The last Shares vs Property thread

[keithj]

ASX has just released a report on the relative merits of investing in local & OS shares, residential IP, LPTs, fixed interest & cash, both geared & ungeared.

You can find it here (http://asx.com.au/investor/shares/news/russell_-_asx_investment_report_2004.htm)

The bottom line is that Shares & Property performed similarly over 10 & 20 yr periods. So there is absolutely no need for any debate over which is better.

[alexlee]

Does that take gearing into account, and price volatility?

[Glebe]

... and transaction costs... and taxes...

[alexlee]

In short, this sort of comparison is WAY too simplistic.

[see_change]

The last Shares vs Property thread ??!!!! :eek: :eek: :eek: :eek: :eek: :rolleyes: :rolleyes: :rolleyes:

You've got to be joking :D

See Change

[Aceyducey]

So if you buy and hold property in an average suburb and don't improve it in any way you'd do just as well as if you bought an average share and didn't trade in any way.

Where's the fun in either of these?

It does get to the root issue with comparing investments.

A serious investor actively improves their investments over time - spending time researching to select the best options (suburb/company) and trading shares or developing property ('developing' including renovating/refreshing/subdividing/rebuilding/etc).

When you compare whether a person buys A versus B investment and do nothing with them for 10 years or 20 years it kind of misses the point.

Cheers,

Aceyducey

[TheBacon]

On reading the article, it seems tax, holding costs, and gearing are indeed included. Volatility is not discussed.

Yes, it is simplistic.

It does show however that there are good gains to be made in most asset classes over the long term. Note that cash does not perform well.

It would seem that its worth at least thinking of diversification into different asset classes. This should not be a big surprise to most people.

TheBacon

[ggumpshots]

On reading the article, it seems tax, holding costs, and gearing are indeed included. Volatility is not discussed.http://www.somersoft.com/forums/images/icons/icon10.gif
Talking

Yes, it is simplistic.

It does show however that there are good gains to be made in most asset classes over the long term. Note that cash does not perform well.

It would seem that its worth at least thinking of diversification into different asset classes. This should not be a big surprise to most people.

TheBacon




The report is inaccurate as it uses an LVR of 50% when trying to calculate gearing. The majority of investment property owners have a higher ratio. Thus better leverage .

Those who have property will be far more likely/ able to borrow funds than those who hold shares.
The reality is for the average person , which is what the report talks about, property would be a better investment.
Obtaining funds for a 300,000 property is far easier than for shares. If I am wrong please direct me to all sites where I can get such a loan without a bricks and mortar collatoral. Perhaps there are a few but compare that with the hundreds available for housing


I suspect the Property trust Accumulation Index by which property values were measured would perform less well than the residential investor would have.Some , not all property investors add value to the existing property, ie renovate, and then make a killing. These investors would be far better off than the typical Property Trust investment.

some people even buy property in Sydney where people have been killed!!!!!!!! :D :D :D :D

[Aceyducey]

At the end of the day, is the ASX the best source of independent analysis of whether shares are better than property?

Cheers,

Aceyducey

[topcropper]

The comments here are pretty much spot on.

While I'm currently in the pro shares camp, especially now after this last 10/15% drop on the all ords, I think the average investor will do better from property due to the higher level of gearing allowed, and the lower volatility, that allows an investor to sleep better without the worry of a market slump. Someone who was unfortunate enough to pile into shares 2 months ago would think the sharemarket was a nightmare. While I will gear into shares, especially when they are super cheap like 2 years ago, I would never be game to do it in a big way like you would with property. Therefore, property is the winner.

Having said that, shares are now in the historically good value range, and residential property is still expensive despite the current small drops. The All Ords should fly today, hopefully.

My long term plan is with property, as it's always been, just not right now.

See ya's.

[alexlee]

I think the main problem is that the stats compare market returns. i.e. the return of the entire share index and the entire property market. Obviously markets aren't totally even: some shares will do better and worse than others, likewise property.

For serious investors in either camp, you want to beat the average anyway, right?

[see_change]

and some shares will do well while the rest go down :D

See Change

[Freeatlast]

It may be an even race, but with property I can actually change the outcome ( price ) by doing a reno..... You can't do much to a share price......

Just a thought.......

I've done the whole shares thing...... I lost 50k in a matter of 3 days in 2000.... lucky for me that was just profits.... and not my capital....... have not managed to do the same with a property in 3 days......

[see_change]

It may be an even race, but with property I can actually change the outcome ( price ) by doing a reno..... You can't do much to a share price......

Just a thought.......

I've done the whole shares thing...... I lost 50k in a matter of 3 days in 2000.... lucky for me that was just profits.... and not my capital....... have not managed to do the same with a property in 3 days......

Sounds like you did the share equivalent of buying OTP units . I know several people who have gone bankrupt from property , but am yet to meet one who's done that with shares.

Leverage can be a double edge sword.

See Change

[Tim]

Yet on the ASX site the 2003 Perrin Reports actually says that residential investment property outperformed all other asset classes over the last 10 years....


Perrin Report (http://asx.com.au/about/pdf/TowersPerrin2003.pdf)

[topcropper]

Tim say's......

"Yet on the ASX site the 2003 Perrin Reports actually says that residential investment property outperformed all other asset classes over the last 10 years...."


Well, that's not surprising.

Since the March 2003 low, the stockmarket went up by 60% to March 2005. add dividends, and it would be nearly 70%. Take off 10% for the last 2 months, and it's still a big result.

Property has done what in the same time? Up, down, flat, depending where. So shares are now back in front. It's neck and neck.

See ya's.

[Thommo]

As singlies in the services we had interminable arguments.
Aussie rules V League
Peanut paste V Peanut butter
Port V suitcase
Mercifully I have forgotten most.

You may be surprised to hear that no side ever "won" these arguments. They are probably still debated today. Equally surprising is the fact that neither side will "win" the shares V property debate. Frankly I suggest the blonde V brunette argument is eminantly more solvable. LOL

So let's just discuss "investment" without putting fences or pre-conditions on it. OK I know it says "Somersoft; Property Investment Forum" at the top of the page.

Thommo

[Aceyducey]

Actually we did have a shares versus property debate at the last CRIN meeting in Canberra.

And the majority of a room full of property investors voted for - you guessed it - SHARES.

:D

Cheers,

Aceyducey

[geoffw]

Actually we did have a shares versus property debate at the last CRIN meeting in Canberra.

And the majority of a room full of property investors voted for - you guessed it - SHARES.Probably due to the quality of the speakers presenting the case for shares ;)

(Note to non- Canberrans- that was Acey)

[Panda]

Who cares if property is better than shares or visa versa. If you can make a good return in one or the other or both then yippeeeee....

I admit I don’t know a great deal about shares at this stage but regardless other people make good consistent returns from the share market as do people from property. I think the more asset classes the better.

I like property as I can have a direct impact on its value above and beyond what the market dictates (too some extent). I am interested in shares as there are techniques to generate cash flow as well as the potential for good/great capital gains and within a reasonable risk profile.

I think underlying the argument of shares vs property exists fear. When I first thought about buying a property all I could see was a huge loan and that was scary to me. However, once I started to get more educated I realised that those fears and the risk could be minimised to a large extent. It’s the same with shares in my opinion.

Remove the fear and only the facts remain. And in my opinion the facts are that some people can make good money from the stock market, above and beyond what is displayed in the various reports (that means its possible). So then the question is one better than the other (in a generic sense) is pointless. Its like saying is coke better than pepsi.


We all know coke is better :p


Better to ask will investing in shares or property get me to my goals quicker?

What ever achieves the goal I reckon? The goal is GOD!!

Cheers,
Panda

[see_change]

Probably due to the quality of the speakers presenting the case for shares ;)

(Note to non- Canberrans- that was Acey)


Geoff, you wern't arguing for property were you .......

See Change

[ggumpshots]

Who cares if property is better than shares or visa versa. If you can make a good return in one or the other or both then yippeeeee....

I admit I don’t know a great deal about shares at this stage but regardless other people make good consistent returns from the share market as do people from property. I think the more asset classes the better.

I like property as I can have a direct impact on its value above and beyond what the market dictates (too some extent). I am interested in shares as there are techniques to generate cash flow as well as the potential for good/great capital gains and within a reasonable risk profile.

I think underlying the argument of shares vs property exists fear. When I first thought about buying a property all I could see was a huge loan and that was scary to me. However, once I started to get more educated I realised that those fears and the risk could be minimised to a large extent. It’s the same with shares in my opinion.

Remove the fear and only the facts remain. And in my opinion the facts are that some people can make good money from the stock market, above and beyond what is displayed in the various reports (that means its possible). So then the question is one better than the other (in a generic sense) is pointless. Its like saying is coke better than pepsi.


We all know coke is better :p


Better to ask will investing in shares or property get me to my goals quicker?

What ever achieves the goal I reckon? The goal is GOD!!

Cheers,
Panda



Well a 3% yearly difference over 12 years for making the poorer choice in my case would be about $250,000.
Better to know these things than live in total ignorance,
unless money means little to you as an investor

I have never met anyone fearful of buying shares or property , although many have been indescisive or uninformed

[see_change]

Well a 3% yearly difference over 12 years for making the poorer choice in my case would be about $250,000.
Better to know these things than live in total ignorance,
unless money means little to you as an investor


yes, but the difference between good property investing and bad property investing is significantly greater than a 3 % difference. It's the difference between being bankrupt and being a multimillionaire.

The same would apply to shares.

Those sort of comparisons are artificial and really a waste of time.

See Change

[ggumpshots]

yes, but the difference between good property investing and bad property investing is significantly greater than a 3 % difference. It's the difference between being bankrupt and being a multimillionaire.

The same would apply to shares.

Those sort of comparisons are artificial and really a waste of time.

See Change

As an apprentice Time Lord .......shame on you.

you should realise that
the more information you have the better you can make informed choices.
It would be impossible to make a good investment if you dont know the returns
remember we are only talking in generalities when we discuss SHARES and Property

[Panda]

Hi ggumpshots,
I agree that we need as much information as possible, that is obvious. My point is that in my opinion much of an individual’s success is based more on how they invest as apposed to what they are investing in.

Millionaires are made from property and from shares. So a discussion of which one is better based on average performance, is in my opinion, a waste of time.

The fact that a 3% difference in what ever market over 12 years makes you $250K more or less does not take into account other factors such as your ability or lack of. I think making the assumption that investing in one asset class and expecting to do better just because it has performed a little better than another class in the past. Is missing the point.


Cheers,
Panda

[ggumpshots]

Hi Panda ,
I take your point. How you invest is crucial.

However the reference point is the report that was published.Not how to be a millionaire
Shares are much better investment if you know how to deal with / take advantage the volatilityof the market in my view.
Property investment tends to lack this volatility and is oriented to the longer view which is ideal if you dont want a daily hands on investment .
Horses for courses. Those suited to a particular investment will do better than someone who is not suited

However a general discussion is not a waste of time unless you try to argue a general case on a specific instance ......which neither of us are doing.

Id liketo buy you a Pepsi but I my guess is youd refuse ;)

[Thommo]

I take your point. How you invest is crucial.


I beg to differ. There are no right or wrong investments; merely right or wrong TIMES to do your (buy/sell) trades. OK. Like Warren Buffet I'm not convinced there is ever a good time to buy airlines.

To butcher the song: "For every thing there is a season, a time to buy a time to sell." It aint easy but I think SeeChange is applying this philisophy as well as anyone on SS. Read his posts carefully.

Thommo

ps Searched the quote and found it was biblical, incorporated into a song.

For everything there is a season, and a time for every purpose under heaven. ( Ecclesiastes 3)

[ggumpshots]

I beg to differ. There are no right or wrong investments; merely right or wrong TIMES to do your (buy/sell) trades. OK. Like Warren Buffet I'm not convinced there is ever a good time to buy airlines.

To butcher the song: "For every thing there is a season, a time to buy a time to sell." It aint easy but I think SeeChange is applying this philisophy as well as anyone on SS. Read his posts carefully.

Thommo

ps Searched the quote and found it was biblical, incorporated into a song.

For everything there is a season, and a time for every purpose under heaven. ( Ecclesiastes 3)

Thommo
we are on the same side of the coin.
How you invest means what you invest in, where you invest and when you invest
Cheers
PS How do you become a millionare?
Start off as a Billionaire and invest in an Airline
..........Sir richard brannson

[Aceyducey]

PS How do you become a millionare?
Start off as a Billionaire and invest in an Airline
..........Sir richard brannson

Hey Ggumpshot,

I know you're joking, but I reckon you should read Branson's autobiography sometime.

He wasn't born with billions, and he did prove that airlines are profitable businesses :)

Frankly I reckon he's glad to see (more of) the back of Patrick Corp - and with a nice profit.

How Virgin Blue unfolds will demonstrate what happens when your partners are grasping too hard.

Cheers,

Aceyducey

[Bill.L]

Hi all,

The shares vs property debates are always fun, and I'll bet this is not the last one.

On this forum there are probably quite a few people who have over a million dollars in equity in property, gained from time, good buying, renovating and usually holding. Most started from a deposit in their PPOR a few years ago(many for some of us).

How many people on this forum have made over a million dollars worth of equity from shares WITHOUT using the gained equity in property?? I'll hazzard a guess at none. The rich 200 or 500 list or whatever is often full of millionaires from stocks, but most of them are large percentage owners of companies that have been floated and have retained near control of their companies.

How many people here know a millionaire from trading/investing in shares ALONE, without the equity in property used, or started (or were part of) a company upon listing???

bye

[Aceyducey]

Bill,

You've hit the nail on the head.

The early bird gets the worm.

The best time to invest in a company is before it lists on the stock market.

Of course this means more risk as well :)

Cheers,

Aceyducey

[Thommo]

Bill, you would be correct in your assumption that no investor on this property forum would have made his (her) first million in shares.

The results would be the same had you asked about tuna fishing, prawn trawling, grazing cattle or prospecting. But they have all thrown up their big winners.

Among the millionaires I know personally 100% have done it via owning their own biz. The one I know best now owns a number of properties which were easy to buy because of his high cash flow. (He bought a BMW M3 with his tax return one year). He never had sleepless nights because he owned the w/house he ran his agency from and had enough liquidity to operate a year without income.

Naturally, like everone else, he has made more from property than his agency in the last few years but business success came first. Nor has he ever bought a rental property so has avoided any problems with tenants and property managers.

Another owned a pub 30yrs ago when they were a licence to print money. When I met him he was semi retired: A deckie on a tug working under the seaman's award. Good money, bugger all work which allowed him to own and maintain a number of rentals but I think he sold them before the boom. I think the hassles of self management got to him. Would still own a million bucks worth of "private" residential though.

Warren Buffett has become world's second richest man via the stock market.

Closer to home my Aunt (mentioned previously, but I'm in awe of her) invested $500 in '62 and her shares are now worth nearly a quarter mill. She would have needed $2,000 as a dep on a property then so a prop investor's deposit would be a mill today. I doubt she ever reinvested dividends. These (the divs) grew to where they were a useful addition to her pension and allowed her to live comfortably in recent years. She certainly never had a tenent wreck her share portfolio.

So the debate lives on LOL

Thommo

[mit]

The 100% security exists I saw an advert in the fin review for it today. However, I think that a call option is priced into the cost of the shares like they do with the capital guaranteed funds. So you have to overcome the cost of the option premium and the interest rate before you make any money.

As for sharemarket millionares. I think that there is two reasons that you don't see them. The first is because you can buy and sell shares in small parcels at low cost, you reach a comfortable income quicker. Say if you can consistantly return 20% annually from shares (which is not a big ask for a retail trader and many do much better). You would return 100k income after you had $500k invested. The question is that would you work for another 4 years to build this up to $1m+ or would you leave work to live on the income? :cool:

Alternatively, unless you flip properties it would take many millions of dollars of property to get to the same level of income from property. Whether shares of property would get you to the $100k position faster is another question.

My second theory is that with property you need to deal with so many people (PMs, Real Estate Agents, Solicitors etc) your position eventually becomes reasonably public. In shares you could theoretically amass a great deal of money and only your broker would know. Even on share forums if somebody says they are buying BHP, they would never say whether they were buying $2k or $2m worth of shares. :D

MIT

[keithj]

Cant say Ive done it myself so Ive got no details, from memory they had to be selected stocks (ie blue chips) and I think it was through Mac bankYesterday I got junk mail from MacBank offering such a product called Altas Fund. The catch was that if any of the basket of stocks in the fund drop by a certain %age in 7 yrs, then the return is capped. So it's really more like a bet than an investment. And with the smart $18M men at MacBank, do you think the odds are tipped in the investors favour?

[Panda]

Certainly not my sort of "Investment".

[ggumpshots]

Yesterday I got junk mail from MacBank offering such a product called Altas Fund. The catch was that if any of the basket of stocks in the fund drop by a certain %age in 7 yrs, then the return is capped. So it's really more like a bet than an investment. And with the smart $18M men at MacBank, do you think the odds are tipped in the investors favour?
Keith or others,
What other concerns do you have.
Leverage ,if you take out a loan is a factor of 12 before tax
which seems good

I checked out the info. there needs to be a 45% drop from a selection of 80 stocks. Capital gain is not affected.
I wonder if they would select a few stocks which they would hope would drop 45%. This would then cap income.


Is this the only concern or is there another.
I could only locate the S and P 200 index with Commsec back to 2000 . I wanted to see back to 1993

Youre right , Those guys are no dummies but I would be interested in similar products other investors have had experience with.
Cheers
ps
On the other hand how many brilliant guys have you met at a bank.........well I guess there must be some

[keithj]

What other concerns do you have.
Leverage ,if you take out a loan is a factor of 12 before tax
which seems good

I checked out the info. there needs to be a 45% drop from a selection of 80 stocks. Capital gain is not affected.
I wonder if they would select a few stocks which they would hope would drop 45%. This would then cap income.Hi GG,

I only glanced at the online PDS, so some of what I say below may be wrong.

The biggie is the number of knockout events that could occur - how many do you think there might be ? Did you read section 6.1 of the PDS ?
According to their table there have been around 20(?) out of the 80 stocks in the basket that have lost 45% or more of their value over the last 7 years. So judging by their historical data it's highly likely that there will be more than 7 knockout events over the next 7 years. So the yield will get to worst case sooner rather than later.

You only get 75% of any gain in the index - Mac Bank get the other 25%. (remember all those $18M men need paying:rolleyes:)

I didn't read anywhere that you could continue to 'top up' your exposure over the 7 years. So 100% leverage might be down to 50% in 5 yrs time.

Is this the only concern or is there another.
I could only locate the S and P 200 index with Commsec back to 2000 . I wanted to see back to 1993

Youre right , Those guys are no dummies but I would be interested in similar products other investors have had experience with.
Cheers
ps
On the other hand how many brilliant guys have you met at a bank.........well I guess there must be some

Some general points about this type of investment -
- this seems to be a product with a lots conditions
- it shows the benefits after taking tax into account which is sometimes a warning that it may not be a good investment before taking tax into account
- you need to read every bit of the fine print to understand it all
- the investor doesn't have much control
- it might look like a good deal today, but what about next yr or 7 yrs.
- liquidity - will you need the cash elsewhere ?

Investing in an index fund or sensible LIC doesn't have any of these downsides, but will retain the upside of growth. Macbank is lending you 100% today.

I'd suggest you do a spreadsheet over the next 7 years with a sensible margin loan topping it up every year and see if there's a better result.

And none of this is advice, of course:).

Cheers,

KJ

[see_change]

Really doesn't sound like what I would call share investing.

See Change

[ggumpshots]

keith,
Having checked there is no topping up and taking into account the likely hood of 7 knockouts which seems pretty high, now that you have pointed it out,
I have to say this product is pretty much what you initially indicated........more of a bet than an investment.
I dont bet .........
the pain of losing is more than the pleasure
of winning
Thanks for the info

[keithj]

Having checked there is no topping up and taking into account the likely hood of 7 knockouts which seems pretty high, now that you have pointed it out,
I have to say this product is pretty much what you initially indicated........more of a bet than an investment.
I dont bet .........
the pain of losing is more than the pleasure
of winning
Hi GG,

I'd guess that MacBank (& others) rely on the fact that most people read only the glossy brochure that shows the upside rather than trawling through the fine print (that ASIC insists they produce) that shows that the downside exists.

IMHO as a general rule, products with glossy brochures that claim to have no downside are aimed at less sophisticated investors who are less likely to read the fine print. Applies to IP & funds.

Cheers,

Keith

[Les]

Thought I should "bump" this thread - it disappeared off the radar when several posts were trashed, along with TMA.

Regards,