Asset Allocation

[Jesse Livermore]

Just wanted to ask members how they diversify their financial assets? what percentage of your total financial resources do you devote to trading, how much is locked up property or businesses, superannuation and cash?
I read that Warren Buffett would only buy a property when it made up 10% of total worth, the other 90% was invested into shares.

 

[Stan 101]

hi this is my situation.

Property 48%
shares 35%
cash 8.5%
super 8.5%

geared at 34%. I'm very comforatable with that.


Cheers,

 

[DTM]

Property overseas in NZ 43% with 3.5% gearing
Property in Australia geared 44% with 50% gearing
Cash 8%
Super 4%

Not planned, just happened that way.

 

[tech/a]

Business 18%
Property 65% (This fluctuates)
Shares 10% (so does this).
Other 7%

 

[Jesse Livermore]

Question:

If YOU were 18 and $100,000.00 cash how would it would it be allocated?

Cash (for basics - books/food/clothing/entertainment...): ?%
Shares (trading for income): ?%
Shares (Long -Term Investment): ?%
Studio Apartment (Long - Term Investment): ?%

I am looking to sort this all out within the next 6 months before I turn 19.

An example of the type of property I would like to purchase can be seen at the link below (exactly the same, minus the unnatractive interior!):
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2004898353&n=#

 

[Jesse Livermore]

An example of the type of property I would like to purchase can be seen at the link below (exactly the same, minus the unnatractive interior!):
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2004898353&n=#

This one is better but isn't in potts point .

http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2004897672&n=

 

[mime]

If you had $100K you could gear maybe 30% or 40% into a commerical property. Then work part time.

 

[Fleeta]

Jesse,

The world is at your feet, do what you most enjoy with it, for some people its property, for some its shares, for some its cigarettes and alcohol. Personally, I think I would have much more fun trading it all on the sharemarket. Buy some LICs to be defensive and trade the rest. If you get lucky, you might double it in a year and then buy a much better apartment. Just my thoughts...remember that the property market is still pretty hot and I wouldn't fall for the trap of thinking you will miss out on a great buy now. The prices will still be the same in a year or 2's time...that's what I think anyway.

Or as the billboards say here in Melbourne...want a bigger house an a smaller mortgage...move to Adelaide! Yeah, because thats about all it has going for it.

 

[Jesse Livermore]

The world is at your feet, do what you most enjoy with it.

This is the best advice yet! Thanks Fleeta

What I want to do is purchase a studio apartment in the Sydney harbourside suburb of Potts Point for less than $250,000.00, not primarlily as an investment but a place to live. I currently rent a tiny apartment in the same suburb that's not even 15 sq m, but is really cheap. I wanted to put $50-$75K down for a deposit. up to $18,500 into long - term shares (like a self managed fund) and open a $5-$7.5K (to start with) account with commsec to trade the all ords as an end-of-day trader using a combination of technical, fundemental and quantitative analysis with a stringent risk-management policy to find undervalued and growth situations that I can capitalise on in the short and long-term? I would compound a % of my profits in both the apartment and longer-term shares.

When people hear that I want to trade they say don't your too young and all other sorts of crap, but I say I can't avoid something I am intensley passionate about that would be living half a life!

 

[It's Snake Pliskin]

When people hear that I want to trade they say don't your too young and all other sorts of crap,

Don't get too caught up in the property hype. If you are after an investment property do your homework seriously because there are too many problems and headaches to deal with.You only sit on wealth that is created over the long term and just like shares it can go down (though slower). I managed many apartments in Sydney and found the experience to be a total HEADACHE. Rents don't always go up, properties need repairs, and and oversupply pushes down values. Pick the everbody wants areas or a new and up and coming area, thats where you can realise wealth creation.

With regards to trading - DO IT! If you have good money management strategies and treat it like a business, I'm sure you'll do well. Just don't expect too much from the market though.

 

[mime]

I'm studying RE at the moment. I don't think you should buy a studio rather rent it as the additional cost like taxes, body corp, rates ect will really hurt for such a cheap property(250K in syd isn't much) and it probably wont appreciate for a few years. Hope it helps.

 

[Smurf1976]

Agree totally that age is not a problem. In my case it was energy / economics / politics but if trading is your thing then GO FOR IT.

BUT I really do think that now isn't the time to be investing in residential property. I know this is a contentious point but at least in some places prices are falling and in the rest it's generally slowed right down. (Radio report yesterday morning said Hobart down 11% and there have been plenty of TV / newspaper reports of falling prices in Sydney).

Best thing to do in my opinion is:

*Rent

*Have a "house buying fund" that is invested safely (cash). You are aiming for a lower property price rather than appreciation of your deposit capital.

*Before buying any property I suggest that you take a very good look at Neil Jenman's stuff - www.jenman.com.au and maybe go to one of his free 3 hour talks if he is still doing them (been to one, very useful and there is NO pressure to buy or pay for anything (unlike others). At least read the book "Real Estate Mistakes" - the negotiation tips should save you big $ quite easily.

*Invest the rest but in the present market environment trading makes far more sense to me than managed funds. If I wanted managed funds then I would go for an ETF that's easy to get in/out of rather than a traditional managed fund.

 

[Jesse Livermore]

I just wanted to respond smurf1976 and mime.

There are three reasons that I wanted to by a property:

1. As an Investment
I understand when you say property might not be a outstanding investment at this point in time, however it isn't the main reason for wanting to purchase one.

2. To Live in
I currently live in a studio apartment which is way too small (less than 15 sq m). I went to a property inspection yesterday just out of curiousity and was in awe of how nice the studio was, it was double the size of my rented one with far better polished timber floors and in one of the best art-deco buldings on Macleay St, Potts Point with glimpses of elizabeth bay/rushcutters bay through the french doors from the juliette balcony
http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2004773927&n=

3. To avoid spending and force me to rely on my own talents to provide income
I believe that locking the majority of my money up into a studio would force me to rely on my own talents to provide an income. Having this money has made me quite lazy as far as working is concerned.

 

[Jesse Livermore]

How much do studio apartments in Potts Point, Sydney appreciate anyway? 4,5,6,7%pa...?

 

[keebab]

Hey Jesse

I think you are on the right track with your thinking. I am in a similar situation looking at the same options. I was looking at 1 & 2 Bedroom apartments in Sydney (Chippendale, Surry Hills and Newtown). My borrowing capacity is around 275k (I can't get too much more because I am self employed). My thoughts were to take advantage of the 1st Homeowners grant, get a place possibly with another room to rent out to assist with repayments. Your property must be larger than 50sqm or you won't be able to get mortgage insurance. Generally lenders want you to get a 1 or 2 bedder as opposed to a studio because they are safer options.

You are absolutely right in your thinking that a property is a forced saving vehicle. It forces you to create equity. Your apartment will appreciate at a slower rate than a residential house but it will appreciate.

Let me know how things go. I would be interested in hearing more.

Cheers

Mick

 

[mime]

How much do studio apartments in Potts Point, Sydney appreciate anyway? 4,5,6,7%pa...?

I think you should put -ive signs in front of those numbers.

I'll give my opinion if you want to buy property. Use the money to buy a highly +ive cashflow property('s) between 7% and 10%(usually commerical) pa and rent the appartment.

I think you should take the time to learn about this stuff before you buy any property because in the current conditions ignorence can be very expensive.

 

[tech/a]

I'll give my opinion if you want to buy property. Use the money to buy a highly +ive cashflow property('s) between 7% and 10%(usually commerical) pa and rent the appartment.

I think you should take the time to learn about this stuff before you buy any property because in the current conditions ignorence can be very expensive.

I agree with Mime here.
Unfortunately + geared properties are now only found in commercial and this is a whole new game to residential.Worth the effort to understand.

If its not producing income its bad debt.
The tax advatages of owning property are enormous.
(Buy a lawnmower and claim it etc),cant do that with your own home.

Find a good accountant who understands commercial R/E investment.Youll be glad you did.

There are still ways of making good $$$s in realestate unfortunately what you have in mind isnt one of the better ways of doing it.In 2000 yes now NO.

 

[krisbarry]

Or as the billboards say here in Melbourne...want a bigger house an a smaller mortgage...move to Adelaide! Yeah, because thats about all it has going for it.

Wouldn't bother moving to Adelaide either, house prices have sky-rocketed here too. So if you think you can get a cheap house, forget it. Go RBA and raise those rates!!!

BTW Adelaide is a a great place to live. (the 20 minute city)

City, Hills and Beaches all within a 20 minute drive.

 

[rocker]

Well said Krisbarry,
No amount of money could make me want to live in Melbourne or Sydney. Great to visit but always good to return to little old Adelaide. But shhhh we don't want everyone to find out what a good life we have here.

 

[mime]

I want to see a property crash too. It'll be a struggle to get into the market at this time. I hope Bob Car keeps up those great taxes on RE