the province of experienced, educated investors not the OP. It makes little difference then whether such investors invest inside or outside of super except that at least super imposes some saving and investment discipline on them and they are far less likely to go broke leveraging to the hilt.



> Soo FX is risk management only applied to equities? If the bank says you have the equity to buy a $500,000 house, is that the size of the house you buy? Do you gear yourself to the maximum you possibly can or do you use a reserve to protect the integrity of the asset



You trivialize an important issue here. Many property spruikers encourage just that, pyramid into your next property as soon and there is sufficient equity to do so. And many home buyers these days are compelled to stretch their finances to the limit to get that bricks a mortar because they fear (as did many prior to the bust in the U.S.) that if the don't get in now they will be priced out of the market.



> So why didn't every American who had a mortgage lose their house? What makes them so special? Could it be that they were not *overgeared*? That they used risk management techniques on their property portfolio?



Oh yes, many were responsible enough to not over leverage and now their net worth has been severely impacted in most cases. Your so called risk management is nothing more than living within one's means. But why be responsible when you can get a cheap nothing down NINJA loan from a shark and invest into property to make a short term profit on the always rising property market? No skin in the game required, just walk away if it all goes wrong.  Literally millions of property loans are in arrears and the banks are at breaking point.

Can a property crash happen here like it has in other developed countries. Nah, Australia is immue, we are the exception. Our property market is one of the most expensive in the world for good reason, we build em better 



> Why sell? My ideal holding period for any quality asset be that property or shares is *forever.* There has to be a damn good reason for me to sell a core equity position or a piece of property.



Well that sums our very different views on investing then.  My holding period for any asset (long or short) depends on price outlook, price action/direction and external factors that may have a material impact.  Buy, hold and hope is not an investment strategy and delivers inferior returns. Good luck with it, you will need it.


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## ParleVouFrancois (14 December 2010)

If you look at the profits of housing construction companies, I conclude that the rising house prices are from the increasing *land* values instead of how we build houses etc, otherwise construction companies would be the new bubble in the ASX.

PVF.


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## Julia (14 December 2010)

FxTrader said:


> True enough, but I'm not advocating for expert status, just financial/investment literacy. Sure you can pay "experts" to manage your portfolio but my interaction with them indicates they are only experts in products they advocate that generate a commission. No doubt Storm clients thought they were dealing with experts, but then if you're not financially literate there are Storm like entities all over the place happy to separate the naive and poorly informed from their money.



Excellent point.   We should be encouraging everyone to acquire a reasonable level of financial literacy, if only that they may be aware when some fancypants so called adviser is trying to rip them off.



Sir Osisofliver said:


> Cool...compared to what?  You see without a comparison your statement is... meaningless. I know someone who deposited $1,000 into a 30 year term deposit and ended up with over a million dollars. Was that a good idea?  You can't answer that question because you have no idea of what rate of return it could be compared to. Similarly your statement that you know people who have accumulated significant sums in super through buy and hold strategies has no basis of comparison. You are not comparing apples to apples. You only have one apple.



With respect, Sir O, you are indulging in a bit of sophistry here.
FX, as I did earlier, was I think simply referring to your earlier suggestion that someone with Super in pension phase would, to be successful, need to be a 'trader'.
I don't want to put words in FX's mouth, but I think he was simply pointing out that various other strategies are equally valid - and likely more practical - in pension phase.



> Yeah yeah the sky is falling I get it we're all going to end up eating each other when the world ends. You're not doing your side of the debate any good by fearmongering.



There is a certain irony here.  What are you doing yourself, Sir O, if not fearmongering about Super?
I agree with your much earlier point that it's probably not wise to channel every spare dollar into super before the age of about 50, largely because of some of the reasons you have offered, but more particularly because of the risk that governments will essentially take over Super and dictate how it may be used.

That said, I think there's little risk of this happening for those close to retirement now, so your vehement opposition to Super in every way seems to me to be the sort of fearmongering you are so deriding FX for.





tech/a said:


> Mind you I have one rule (for myself) with Money matters.
> If I cant control it then I dont get involved.



Agree absolutely.  My golden rule also.
Mind you, it was not always thus.  I have been fleeced before finally coming to my senses.




FxTrader said:


> You're putting words in my mouth. How major or minor a part of one's investment portfolio super investment should comprise depends on individual circumstances. However, for a significant number of people, it's the only way to compel them to save toward retirement in a disciplined way.



Yes, agree again.
Sir O. This is a dispute you and I have had many times.  You are so utterly opposed to Super that you seem not to recognise the truth of what FX says above.



> A puzzling and self contradicting argument. The calculated use of flexible gearing, proper risk management, position sizing and the like are the province of experienced, educated investors not the OP.



Quite so.  As I said several posts ago, the two of you arguing between yourselves is doing little to help the OP who is probably feeling more daunted than ever.

It's a bit sad when the needs of the questioner are displaced by the ego driven quarrels of people wanting to score points off each other.



> My holding period for any asset (long or short) depends on price outlook, price action/direction and external factors that may have a material impact.  .



Makes perfect sense to me.


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## FxTrader (15 December 2010)

Julia said:


> Quite so.  As I said several posts ago, the two of you arguing between yourselves is doing little to help the OP who is probably feeling more daunted than ever.
> 
> It's a bit sad when the needs of the questioner are displaced by the ego driven quarrels of people wanting to score points off each other.



Fair enough critique. When someone new to investing asks what they should do, my first response is always improve your financial literacy before you do anything. That way you can more easlily spot the motives, agendas and biases of the Sir O types out there selling advice.

I stand by my initial declaration, telling a high earning 40yr old new to investing not to invest money in super, then misrepresent it's benefits, but look instead into "structures" and "gearing" is irresponsible and biased posturing. My main agenda is to assist people with information on where they should start their investment journey. I will let other's discern what Sir Os agenda is.

As for egos, agree, the debate with Sir O has gone far enough. The focus has moved to far from the original subject.


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