Another house or share market

[brocky05]

Hi Everyone.

I have an IP and have just purchased a PPOR. I was thinking about buying another IP a cheap one less than $150,000 or either investing $10,000 in the shares. Just wondering what would be my best bet long term considering If I held onto either option for 20 years. Im thinking shares mainly due to the investment of only $10,000 now as im not sure if I could afford to borrow $150,000 again. Is there any point to buying $10,000 worth of shares or to make money do you need to invest more.

Thanks

 

[Brady]

$150,000 doesn't give you a whole heap of purchasing power for an IP. You will likely be able to secure a good yield. But I would ensure that you factor in the other associated costs, insurance, possibly strata, rates and big possible factor maintenance. You won't have the costs on the share market but also wont have the benefits of leverage.

 

[LeoT]

Hi Everyone.

I have an IP and have just purchased a PPOR. I was thinking about buying another IP a cheap one less than $150,000 or either investing $10,000 in the shares. Just wondering what would be my best bet long term considering If I held onto either option for 20 years. Im thinking shares mainly due to the investment of only $10,000 now as im not sure if I could afford to borrow $150,000 again. Is there any point to buying $10,000 worth of shares or to make money do you need to invest more.

Thanks

Hi mate,

Just a few things, this is how I see it:

1. Get clear on what the goal is. You seem to want long term growth (20 years). OK. Talk to a broker to see what your financial capability is before you make a decision mate. Last thing you want to do is assume that you cant afford it, and its the wrong assumption.

2. The beauty of investing say 15k deposit into a 150k asset is now you have a percentage of growth not on your 15k but on 150k asset which is compounded each year. So effectively you are using 15k or so, to control a 150k asset. With conservative growth for 20 years, lets say your asset base more than doubles to 350k (not uncommon for a 20 year period). So after 20 years you now have at least 200k equity (give or take) not taking into accounts other costs etc or increasing rents.

3. If you invest 10k in stocks, anything is possible. It could be a miracle stock and go up to $10,000,000 in 20 years. is it likely? Will the 10k go up 2000% to get you a 200k return? Which scenario do you think is more likely? Granted nothing is certain , but try to weigh up both possibilities. You make the judgement

Good luck

Leo

 

[redwing]

Here's a couple of shares that enjoyed some nice growth over the last decade

Fortescue Metals Group Limited
13,735%
Aurora Oil & Gas Ltd.
7,024%
REA Group Limited
6,332%
CTI Logistics Limited
3,052%
Tox Free Solutions Ltd.
2,718%
Steamships Trading Company Limited
2,225%
Monadelphous Group Limited
2,106%
Cromwell Property Group
2,017%
Sandfire Resources NL
1,970%
McMillan Shakespeare Ltd
1,767%
Webjet Ltd.
1,754%

Next One

No Idea

I think from early 2009 to now the US Market is up just over 100% (plus dividends) and the Aussie Market up 60% (plus dividends).

 

[redwing]

From an earlier post on property

From Domain (where they talk about the last 50 years of price appreciation)

1973, median house prices across Australia's capital cities looked something like this:

Sydney
$27,400
Melbourne
$19,800
Brisbane
$17,500
Adelaide
$16,250
Perth
$18,850
Canberra
$26,850
Hobart
$15,200
Darwin
$87,500 (information unavailable until 1986; this value reflects 1986 housing costs)

September 2014 numbers from Domain Group's House Price Report:

Sydney
$843,994
Melbourne
$615,068
Brisbane
$473,924
Adelaide
$459,258
Perth
$604,822
Canberra
$573,326
Hobart
$322,274
Darwin
$667,115

Back in 1973, the average weekly wage was $111.80 (including full- and part-time workers), according to the Australian Bureau of Statistics (ABS). Today, a full-time worker makes on average $1453.90 weekly (before tax). However, in the house price report, Dr Andrew Wilson, senior economist for the Domain Group, predicts that housing-market activity will continue to decline as affordable housing falls, joblessness increases and consumer confidence wavers.

 

[xactly]

use this and have a play:

http://www.noelwhittaker.com.au/stock-market-calculator/

5 years?. not so much 9%

In 10 years 10K rises 120% (remember this has included the GFC)
your money is just over doubled.

In 20?500%.. try getting that with a 150K house.

It depends on the length of time you leave it in.
You don't have to pick the next Fortescue and sell out at the right time. seeing the future is a skill humans lack.
And they often mistake luck for foresight

The indexes will get you there safely.

you have a PPOR and an IP.
deversify
you need both. ATM you have no liquidity.

 

[LeoT]

you have a PPOR and an IP.
deversify
you need both. ATM you have no liquidity.

Do you really need to diversify from property after only 1 IP?

Interesting.


Leo

 

[xactly]

im not sure if I could afford to borrow $150,000 again. Is there any point to buying $10,000 worth of shares

Thats the reason he needs to leave it at 1 IP for now.

He is outside his SANF

He is outside his borrowing limit

He has no liquidity. His choices are offset or shares.

There is a point to buying 10K of shares if his time frame is 20yrs as he mentions.
if his timeframe is <5 years the offset is safer
Noels calculator will prove it to him.

 

[LeoT]

Hi Xactly,

that's why my first point was "1. Get clear on what the goal is. You seem to want long term growth (20 years). OK. Talk to a broker to see what your financial capability is before you make a decision mate. Last thing you want to do is assume that you cant afford it, and its the wrong assumption."

He is not sure yet. He needs to be sure, before he makes a decision.

Cheers

leo

 

[xactly]

Regardless of what his broker says, I still think he should investigate shares.

Ive noticed a couple of themes from somersoft.
1. people post wildly excited about the upcoming sharemarket after pro- property only under thier belt. this usually means a market crash is coming.
they would have seen it coming if they had more experience in the market and been less blinkered from complete naiveity.


2. There is a total obsession over irrelevant number of properties ("how many do you have" polls?) while ignoring the real stuff.
yeild LVR, cashflow. qualityof asset base
you never hear this on the share discussions
eg "I have 445 BHP shares yeaahhhh!"
no!....its all about 10% gain etc...much more usefull

as successfull investors, a wide and comprehensive knowlege of both asset classes is required for flexibility and control.
look at Keithjs famous post on the stories thread where he successfully switches back and forwards between assest classes.
He is successful because he has been playing with both for years.

See Change has been very successful in property and admits he uses share trading principles BUT in the property market. and follows the market trends and chatter very well.

So to a clearly novice investor post....
My advice is play with both IP and Shares while the numbers are small. Then you wont make rookie errors when the numbers are bigger. It is easier to deal with a 10% drop of 10K then 100K as a first step.

There are a number of posters who did well in the boom times, plunged on the stock market, flushed with thier success in one assest class and lost heavily cometh the GFC.
Why?
because they ignored the other assest class'sbase knowlege.

The rule is
Get as much as you can, as quick as you can, and hold it for as long as you can
that applies to:
Property
Shares
....and Knowlege...

 

[LeoT]

Regardless of what his broker says, I still think he should investigate shares.

Ive noticed a couple of themes from somersoft.
1. people post wildly excited about the upcoming sharemarket after pro- property only under thier belt. this usually means a market crash is coming.
they would have seen it coming if they had more experience in the market and been less blinkered from complete naiveity.


2. There is a total obsession over irrelevant number of properties ("how many do you have" polls?) while ignoring the real stuff.
yeild LVR, cashflow. qualityof asset base
you never hear this on the share discussions
eg "I have 445 BHP shares yeaahhhh!"
no!....its all about 10% gain etc...much more usefull

as successfull investors, a wide and comprehensive knowlege of both asset classes is required for flexibility and control.
look at Keithjs famous post on the stories thread where he successfully switches back and forwards between assest classes.
He is successful because he has been playing with both for years.

See Change has been very successful in property and admits he uses share trading principles BUT in the property market. and follows the market trends and chatter very well.

So to a clearly novice investor post....
My advice is play with both IP and Shares while the numbers are small. Then you wont make rookie errors when the numbers are bigger. It is easier to deal with a 10% drop of 10K then 100K as a first step.

There are a number of posters who did well in the boom times, plunged on the stock market, flushed with thier success in one assest class and lost heavily cometh the GFC.
Why?
because they ignored the other assest class'sbase knowlege.

The rule is
Get as much as you can, as quick as you can, and hold it for as long as you can
that applies to:
Property
Shares
....and Knowlege...

HI xactly,

I actually disagree with most of your post on a few levels. But i respect your right to have an opinion. Just have to agree to disagree

Leo

 

[brocky05]

Interesting advice. Im pretty sure I can afford a lazy 10K on shares I must admit im scared to jump into another property and if I did it would be in a cheap suburb possibly spending less than $150K. I have found quite a few suburbs in S.A Victoria and Tasmania where you can pick up a old 3 bedroom house for under 120K. Who knows what could happen in 20 years time pick the right suburb that grows and I guess your laughing.

I have never really met anyone though that has bragged about shares making them a bucketload of cash whereas property you hear stories everyday. My grandparents had alot of shares but I think they did very poorly. As a teenager I always wanted to buy Woolworths shares when they were trading at about $5.00 each I really wish I had money back then..... when I was 23 I bought $2500 worth of Telstra shares sad I know but I had a low paying job and its all I could afford I guess it stopped me wasting money on cars as I blew most of my wage on stupid cars every week. Really would like to pick up a good stock and this time buy a decent amount to make some more money. Sometimes I just think im a bit to late to enter into the property game and really wish I had my head switched on when I was younger....

 

[brocky05]

Wondering if anyone with some knowledge of coal mining think that Yancoal shares be any good since they are trading at 14c per share at the moment. I have heard that coal mining is pretty risky especially in the future but then again I dont know much. Anyone got any advice to shed.

Thanks

 

[pinkboy]

Wondering if anyone with some knowledge of coal mining think that Yancoal shares be any good since they are trading at 14c per share at the moment. I have heard that coal mining is pretty risky especially in the future but then again I dont know much. Anyone got any advice to shed.

Thanks

No one can tell you what you should buy. I will point out to look at a stock's chart, it's financials, it's liquidity and it's future prospects in your decision. Apply that to each share you look to buy and either buy with confidence or move on to the next.

pinkboy

 

[redwing]

Wondering if anyone with some knowledge of coal mining think that Yancoal shares be any good since they are trading at 14c per share at the moment. I have heard that coal mining is pretty risky especially in the future but then again I dont know much. Anyone got any advice to shed.

Thanks

I don't know anything about them

Chart below (down about 84% over the last 2 years)

 

[Adrian Cahill]

Some great advice here.

My question would be, whats the purpose of asking?

It's a very broad question. So as Leo and perhaps other people may have asked, whats your goal? If unsure perhaps figuring out where you want to be will help more than the specifics as to what exactly to invest in.

 

[xactly]

Wondering if anyone with some knowledge of coal mining think that Yancoal shares be any good since they are trading at 14c per share at the moment. I have heard that coal mining is pretty risky especially in the future but then again I dont know much. Anyone got any advice to shed.

Thanks

OMG

do not dive in with your 10K to a spec stock and hope it will come good.

go and read chinas posts who has plunged heavily on a "blue chip" miner and is now hurting.
the macro economics do not support a short term investment in miners (long term, yes BHP is getting cheaper but you must be prepared to wait.... quite a while....)

think about your WOW shares you "almost bought"
how much would you have now if you reinvested the divs and just left it the hell alone?

it will have given you less trouble than a falling apart IP i would wager.

I suggest with shares.
work out whether you are a trader or an investor.
go and read everything on the forum by intrinsic value and chillia. I believe a thread has been resurrected lately.

Hint: most traders lose money as they are:
1. not psychologically suited
2. not clairvoyant and seeing the future is quite helpful in trading

seriously look at yourself and your timeline. are you an average investor who gets guided by emotion?
stick to indexes and LICs
As Warren Buffet says, the average person should buy the index and stick to his day job.

Do you need yield? or a different take on the capital growth mantra?
Read Peter Thornhill
http://www.motivatedmoney.com

all the best, tread carefully
I hope this helps

 

[Terry_w]

and Tasmania where you can pick up a old 3 bedroom house for under 120K. Who knows what could happen in 20 years time pick the right suburb that grows and I guess your laughing.

Yes the property could be worth $120k in 20 years time. I had a client investing in Zeehan 10 years ago for around $120k - is this the area you are talking about?

 

[Terry_w]

Do you need yield? or a different take on the capital growth mantra?
Read Peter Thornhill
http://www.motivatedmoney.com

This is a great book. I suggest you read it too.

 

[Angel]

A decent basic share book for novices is released at the end of each year, by Australian author Martin Roth. It is called Top Stocks (2014) and in it he summarises what I understand to be the top 100 companies currently on the ASX. I am a total share novice and I like that he talks about all our favourites - BHP, Woolworths, Wesfarmers (bunnings) etc, in total idiot laymen's terms.

I purchased one or two editions in the GFC but since then just borrow the new edition each year from my local library and photocopy a few pages that I want to keep.

Brocky, If you want to spend $10K on shares, my only tip would be to buy a few different ones rather than just one company. For what it's worth, I bought a similar amount in 2009 and they roughly doubled in value by the time we sold out most of them last year. The two stocks we kept have dropped a lot since then.

Disclaimer: I haven't read one in the past few years so I don't know if they are still reliable. If I had have read more recently I probably would have sold our BHP when they were $39 each a few months ago.