Property vs. Stocks

[obiwan]

well there is endless chatter about this. Ask people who have money how they made their first 5mill and they will generally say something like :

- I bought a rundown property then sold it, and then I did it 20 more times and then I got greedy and went into shopping malls etc
- I ran a business and then I develloped a factory or office or something and then my business got bigger etc.

None of them I have met said "sonny jim, I made my first couple mill by buying stocks and trading or picking them real good". Why I wondered when so many people are attracted to the stockmarket likes moths to a light. why, why, why...

Well I think it has a lot to do with the fact that stocks in the last 50 years have been a crap risk adjusted return (RAR) investment. Now I love the stockmarket, love it to death, but if you're trying to scratch up your fortune, it is probably not a great place to be for very long because you cannot leverage adequately or if you do, tend to get blown out over long term periods (10+ years).

Compare sydney house in the last 10 years (14%pa) with XAO (12%pa). Be pesimistic and assume the housing market is frothy and this time series is not representative. Say the property market will be stagnant for the next 4 years.

We have : Syd residential - 10%pa
XAO - 14%pa
Over the 14 year time period.

Standard deviation of returns : Syd residential - 4.26%
XAO - 12%

Whoa ! The RAR for XAO sucks ! Would you be more likely to survive being levered 70% to the allords for a decade (with margin calls etc) or to sydney residential. I think the latter is much more probable.

So I think the variance adjusted return is much better for property, and that is why people can lever successfully and far more initial millions have been made here than in picking stocks (as most stock pickers do worse than the index, and even the index is too volatile to lever very much anyway).

I think stocks are great to have a look around before wading back into property. But it is only a sideline and a distraction. I reckon the big bickies are really in property for a small to medium investor like me .

 

[The Barbarian Investor]

Re: property vs stocks

Hi Obiwan

"GREAT" avatar by the way..

I believe in a "balanced" approach and have both Investment Properties and now again hold some stocks, as i come to grips and learn more about the market, i will invest more.

I prefer property, probaly because i understand it more, however, i'm enjoying the learning experience here after being out of the stock market for some years.

I'm looking forward to learning more about the value of options also..and enjoying posts from people who have been in either market for years..

 

[crashy]

Re: property vs stocks

BRW rich list

Not ONE of the top 200 made their fortune from property.........all from shares.

 

[tech/a]

Re: property vs stocks

Obi.

You have a very narrow veiw of both Property and Trading.

When talking Mr and Mrs Average even above average.

People invest in property simply because they UNDERSTAND it.
Mum and Dad understood it and lets face it according to "Everyone" you CANT lose buying realestate!!
Secondly banks love it (Property) its tangable bricks and mortar and they will lend up to 95% and if you know what your doing 110%-------thats leverage.
All of a sudden they understand/stood "EQUITY MATE"
Any idiot can be Property Savvy ask any idiot and youll know what I mean!

But property Millionaires are still few and far between.Simply becuase most investors havent got the Kahunas to borrow $2 to $5 Mill-they simply dont understand and comprehend the adage-----Money Makes Money---REAL MONEY MAKES REAL MONEY.
Most will have one or at the very most 2 investment properties and feel all wet and gooey.Particularly when they sell them and realise their $200K which will be worth around 70K in 10 yrs time let alone retirement.

While Mr and Mrs Average are out of the market in total fear of losing their $200K the Pros are turning round wheels into square ones----- the difference is the Pros are using their $200K+(Continuously turning it into $400K and on and on.) the ametuers are ferreting it away and will be all wet and gooey for 10 yrs when it will be either all spent or worth very little in real terms.

SHAREMARKET.
Simply the average idiot doesnt understand it.Infact he knows he doesnt understand it,Hes tried it and lost!!
Further more he has attended Seminars and bought software and purchased trading methods from (Youd think so anyway) people who HAVE made small fortunes in the market(well thats what they said at the seminar).
Theyve "Heard" fantastic stories of enormous wealth--------NEVER MET OR VERIFIED THE GENIUS but hey there out there------Arnet they??

Is Mr and MR Average going to trade the $100s of $1000s they borrowed from the bank for property on Trading---------NO WAY IN GODS EARTH!!

The pros however understand that there will ALWAYS be stocks that outperform the index and they find them and they trade with $100s of $1000s.
They UNDERSTAND WHAT makes them profitable and to them its MILLIONS of miles better than Property------Why???? I can liquidate $100-200K in 5 mins!!!!!
I have no staff-------I can implement action in minutes.


So once you understand the REAL MEANING of MONEY MAKES MONEY go the final step.

You want to guarentee financial security for the rest of your life

Then look at EVERY SINGLE INVESTMENT you make with PASSIVE INCOME in mind,Business,Property,Trading. Now CREATE IT! Youll first need the KAHUNAS.
(Un encumbered).

Oh yeh I made my $$s from Property but use it everywhere.


A jedi you may not yet be!

 

[The Barbarian Investor]

property vs stocks (Ding-Ding!!)

Yeh, but what do you "Really" think Techa :22_yikes:

Enjoying the thread and your insights guys

Keep it up..

 

[obiwan]

Re: property vs stocks

crashy, crashy, crashy, these people in the top 200 didn't make their money by trading shares or picking stocks... they did it by creating businesses, growing them and floating bits of them back to the public. Did frank lowy make his first 5 mill from *ahem* trading ? kerry packer ? Bill gates ? To make 5 mill you need to know how to manage your money. To make A LOT of money you need to set up a business (I exclude here Warren Buffet who is a freak of nature).

tech, my portfolio is always at least 10% in shares, but the profits from the sharemarket are small compared to what I have achieved in property, MAINLY BECAUSE YOU CANNOT SAFELY GEAR IT AS MUCH. Now the liquidity thing, everyone falls in love with that initially but it doesn't create wealth.

If you have made some bucks from property congrats, but there's also a million ways to lose some, particularly in the share/derivatives market. This is the cycle of the speculator :

1. trades equity, with no idea
2. wonders, how he can make this work, gets educated, tries to find a system
3. Realises running money is more efficient, looks into this
4. Realises the structure of the speculative landscape
- small investors and traders at the bottom (least capitalised, least informed, least resources)
- high net worth investors (fleeced for commissions)
- the firms : realises what these are :
IB's, hedge funds, mutual/super funds, prop trading entities...
- All these firms have a group of people doing systems analysis (quants) - like you are but there are teams of them setting up models and trading systems that it is not possible for one person to do. Where do you think your monte carlo sims came from ?? the quants took this long before you had heard of it, then it got commoditised, and now it filters down and gets sold to individual traders for a small fee.
- Traders - they get the best traders, send them off to do an unnecessary postgraduate degree in finance and pay them a salary and commission.
- Middle orifice - they have a dedicated risk management office to keep & monitor risklimits daily, you have just you.
- Access to cheaper finance, information flow and execution than any individual retail traders

The market is competitive, you are feeding off the dregs of what these guys leave behind. And even they don't live off their trading. They have less risky sources of income : ripping off the end buyer (eg retail consumers, farmers), arbitrage, filling volumes for the mutual/super funds with only a small portion of their profit from discretionary trading.

And of course the brokerages, information providers etc pedal this marketting rubbish about how everyone should trade their own account and aspire to be a trader. It's a business techa, you are a consumer in this although you don't realise it yet.

 

[tech/a]

Re: property vs stocks

tech, my portfolio is always at least 10% in shares, but the profits from the sharemarket are small compared to what I have achieved in property,

Sure Ill guarentee your using less than 10% of total invested funds including those from lenders-----Ill also guarentee your not making a consistant profit of greater than 10%P/A if you were then youd be crazy not allocating more funds both personal and borrowed.

MAINLY BECAUSE YOU CANNOT SAFELY GEAR IT AS MUCH.

RUBBISH Ive NEVER been Margin called in my life!!!

Now the liquidity thing, everyone falls in love with that initially but it doesn't create wealth.

It sure doesnt but hell it gives you the flexability of a cat! Plus greater opportunity.Howd you like to be able to buy a property in 2 mins and sell it again in a wek for 10% gain in another 2 mins and do it all again in the next 2 mins???
Think OBI Think.

If you have made some bucks from property congrats, but there's also a million ways to lose some, particularly in the share/derivatives market. This is the cycle of the speculator :

Be aware of the What ifs but dont become crippled by them.

1. trades equity, with no idea
2. wonders, how he can make this work, gets educated, tries to find a system
3. Realises running money is more efficient, looks into this
4. Realises the structure of the speculative landscape
- small investors and traders at the bottom (least capitalised, least informed, least resources)
- high net worth investors (fleeced for commissions)
- the firms : realises what these are :
IB's, hedge funds, mutual/super funds, prop trading entities...
- All these firms have a group of people doing systems analysis (quants) - like you are but there are teams of them setting up models and trading systems that it is not possible for one person to do. Where do you think your monte carlo sims came from ?? the quants took this long before you had heard of it, then it got commoditised, and now it filters down and gets sold to individual traders for a small fee.
- Traders - they get the best traders, send them off to do an unnecessary postgraduate degree in finance and pay them a salary and commission.
- Middle orifice - they have a dedicated risk management office to keep & monitor risklimits daily, you have just you.
- Access to cheaper finance, information flow and execution than any individual retail traders

Funds react with the speed of an elephant on Valium,buy the time they discuss and red paper the findings the likes of me have been and long gone.

The market is competitive, you are feeding off the dregs of what these guys leave behind. And even they don't live off their trading. They have less risky sources of income : ripping off the end buyer (eg retail consumers, farmers), arbitrage, filling volumes for the mutual/super funds with only a small portion of their profit from discretionary trading.

True but I dont live off my trading either----reportedly only around 1-3% are capable and do.

And of course the brokerages, information providers etc pedal this marketting rubbish about how everyone should trade their own account and aspire to be a trader. It's a business techa, you are a consumer in this although you don't realise it yet.

Hahaha I realise it alright I just use it to my advantage----------Its not 100% doom and gloom.
Just because your not achieving returns well beyond the index doesnt mean it cant be done.

TRUST the FORCE OBI

tech/a

 

[wayneL]

Re: property vs stocks

Heheheheheeheh!

I've typed at least three posts in response to Obi and deleted every one!

Why? Because I can't seem to do it without involving insults or at least satire...and thats been getting me into a lot of trouble over at propertyinvesting.com!

So I'm glad you're doing a great job here Tech, keep it up!! ROFL

Particularly this:

<<Funds react with the speed of an elephant on Valium,buy the time they discuss and red paper the findings the likes of me have been and long gone.>>

Hehehe, could not have said it any better!

Cheers

 

[positivecashflow]

Re: property vs stocks

Why? Because I can't seem to do it without involving insults or at least satire...and thats been getting me into a lot of trouble over at propertyinvesting.com!

Don't worry wayneL, its not you thats getting into trouble mate.

 

[stefan]

Re: property vs stocks

obi,
You've opened so many threads it's a bit hard to follow. I'd say you're posting the same things over and over again but in the end I still can't find what on earth is making you so confident that funds will outperform the individual investor and as far as I can see I'm not the only one searching your postings for the clue.

Tech has put it mildly and after you came up with obsession and addiction to describe somebody who's trading on his own, I was for a moment confused. What exactly are you trying to tell us?

You are seriously claiming that investing in property is less risky. God bless you. People have made money in property simply because they didn't have to think. Prices just went up and up. Instead of doing something intelligent with the money they actually started lending against the equity in their property buying boats, cars, holidays and other longterm investments...

I know you're claiming to be more intelligent than those guys, but then you should actually assume that not all individual investors are nuts, addicted or obsessed.

I don't know where this is going but somehow I think it's going around in circles.

I'm off trading the market.

Happy trading

Stefan

 

[The Mortgage Adviser]

Re: property vs stocks

Obiwan,

I am with you. All the richest people in the world all have heavily weighted property investments in their portfolio.

It seems you get attacked in here if you do not preach shares!

Seems like fun.

 

[wayneL]

Re: property vs stocks

Obiwan,

I am with you. All the richest people in the world all have heavily weighted property investments in their portfolio.

It seems you get attacked in here if you do not preach shares!

Seems like fun.

I don't think it has anything to do with property or shares. I think it is about creating or adding value...inventing money, as it were.

This is what the big guys are actually doing. There aren't any pure share traders in the fortune 500( or whatever it is), but I'll bet my arse there aren't any pure residential property investors either.

For instance, Our dear friend Frank Lowry is not in the business of housing people, but in the business of creating circumstances for businesses to be more profitable so he can charge more for the space he provides...often tied to the business's turnover.

It is more than just renting out commercial property.

Rob,

It's diff'rent stroke for diff'rent folks. I like shares (and derivitives) cause I can drop X dollars into the market at the beginning of the week cash it it at the end of the week, and withdraw some cash from the profits to take the missus out to dinner with on the weekend.

In other words it's my own little business, its not investing per se.

Only a fool would say property is not a great passive investment. Likewise, only a fool would say the sharemarket is crap simply because they don't understand it.

Both have their place, and time in the sun!

Cheers and welcome to the forum.

 

[The Mortgage Adviser]

Re: property vs stocks

I agree totally with that Wayne.

I believe a diversified portfoio is crucial to any long-term investor to flatten the peaks and troughs in any investment cycle.

I am attempting to buy a positive cashflow investment property portfolio which I then use the proceeds of to pay the interest on a 100% geared share investment portfolio. The net cash result is a balanced, neutral investment portfolio but some potentially excellent capital growth possibilities that do not cost me anything to maintain. My income from my trading company will pay for my lifestyle and further growth of the investments.

I am also hoping minimum intervention on my part will be required as I will be using property managers and fund managers and eventually a business manager to run my company. I just want to get on the harbour and go sailing or go SCUBA diving in different locations around the world. Hopefully, I will be able to do this every day from next year some time.

Does anyone know if they have invented an mobile underwater satellite phone yet??? :

 

[crashy]

Re: property vs stocks

....interest on a 100% geared share investment portfolio

100% eh?

 

[positivecashflow]

Re: property vs stocks

Yes please explain.

 

[tech/a]

Re: property vs stocks

Ive had 100% geared on an intial deal.
Whats the prob.

 

[tech/a]

Re: property vs stocks

Just saw the 100% geared was on an investment portfolio of shares.

That could be achieved by owning a positively geared or freehold property,having a line of credit to unlock your equity and leverage that with a margin loan.

100% geared

And the crowd goes OOOOOOOO!

 

[The Mortgage Adviser]

Re: property vs stocks

No, it is not secured against property. Just against the shares. It is interesting to see my other posts being deleted.

 

[RodC]

Re: property vs stocks

Comsec (and probably others too) have a Protected Portfolio Loan with which they will lend 100% of selected shares.

The Interest Rates are prety fierce though!!

Rod,