Cash

[MrBurns]

I'm inclined to agree

 

[prawn_86]

From Infochoice today. But, Burnsie, if you continue to sit on your hands, you will continue to miss opportunities as rates continue to fall. Only a few months ago you could have got over 6%.

It's still only peanuts Julia, I need to make money and that means property or shares........

Since you have been waiting there has been a lot of opportunity cost. What % pa do you feel you need to achieve? In a low IR environment you now need to take on more risk to get the same returns possible a few years ago

It sounds to me as though you want a low risk investment with a high return, and dont want to research it, think about it, or learn much about it (dont we all?)

 

[MrBurns]

No not that at all I've taken advice before but shares have never been good to me except when I was in on float once years ago
I was waiting for property opportunities but I don't think the climate is right
I think park a bit in TLS is probably the way to go

 

[Julia]

Nothing in the market is risk free of course. But we have spoken of TLS. That's one risk I am willing to take over a term deposit.

Mr Burns is 'inclined to agree'. However, he has been humming and hahing over TLS for months. Ditto over taking advantage of even short term quite decent at call rates for cash.

Prawn is 100% correct when he talks about opportunity cost.

Since you have been waiting there has been a lot of opportunity cost. What % pa do you feel you need to achieve? In a low IR environment you now need to take on more risk to get the same returns possible a few years ago

It sounds to me as though you want a low risk investment with a high return, and dont want to research it, think about it, or learn much about it

 

[ROE]

No not that at all I've taken advice before but shares have never been good to me except when I was in on float once years ago
I was waiting for property opportunities but I don't think the climate is right
I think park a bit in TLS is probably the way to go

Do a bit of research you can buy some small cap and midcap stock that can deliver all of the above
good yield and increasing plus capital appreciation with higher risk scale that why research is paramount.

 

[Julia]

ROE, if Mr Burns has had difficulty over many months making a decision over whether to buy such a basic stock as TLS, the likelihood of him acquiring small or mid cap, little known, stocks seems rather remote.

 

[MrBurns]

ROE, if Mr Burns has had difficulty over many months making a decision over whether to buy such a basic stock as TLS, the likelihood of him acquiring small or mid cap, little known, stocks seems rather remote.

Correct

 

[Bill M]

Hi MrBurns, I remember you talking about TLS about 12 Months ago, since then it's jumped nearly 30%. Still not a bad investment now, I hold quite a few and have been collecting those juicy dividends for many years now.

Anyhow no use crying over what could have been and better to look forward. You can still pull 5.46% from your Rabodirect account which is at call, not too bad. Sounds like it isn't enough for you, it isn't for me either so I've had to look elsewhere with higher risk too.

All my bank stocks are well up and in the green and all along they have been paying very strong dividends. I also invest quite a fair chunk of my capital in Subordinated Notes, Preference shares, Hybrids and floating rate notes. Some of these are paying up to 11% gross income. Take a look at the Hybrid Securities thread HERE, you might find that one useful. I spread my holdings over several companies to limit risk. None of mine went under during the GFC and none stopped paying distributions.

If you are not happy with 5.46% from a bank (safe and secure) then maybe property might not be for you either. Not taking capital gains or losses into consideration, the returns from a rental property only bags me around 4% net.

The only way out is taking on some risk, I don't know how comfortable you are with that. A lot of research and close reading of the prospectuses is needed too, good luck.

 

[MrBurns]

If you are not happy with 5.46% from a bank (safe and secure) then maybe property might not be for you either. Not taking capital gains or losses into consideration, the returns from a rental property only bags me around 4% net.

The only way out is taking on some risk, I don't know how comfortable you are with that. A lot of research and close reading of the prospectuses is needed too, good luck.

Thanks Bill, I was involved in a devlopment company years ago we bought buildings improved them and sold them on, thats the sort I've thing I was looking at not just passive investment.

I'll have a go toward the end of the month, I think banks and TLS probably and this time I'll just leave it there instead of reacting to market fluctuations.

 

[prawn_86]

Agree with Bill and i have mentioned hybrids to MB before, however it seems as though he wasn't willing to research them.

I think the benefits of property now with IR continuing down is leverage to a relatively low volatility asset. If i can neutrally gear a property then i can save as per usual and am no worse off, so long as that property doesn't lose value. Knock a years worth of savings off it and it is positively geared and then the income is paying off the leveraged debt. Not a great % pa retrun, as Bill says, but you have leveraged into the market

 

[MrBurns]

Agree with Bill and i have mentioned hybrids to MB before, however it seems as though he wasn't willing to research them.

As I said i'm more of a property person, buy a small office buiding, strata it into small offices, bit of paint, there you go

 

[Julia]

and am no worse off, so long as that property doesn't lose value.

And that is the relevant qualifier. The IMF are making unusually pessimistic noises about a world wide recession next year, plus - despite Mr Swan's protestations of his brilliance - the RBA is hardly dropping rates because the Australian economy is doing well.

 

[MrBurns]

And that is the relevant qualifier. The IMF are making unusually pessimistic noises about a world wide recession next year, plus - despite Mr Swan's protestations of his brilliance - the RBA is hardly dropping rates because the Australian economy is doing well.

Thats the crux of the whole dilema, there's been an axe hanging over the head of all markets for too long, watching, waiting, for direction that has substance behind it, it seems forever.

 

[prawn_86]

And that is the relevant qualifier. The IMF are making unusually pessimistic noises about a world wide recession next year, plus - despite Mr Swan's protestations of his brilliance - the RBA is hardly dropping rates because the Australian economy is doing well.

Agree, but if i am buying a property for around 2-250k i can find ones with a PE under 20, which i feel is pretty good for property. It is also only 3.9 times the median income so is still 'affordable' so to speak. If prices are going to drop it will be the houses in the middle band of suburbs that are already priced >6x income imo

Or i could be wrong and there could be a huge crash, who knows?

 

[MrBurns]

Agree, but if i am buying a property for around 2-250k i can find ones with a PE under 20, which i feel is pretty good for property. It is also only 3.9 times the median income so is still 'affordable' so to speak. If prices are going to drop it will be the houses in the middle band of suburbs that are already priced >6x income imo

Or i could be wrong and there could be a huge crash, who knows?

Thats the problem there could be a huge crash, everyone says we're overpriced, we aren't immune to problems and the markets been rising rapidly for ages so there should be a correction, some say it's already here, slow motion, prices are down over the past 12 months.
The rental market here in Melb is not strong last time I got feedback there were thousands of vacancies.
All I can say is if you buy property to hold make sure you can hold it through all down scenerios as in the end it will be ok, but you have to be able to get through what might be on it's way.

 

[Klogg]

Agree, but if i am buying a property for around 2-250k i can find ones with a PE under 20, which i feel is pretty good for property. It is also only 3.9 times the median income so is still 'affordable' so to speak. If prices are going to drop it will be the houses in the middle band of suburbs that are already priced >6x income imo

Or i could be wrong and there could be a huge crash, who knows?

If the 'earnings' for a property is it's rent, it makes a lousy investment...
(You'd struggle to beat a P/E of 15 for residential property!)

 

[prawn_86]

If the 'earnings' for a property is it's rent, it makes a lousy investment...

Why is that? If it is neutrally geared?

 

[McLovin]

If the 'earnings' for a property is it's rent, it makes a lousy investment...
(You'd struggle to beat a P/E of 15 for residential property!)

Shouldn't the rent be thought of as revenue, or are we going back to that glorious tech-boom measurement of "earnings before expenses"? yes that's what they were calling revenue at one stage!

I agree though, earnings on property look pretty lousy.

 

[prawn_86]

Shouldn't the rent be thought of as revenue, or are we going back to that glorious tech-boom measurement of "earnings before expenses"? yes that's what they were calling revenue at one stage!

I agree though, earnings on property look pretty lousy.

Yeh i am just throwing a few different models together and trying to see if it makes sense or not. Cash is no longer a viable option for us with IR decreasing and being young, so looking for the next investment step.

I can find properties with a gross yeild of 7-8%, so after costs it is pretty much neutrally geared

 

[McLovin]

I can find properties with a gross yeild of 7-8%, so after costs it is pretty much neutrally geared

What sort of net yield would you have after expenses + tax?