What type of trading would suit my situation?

[Sir Osisofliver]

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

 

[FxTrader]

... 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.

 

[ParleVouFrancois]

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.

 

[Julia]

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.

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.

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.

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.

 

[FxTrader]

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.