Shares or Property?

[Julia]

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

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

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

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

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

 

[ROE]

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

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

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

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

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

A little knowledge is a dangerous thing in the stock market

 

[Wysiwyg]

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

That's funny. :

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

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

 

[darkhorse70]

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

 

[RADO]

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

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

 

[Value Collector]

This 30% return is the average over 25 years.

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

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

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

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

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

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

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

 

[Value Collector]

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

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

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

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

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

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

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

the correct calculation to determine profit would be,

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

 

[Value Collector]

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

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

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

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

 

[darkhorse70]

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

 

[darkhorse70]

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

 

[Value Collector]

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

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

Aussie houses prices didn't get slashed during gfc

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

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

 

[joku]

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

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

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

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

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

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

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

 

[tech/a]

Some great posts by Value Collector.

My suggestion is not OR but PLUS

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

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

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

 

[tech/a]

Some great posts by Value Collector.

My suggestion is not OR but PLUS

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

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

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

And From Julia

Asset classes are cyclical

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

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

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

 

[Value Collector]

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

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

 

[darkhorse70]

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

 

[tech/a]

Oh my.

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

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

 

[pavilion103]

And From Julia



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

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

Exactly. Timing the markets.

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

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

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



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

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

 

[Julia]

Some great posts by Value Collector.

Agree. And in other threads also.

Oh my.

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

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

+1.

 

[Value Collector]

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

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

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

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

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

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

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

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

.

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

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

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