I'm down $2k in ASX Share Game
- Thread starter nhb74
- Start date
I've got news for you - it is ALL play money 
money is only a concept
money is only a concept
I just logged in to check my account:
Total portfolio worth $46,580.71
Down $3500.
I haven't been trading though, just bought, held and forgot.
After I found you could only trade the top 100 shares and that you couldn't place more than 25% of your funds in one trade I didn't bother further. Also don't have time to be playing all day and changing positions.
Total portfolio worth $46,580.71
Down $3500.
I haven't been trading though, just bought, held and forgot.
After I found you could only trade the top 100 shares and that you couldn't place more than 25% of your funds in one trade I didn't bother further. Also don't have time to be playing all day and changing positions.
Be thankful it's only a game. I've been margin called twice in 5 months (and covered with cash both times).
I've got news for you - it is ALL play money
money is only a concept
Tell that to the bank manager
Hi Marc,
I know there is a serious side to $ as well
But to continue my theme: The bank manager of all people should know that money isn't real
Whether or not money is 'real' isn't really that relevant. The fact that most people will exchange goods or services for it means that it's real enough to perform its intended task.
Generating money is another matter. Converting it into 'real' money is where the rubber really meets the road.
Generating money is another matter. Converting it into 'real' money is where the rubber really meets the road.
Agreed
Here's a scenario I was thinking about the other day. You buy an IP say for $300K and it goes up say 20% over 2 - 3 years. So now it is valued by a bank valuer at $360K. I go sign papers at the bank to draw down some of the available equity - say $30K.
What do I do for the $30K - nothing (signed a paper)
I buy a car for $30K (say)
Where did that car come from? I own it. I drive it. I can sell it.
The house I had is exactly the same as it was 3 years ago. Maybe in worse condition.
Didn't I just get money for free?
If you don't agree, lets say I decide not to make any repayments to the bank. They repossess it and sell it for market val completely extinguishing the debt.
So where did my car come from?
No? You've increased your initial loan balance, and are now paying interest on that debt. You're also more exposed to price volatility, in the event that prices soften after that valuation.
They wouldn't though, because I assume the car wouldn't be used as security on the loan. They might foreclose on your house, which would leave you out of pocket for the selling costs, especially seeing they won't be trying too hard to get top dollar.
If you had no existing equity in the property, you'd be lucky to see nothing from the sale, assuming you didn't owe them afterwards. You'd have a spiffy new car to live in, though...
More exposed, Yes. Paying interest on additional debt - Yes. Say the rental increase covers the additional repayment and prices don't soften - this is say 2002.
The market is OK - rising steadily. The bank takes it to auction and a good marketing campaign. They get a good price and actually owe me some of the proceeds. They send me a cheque for $10K and I get a bad credit rating.
Yes, but remember I had only drawn $30K of $60K worth of equity - pretty safe.
Where did my car & $10K cash come from? (The new home owners now) But before the bank sold me up, where did my car come from?
This isn't any different to if you got an unsecured loan for a car, and then sold a property at a profit and paid it off. Hell, you might even win lotto in the meantime.
The money came from a trade that you executed. You could have bought shares and sold them at a profit, or even bought cheap wholesale items and sold them on ebay. The money comes from a market where a participant is willing to pay more than you did to secure the asset from you.
Mind you, there's many variables. Perhaps you negatively geared that property, and lost money - or perhaps it was positively geared and you made a profit off the rent as well. None of the money is magic - equity isn't free money, it's just a reflection of the willingness of the market to pay a higher price for the asset and therefore the bank's willingness to adjust their perceived value of your security against the loan.
Of course you have the text book answers Nat and this was all in a bit of fun in any event but when you are older and have seen and experienced some things, you might see things differently. (not meaning to be as condescending as this sounds written down)
But in my view, equity really is free money and if rents increase to service the debt on it then it truely is free........and I suspect what LOE is all about. You get to live for free.
Fair call, we all rationalise things differently - I'd love to have a LOE strategy one day but first I have to worry about earning lots of your free money stuff to make it work
Yes, Nat, you are what we call in the biz "in the accumulation phase". Me 2 FWIW
but its coming......
