Hi All
I believe that although there is merit in both PI and SI that people need to be very wary when either of these markets begin to “skyrocket”. Looking at a 350 year trend is far more sensible than looking at the 5 year performance of a market. Having said all of this one unmoveable principle still applies. Property values are mostly backed by a real tangible asset which can be seen, touched, felt. Share values are often a combination of real assets, goodwill, expectations, future contracts, and a lot of intangibles. This is the key differentiator and also the reason that shares are more volatile. The age old adage applies, the return is directly related to the risk. This applies to all investments. Shares offer a potentially higher risk and therefore a potentially higher return or loss.I fully agree with Crashy that based on historical statistics, share investment has a higher return. There is a cycle for property and share investments. Be careful, your positve cashflow investment may also turn negative when the rental market is down or you can’t get any tenant. I’ve been involved in share and property investments for over 21 years. As a former banker, I’ve experienced the ups and downs of these markets.
Just a quick note on CFD’s and dealforfree. I went to one of their seminars and the concept looked pretty good to me. But then again I am new to stocks so am trying to learn before more before diving in and using leverage. One point with regards to cost that doesn’t appear to have been picked up in this thread is that at the moment the ASX will charge you directly for viewing real time data through the dealforfree site. Apparently they are the only exchange in the world that does this and I think the cost is about $30 per month? Not a huge cost but just thought you should know. The CFD people certainly didn’t seem to like talking about it when an unhappy customer ambushed the seminar I was in. Dealforfree maintain that it is not a charge they are imposing on customers but that the ASX is, hence the bill comes from the ASX.
some good points there HousesOnly
I agree with what you say mostly, but any investment is only as good as its income. A house is a tangible asset, but unless there is a rental income it is a liability. Shares have their own “rent” in their dividend payments. Either investment can lose its income for a long or short period. An ininsured house can burn down.
As for volatility, its a little misleading. Shares rise and fall daily, and I bet if we got property valuations daily we would be a lot more scared. If I was to show you a chart of the all ords using only one price per year, you would not see any volitility at all. There is a perception that property is less risky, as I showed in another post, in 1990-1 property prices fell 30% and stayed there. In 1987 stock prices fell 22% in one day, but then started going higher again. Individual shares can go to zero, which of course a property can not. But an index can never go to zero by the same token.
mcdeyess – yes the exchange fee matter is rubbing a lot of people the wrong way. Remember though that aussie stocks are only 1.7% of the world market. There are plenty of stocks in other countries to trade, which have no fee. you only pay $30 if you trade oz stocks.
98.3% of the opportunity is OUTSIDE aussie.dealfor free make their money on the spread.
Blsck boxes and share trading don’t work for 90% of people, see my other email.
Comsec, lev Equities and Macquarie bank are offering no money down, 100% geared share portfolios, cost 14-15% for interest and hedging (buyng puts).
I am looking into it now.
check it out under protected portfolio loan on commsec.com.auHi all
Crashy
I stand corrected.
you are correct you can get 95% finance for shares. Checked it out tonight on the site thanks michael for the directions. would never have found it by myself. I’m getting more info from them. There could be a place for them in my investment strategies, but you have to be cashed up to cover those margin calls. I used to hate them when i used my leveraged equities account.
westanMe again
forgot one thing
just to clarify shares V property
the recent report by “Atchison Consultants” compares property to other asset classes
this study 15 years from 1987 to 2002
showed the following
Aust shares returned 8.4%
Overseas Shares 8.1%
Residential property 13,6%
Listed property 10.1%
Even ANZ Bank Cheif economist Saul Eslake states the results are “a reasonable representation of asset class performance”
a very good article is written in the april/may issue of Australian Property investor, well worth a look. Crashy i’ll fax it to you if you want to read it.
regards westana lot of people emailing me about this, thought I better put it at top of pile again.
This is just a thought and correct me if i am worng but isnt looking over a 350 year period a little extravagant considering the average person only lives for about 80 years?? That means approximately 60 years trading if you do it all the way to your death. Whats the point in being able to say in 350 years time I made a 13% profit? Im new to this so please dont hesitate to correct me!
Cheers
Wilko
Wilko
that is right
didn’t even know the aboriginals had a property market 350 yrs ago. But then again BHP would have been real cheap
westanwhen looking at possible future returns, its easy to look at recent returns and assume the same will follow. this however is usually the opposite. ovbiously a property boom cannot follow on top of another property boom. there are short term cycles and there are long term cycles, but they all revert to the long term average. its like flipping a coin, if you flip it 5 times you might get 4 heads, which you might say meant that the odds of flipping a head are 80%, which of course is incorrect. however if you flip it 5000 times, you would get closer to 2500 heads, or 50%. the higher the statistical figure, the greater the accuracy. we only have investment data going back 350 years, otherwise we would use 10,000 years. the first stocks came to be around 1650 but real estate values in europe have been recorded since 1082.
A question from an absolute shares novice. If one had considerable funds available from a LOC at 5.97% they would be able to invest directly into shares without margin lending wouldn’t they. That is they are secured by property.
If so, could they invest through dealforfree without using margin call or would they be better off using another access medium ?MJK
you wouldnt pay cash for a house, so why do it with shares? if you had $100k, use dealforfree and only invest 1/2 of it. that way, your LVR is 90% instead of 95%. Or if you are really chicken, invest 1/4 of it. That $25k still buys you $500k in shares, and the market would need to drop 20% before you were at margin. plus you get paid interest on the other 75k. but its better to just take out 25k in the first place, and top it up when a margin is called. (why are people so terrified of a margin call?) its no big deal, i get em bout once a week. money is coming and going out of the account frequently, they are pretty flexible about margin calls.
or you could just invest the money in plain old ungeared shares. (yawn)
hi crashy
how are things
Margin calls are a pain if you havn’t got the financial reserves handy to top up. But as you said working “Deal for free” like an ordinary margin account is a safe way to play it. personally i’d gear up higher than 70%. Just received the mail from them Yesterday so havn’t read it all. But the cash rate plus 1% is heaps cheaper than typical margin accounts. But once again shares can be very volitile as you know. I’ve had a good fortnight bought IGOO at 21c today they are 39c, but a good friend who has a heavy expose to PLA has lost big time 3 days ago they were 32c (he bought at 40), they had a bad anouncement and today they are 19c imagine if you had expose to a stock like this. Can you buy small caps through “DFF”?
regards westanHi Crashy,
What do you think is the best trading software?
Metastock??Can you recommend some good trading books for a beginner ??
Thanks in advance,
ChrisHi Crashy,
> History shows shares return 13% p.a while property returns 9%. A no brainer.
You forgot to add capital gain and positive cashflow together.
If those figures were true (hey – they may be true for the *average investor*) – I wouldn’t be satisfied with a 9 percent return. I don’t even look at a property I am buying for +ve cashflow unless it is already in the high teens based on purchase price and sitting tenant, and I think I can get it into the 20’s after negotiation. (also you can’t negotiate shares, or renovate/improve them….)
That’s 20 plus as a ‘i bought it cash’ which of course gets several times better if you leverage it by paying only 20 percent.> Plus there are large costs and delays when investing in property.
5000 down to get into a 50K property isn’t too bad???
And the delays (like, ten days between offering and settling, at best) mean that panic, sharp drops, don’t happen.
>It is now
> possible to invest in shares at NO COST.That’s not that much of a novelty to property people who have always had that option.
Also, no stamp duty or capital gains tax where I invest.
Closing costs of 800 bearable (500 lawyer, 300 builder’s report)> Property has one major advantage….regular income.
yep, that’s *ONE* of the advantages> Think back 3 or 4 years. Do you wish you had bought property when everyone was
> buying tech stocks?My antenna were’nt up that far yet, then
>Rental yields were high then right?
> Well stock yields are high now. In 3 or 4 years there will be a share mania,
> and everyone will be saying…”gee I wish I had bought back in 2003 when every
> man and his dog were jumping into property!”I spent 6 months studying the share-market as best I could, immersing myself in it much as I am now with property. Reading books, learning, and reading more books.
But because of things like the statement below
> Dont buy for a few weeks yet, the market is about to drop sharply.
share are something you have to constantly be on top of the market with and watch like a hawk. If you’re *interested* and have time it’s all good but I like property as a long-term investment with none of the sharp drops (compared to the sharemarket) that shares have – basically because the property market is 92 percent owner-occupier driven and once people buy a house and move into it, they usually stay put for a bit. Vote with their feet.
> i said stock yields are high right now. some are, but stocks will drop over
> the next 3-4 weeks and yields will jump. yields right now however are still
> higher than sydney property.you keep forgetting to add capital gain in with the rental yield
Or else, think sydney is the only or ‘best’ place to buy propertysoon they will be back to 7-8% as they were in
> March.Is that supposed to be good news? *confused*
Anyway, i soooo couldn’t handle that much work to keep up with the weekly and monthly fluctuations. And day traders, my bro in law is one, forget it!! – not for me!! Also my other friend who’s a grain trader – STRESS! eventual burnout is common -Big grief factor!!!
I am not arguing with the fact that people can make vast amounts of money with shares if they know what they are doing (or are lucky) and if they enjoy it then I am glad they are doing it. In fact VIVE la difference, we *need* people to invest in the sharemarket – that’s our economy and it’s so important. If everybody stopped investing in the sharemarket, the returns would be crazy because capital would be so hard to come by.
– I just don’t see me doing it – because it doesn’t interest me and seems very time consuming. People I know with shares spend 2-3 hours a day watching them, checking in,-
i wouldn’t want to have to do that with my houses!!
I don’t have to check in more than once a month (to make sure my rent went in) or if a maintenance issue comes up. That suits me fine.I’d like to hear your thoughts about (say) investing in funds which average the top 500 share companies, S&P 500 or whatever it’s called? How are the returns on that these days?
I mean if you said ‘that’s for boring people who don’t want to take risks and don’t really understand the sharemarket’, I’d say great sounds like me, maybe i will try shares after all?? no seriously, i’d like to hear your thoughts on funds.> I also stated that you should gear with HIGH YIELD stocks, not rubbish like
> DVT HIH ONE et al.I’m soo outta my depth here!!
If it was true what you said about “shares13 versus property 9 percent”, then *maybe* i’d have made more of an effort with shares, to learn the market, develop an encyclopaedic knowledge of the economy and a finely tuned nose to whiff out the merest scent of change. But for me ….
property gives me a better return
has an actual physical use rather than a ledger entry
you can improve it
the market moves less jumpily than the sharemarket
(” Hi Crashy,> History shows shares return 13% p.a while property returns 9%. A no brainer.
You forgot to add capital gain and positive cashflow together.If that were true, I wouldn’t be satisfied with a 9 percent return. I don’t even look at a property I am buying for +ve cashflow unless it is already in the high teens based on purchase price and sitting tenant, and I think I can get it into the 20’s after negotiation. (also you can’t negotiate shares, or renovate/improve them….)
> Plus there are large costs and delays when investing in property.
5000 down to get into a 50K property isn’t too bad???
>It is now
> possible to invest in shares at NO COST. Why waste 10% or more of your money
> in transaction costs?
No stamp duty or capital gains tax where I invest> Property has one major advantage….regular income.
yep, that’s what I figured out and why I’m here now.> Think back 3 or 4 years. Do you wish you had bought property when everyone was
> buying tech stocks?My antenna were’nt up that far yet, then
>Rental yields were high then right?
> Well stock yields are high now. In 3 or 4 years there will be a share mania,
> and everyone will be saying…”gee I wish I had bought back in 2003 when every
> man and his dog were jumping into property!”I spent 6 months studying the share-market as best I could, immersing myself in it much as I am now with property. I think because of those things such as the statement below
> Dont buy for a few weeks yet, the market is about to drop sharply.
share are something you have to constantly be on top of the market with and watch like a hawk. If you’re interested and have time it’s all good but I like property as a long-term investment with none of the sharp drops (compared to the sharemarket) that shares have – basically because the property market is 92 percent owner-occupier driven and once people buy a house and move into it, they usually stay put for a bit.
> i said stock yields are high right now. some are, but stocks will drop over
> the next 3-4 weeks and yields will jump. yields right now however are still
> higher than sydney property. soon they will be back to 7-8% as they were in
> March.See, i soooo couldn’t handle that much work to keep up with the weekly and monthly fluctuations. And day traders, my bro in law is one, forget it!! Also my other friend who’s a big time grain trader – STRESS! burnout, I reckon!!! who needs the grief???
I am not arguing with the fact that people can make vast amounts of money with shares if they know what they are doing (or are lucky) but I just don’t see myself doing it in the way you describe, because it doesn’t interest me and seems very time consuming. People I know with shares spend 2-3 hours a day watching them, checking in,-
i wouldn’t want to have to do that with my houses!!
I don’t have to check in more than once a month (to make sure my rent went in) or if a maintenance issue comes up. That suits me fine.
I’d like to hear your thoughts about (say) investing in funds which average the top 500 share companies, S&P 500 or whatever it’s called? I mean if you said ‘that’s for boring people who don’t want to take risks and don’t really understand the sharemarket’, I’d say great sounds like me, maybe i will try shares after all?? no seriously, i’d like to hear your thoughts on funds.> I also stated that you should gear with HIGH YIELD stocks, not rubbish like
> DVT HIH ONE et al.I wouldn’t know what you are talking about!!!
If it was true what you said about “shares13 versus property 9 percent”, then *maybe* i’d have made more of an effort with shares, to learn the market, develop an encyclopaedic knowledge of the economy and a finely tuned nose to whiff out the merest scent of change. But for me the facts are property gives me a better return, has an actual physical use rather than a ledger entry, you can improve it, the market moves less jumpily than the sharemarket, and within property you still have a wide range of investment types to suit different target outcomes. The market is guaranteed to go up, as long as the world’s population is increasing ….and I enjoy shootin’ the breeze about it…
bye for now
cheers-
Mini
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