200K cash, What would you do ?
- Thread starter Giulio Taranto
- Start date
HI Ajax,
I've held SBM since 9 cents, they are at 50c now and still have a lot of life left, the same with BMX (their chart indicates a breakout soon).
SBS is sub sahara resources, they are at 9 ish cents at the moment and have been through a few changes in the last week and should see a rise very soon (few resistance levels and 8.2 c is the bottom).
Yes spec stocks but well researched which takes some of the risk away.
Correct, leverage on BMX (can get 40%) but not on the other two.
Peter
I've held SBM since 9 cents, they are at 50c now and still have a lot of life left, the same with BMX (their chart indicates a breakout soon).
SBS is sub sahara resources, they are at 9 ish cents at the moment and have been through a few changes in the last week and should see a rise very soon (few resistance levels and 8.2 c is the bottom).
Yes spec stocks but well researched which takes some of the risk away.
Correct, leverage on BMX (can get 40%) but not on the other two.
Peter
Giulio Taranto said:
Giulio,
imho,if you have 200k to start with then i would start with property
i know nothing about Melbourne real estate market,i looked at a property
this afternoon,about 8 to 9 klm from the Brisbane CBD, the r/e saleslady
told me over the phone ,that a builder who owns several run down
properties in this street is starting to experience considerable problems
with the other units that he can not sell,i am starting to see so many
lmr development blocks on the market in the 10 klms inner southside
come on the market over the past three weeks,why i'm not sure
the previous demand for this type of property one and a half years ago
was huge back then most would sell in a week,its a different market
and i know for a fact for 200k you will buy a small 450sm 2 bedroom
i bathroom lmr zoned house 8 klms from the brisbane cbd on the southside
of brisbane,If i can find that sort of property after one phone call just
think what you might find in your local area, dont be conditioned to
think property investing is easy its not..
good luck
willair..
I would invest it in silver. Second choice gold. There are many ways to do this.
But you want leverage? Buy the near/new producers. The beauty is that you get leverage without borrowings. Want more leverage? Buy futures. It is a falacy that RE is the only investment you can leverage over 90%.
A well known gold miner, which shall remain nameless, (not a near/new producer BTW) has big mobs of JORC compliant reserves but for years, their mining costs have exceeded their sales, ie they were mining at a loss. Bad management and high fuel cost killed'em. In spite of this they trade at over $1/sh. Why? Because they've got the gold, is why?
I don't own this stock and have, up till now, only passing interest in it so I don't know the real figures. But they only need to be an example anyway.
Company XYZ is ACTUALLY mining 1mil oz's of gold per year but, like all open cut miners, the price of fuel eats into profits, (sadly, this mob is operating in a far-away land) and for some it destroys their visions of profit. XYZ is like that.
They are unhedged, ie They sell at prevailing prices, which for the '05 calander yr may have meant they averaged US$525/oz but their ACTUAL costs were US$575/oz.
All else being egual, a gold price rising US$100 shifts this company from doin it @ $50/oz loss into profit @ $50/oz. How much leverage do you want? It's on my watch list because management has recently changed and last year they commissioned a thermal power generator which must reduce their oil costs.
But I am unqualified to give advice. Do not act on this non-advice without doing your own research or consulting someone qualified in equities.
But you want leverage? Buy the near/new producers. The beauty is that you get leverage without borrowings. Want more leverage? Buy futures. It is a falacy that RE is the only investment you can leverage over 90%.
A well known gold miner, which shall remain nameless, (not a near/new producer BTW) has big mobs of JORC compliant reserves but for years, their mining costs have exceeded their sales, ie they were mining at a loss. Bad management and high fuel cost killed'em. In spite of this they trade at over $1/sh. Why? Because they've got the gold, is why?
I don't own this stock and have, up till now, only passing interest in it so I don't know the real figures. But they only need to be an example anyway.
Company XYZ is ACTUALLY mining 1mil oz's of gold per year but, like all open cut miners, the price of fuel eats into profits, (sadly, this mob is operating in a far-away land) and for some it destroys their visions of profit. XYZ is like that.
They are unhedged, ie They sell at prevailing prices, which for the '05 calander yr may have meant they averaged US$525/oz but their ACTUAL costs were US$575/oz.
All else being egual, a gold price rising US$100 shifts this company from doin it @ $50/oz loss into profit @ $50/oz. How much leverage do you want? It's on my watch list because management has recently changed and last year they commissioned a thermal power generator which must reduce their oil costs.
But I am unqualified to give advice. Do not act on this non-advice without doing your own research or consulting someone qualified in equities.
I think it was the recently deceased George Best, when asked what happened to all his money, said something like:
"Most of it I spent it booze and wild women. The rest, well, I just wasted it."
How long would $200K last?
For me, I'd be heading to the sharemarket, mostly ASX 300, with a few specs thrown in to make it interesting. Probably in the SMSF.
GarryK
"Most of it I spent it booze and wild women. The rest, well, I just wasted it."
How long would $200K last?
For me, I'd be heading to the sharemarket, mostly ASX 300, with a few specs thrown in to make it interesting. Probably in the SMSF.
GarryK
Gold as a market hedge?
Yikes.
Check all assumptions about commodities at the door please.
A great lie about gold is that it does well when the market is tanking and there are economic recessions. Witness 1929 and 1987.
Advising someone to buy gold or silver related vehicles at the moment is speculation pure and simple, certainly something I wouldn't classify as investing.
If someone can suggest a better vehicle for investing for Joe Public in Australia than property investing (state sponsored to boot) with a bit of value adding then I would really like to hear about it.
Yikes.
Check all assumptions about commodities at the door please.
A great lie about gold is that it does well when the market is tanking and there are economic recessions. Witness 1929 and 1987.
Advising someone to buy gold or silver related vehicles at the moment is speculation pure and simple, certainly something I wouldn't classify as investing.
If someone can suggest a better vehicle for investing for Joe Public in Australia than property investing (state sponsored to boot) with a bit of value adding then I would really like to hear about it.
For something totally different...
I'd take a year's leave without pay and go backpacking overseas and visit every continent. What I don't spend I will invest when I get back.
I'd take a year's leave without pay and go backpacking overseas and visit every continent. What I don't spend I will invest when I get back.
Nicely said natmarie
ToeEdge, I agree with your logic and reasoning. One thing though on your "Bad debt is bad, plain and simple.", I don't entirely agree, in terms of paying it down in all circumstances.
In my personal opinion, if I am able to better utilise the money elsewhere and leverage greater returns than the interest I would be facing on the current bad debt, I would take my money elsewhere.
For example, for simplicity sake based off say cash of 30k
Bad Debt - 30k owed on a car loan at 8% interest - $2400 per annum
= $2400 a year interest (excluding the high depreciation and principal)
Good Debt - 30k + 30k (50% LVR) shares = 60k - $2550 per annum tax deductible interest on 30k (assuming 8.5% margin loan), $3000 dividends (assuming avg 5%), $3000 (assuming modest 5% share growth)
= $6765 combined share/dividend growth and tax refund per year, with $1785 paid for interest (assuming 30% tax bracket)
= $4980 a year - $2400 bad debt = $2580 a year better off if the bad debt paid off minimally, given the good debt allows improved leverage from greater gains
Do the sums over the average car loan term of 4 to 5 years.
I did this quickly so feel free to fix any maths errors I've made
PS. Personal opinion, this information is not to be taken as advice.
ToeEdge, I agree with your logic and reasoning. One thing though on your "Bad debt is bad, plain and simple.", I don't entirely agree, in terms of paying it down in all circumstances.
In my personal opinion, if I am able to better utilise the money elsewhere and leverage greater returns than the interest I would be facing on the current bad debt, I would take my money elsewhere.
For example, for simplicity sake based off say cash of 30k
Bad Debt - 30k owed on a car loan at 8% interest - $2400 per annum
= $2400 a year interest (excluding the high depreciation and principal)
Good Debt - 30k + 30k (50% LVR) shares = 60k - $2550 per annum tax deductible interest on 30k (assuming 8.5% margin loan), $3000 dividends (assuming avg 5%), $3000 (assuming modest 5% share growth)
= $6765 combined share/dividend growth and tax refund per year, with $1785 paid for interest (assuming 30% tax bracket)
= $4980 a year - $2400 bad debt = $2580 a year better off if the bad debt paid off minimally, given the good debt allows improved leverage from greater gains
Do the sums over the average car loan term of 4 to 5 years.
I did this quickly so feel free to fix any maths errors I've made
PS. Personal opinion, this information is not to be taken as advice.
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oc1 said:I'd be investing is Silver rather than Gold. Silver is the most undervalued commodity out there. Ration of 60:1 with the price of gold. its historical average has been around 16:1.
Cheers
Although I agree with you to some extent, Gold and Silver have totally two different attractions to the market. While Gold at the moment is seen as an anti-inflatory investment due to concerns with the stability of the US$, Gold has no other substantial use in the world. Silver is not seen as an anti-inflatory investment, and has never been seen as that. Silver on the other hand has very different value as a material used commonly in the world (i.e. medicine, electronics etc.)
That doesn’t mean that silver is not a good investment at the moment, but simply assuming that siver will rise in price to reflect the long time ratio to Gold is not correct in my mind.
Thx
V
I've been thinking about "bad debt".
If we use the definition of "bad debt" as debt which is non tax deductable debt then we will see PPOR debt as "bad", and a company car lease debt as "good". If OTOH we define "bad" debt as debt to finance a depreciating asset, it would be the company car debt which is bad and the PPOR debt which is good. Remember that PPOR is CGT free, so tax deducability is a double eedge sword (gain some in cash flow, lose some in CG).
I think then that the most important criteria for "good" debt is whether debt has been used to purchase an appreciating asset. Tax deducatability is a distant second.
IP/Share debt is "good", PPOR then is "good-ish" debt, Tax deductable car lease is "pretty bad" debt, Plasma TV finance is just plain "bad".
So……. I would use the $200k to clear debt on depreciating assets, and then on clearing non-deductable assets. Only then would I use it to buy some more appreciating assets.
If we use the definition of "bad debt" as debt which is non tax deductable debt then we will see PPOR debt as "bad", and a company car lease debt as "good". If OTOH we define "bad" debt as debt to finance a depreciating asset, it would be the company car debt which is bad and the PPOR debt which is good. Remember that PPOR is CGT free, so tax deducability is a double eedge sword (gain some in cash flow, lose some in CG).
I think then that the most important criteria for "good" debt is whether debt has been used to purchase an appreciating asset. Tax deducatability is a distant second.
IP/Share debt is "good", PPOR then is "good-ish" debt, Tax deductable car lease is "pretty bad" debt, Plasma TV finance is just plain "bad".
So……. I would use the $200k to clear debt on depreciating assets, and then on clearing non-deductable assets. Only then would I use it to buy some more appreciating assets.
According to this graph of the price of silver over 600 years the relationship was a powerful one.oc1 said:I'd be investing is Silver rather than Gold. Silver is the most undervalued commodity out there. Ration of 60:1 with the price of gold. its historical average has been around 16:1.
Cheers
Trouble is the last time it traded at this relationship was around the 1800's, a bit beyond most people's time frames for a return on their investment.
I have a lot of respect for the market to find fair value, if you are looking for undiscovered value you will need to look somewhere the rest of the world isn't presently looking.
Jim Rogers who has made a dollar or two out of this theory has recently suggested the soft commodities (sugar, coffee, soy etc).
But seriously 200k will fund you for 4 years of a modest lifestyle while you educate yourself on how to become rich, it's an approach with some merit for those stuck in jobs and lifestyles they presently hate.
Panic
The gold/silver ratio i have mentioned is just one simple indicator to use. To base your decision solely on this would be foolish. Being a property forum i find it to be inappropriate to go through the big spill as to why silver will be one of the best investment in the years to come. Demand and supply simply dictate this...not just speculation as many would think. And no it hasn't got much to do with being a hedge against inflation, although it may well be used as a medium of exchange when SHTF!!
Just my 2 cents worth.
P.S. Those that are interested in Silver, check out the Perth Mint website.
The gold/silver ratio i have mentioned is just one simple indicator to use. To base your decision solely on this would be foolish. Being a property forum i find it to be inappropriate to go through the big spill as to why silver will be one of the best investment in the years to come. Demand and supply simply dictate this...not just speculation as many would think. And no it hasn't got much to do with being a hedge against inflation, although it may well be used as a medium of exchange when SHTF!!
Just my 2 cents worth.
P.S. Those that are interested in Silver, check out the Perth Mint website.
Andrew
I reckon you're spot on...we are in a commodity cycle. Sugar has already made a 60% run up in the last year. Corn, Soy etc will probably do the same...just not sure how you will go with storage
You will be guaranteed to take part of the run up with price when you have physical posession of the real thing (commodities)...not just a paper contract.
Cheers
I reckon you're spot on...we are in a commodity cycle. Sugar has already made a 60% run up in the last year. Corn, Soy etc will probably do the same...just not sure how you will go with storage
You will be guaranteed to take part of the run up with price when you have physical posession of the real thing (commodities)...not just a paper contract.
Cheers
Agree. I was stating a very simplistic view. Bad debt does have a sliding scale I guess. MDK touched on that.vandalic said:Nicely said natmarie
ToeEdge, I agree with your logic and reasoning. One thing though on your "Bad debt is bad, plain and simple.", I don't entirely agree, in terms of paying it down in all circumstances.
In my personal opinion, if I am able to better utilise the money elsewhere and leverage greater returns than the interest I would be facing on the current bad debt, I would take my money elsewhere.
Debt for dodads on high interest cards is probably the worst, then credit card debt, cars, PPOR debt is probably the best bad debt
at least it's appreciating and adding to lifestyle, usually.I suppose the main point I was trying to make is, if you can use the 200k to change bad debt into good debt then that is the way to go. This probably only applies to a PPOR because it is viewed by lenders as the safest bet when lending money. A car for example doesn't give you much in the way of equity as far as lenders are concerned.
But man, there are a billion different ways to do things hey? As is often said, it all depends on personal circumstances, SANF etc.
I'm with the Y-man!!
I recently sold my PPOR in Brisbane at the top of the cycle in Brisbane, back in late 2004 and walked away with about 255K profit.
I have been renting ever since and seeing what the property market does in Brisbane.
As the Y Man suggested... I have borrowed via a margin lending loan of another 250K and invested all 505k in a managed fund.
Since the initial investment date of January 2005 the fund is just short of 600k now...that's nearly 20% return this year.
2005 was obviously a very good year for the sharemarket, with many market anaylists suggesting a much slower year for 2006...perhaps even a correction, than this may not be the way to go...certainly was 12 months ago!
I recently sold my PPOR in Brisbane at the top of the cycle in Brisbane, back in late 2004 and walked away with about 255K profit.
I have been renting ever since and seeing what the property market does in Brisbane.
As the Y Man suggested... I have borrowed via a margin lending loan of another 250K and invested all 505k in a managed fund.
Since the initial investment date of January 2005 the fund is just short of 600k now...that's nearly 20% return this year.
2005 was obviously a very good year for the sharemarket, with many market anaylists suggesting a much slower year for 2006...perhaps even a correction, than this may not be the way to go...certainly was 12 months ago!
This is an interesting question as I have just invested 200K.
My portfolio is way overweight on residential property. I'm pulling out (redrawing) 200K from 2 IP mortgages and adding to my paper portfolio. I'm betting on international shares and international health care companies (big pharma, biotech, hospitals etc). The ageing population will help me out here, or at least that is what my crystal ball is telling me.
My residential IP's now account for 88% of my total investment portfolio, my target is about 50%, so I need a couple more mill in LPT's and other funds. Long long way to go but slowly getting there.....
I'll post in 12 months on this subject and let you know what transpires.
My portfolio is way overweight on residential property. I'm pulling out (redrawing) 200K from 2 IP mortgages and adding to my paper portfolio. I'm betting on international shares and international health care companies (big pharma, biotech, hospitals etc). The ageing population will help me out here, or at least that is what my crystal ball is telling me.
My residential IP's now account for 88% of my total investment portfolio, my target is about 50%, so I need a couple more mill in LPT's and other funds. Long long way to go but slowly getting there.....
I'll post in 12 months on this subject and let you know what transpires.
