Motivated Money by Peter Thornhill... Shares for Property Investors!

[JIT]

opportunity in my limited sephere of knowlege (my returns on property have exceeded my returns on the stock market, but maybe that was just due to a limited window of opportunity in my area of limited property knowledge)

I think I will do the same, but with my ''limited sphere'' in shares.

Over the very long term, shares should outperform because they are the most risky, its basic risk vs return. This has been supported by the 'long term' statistics. But long term here can really mean long term

...

the key to dollar cost averaging in an indexfund is to maintain it regardless of timing.

That's why an SMSF is well suited to share investing for me, as I won't be able to access the $ for at least 25+ years!

I'm glad that the statistics support the theory behind this approach.

 

[Sunfish]

Ohhh does the amount of shares you get offered to purchase based on the amount you already own?

It varies. The fairest way is an X:1 issue but there is usually a minimum issue and you can bid for more (post a cheque with the application) but (now that I think of it) they are usually non-renounceable ie you have no option to on-sell.

 

[Sunfish]

I'm glad that the statistics support the theory behind this approach.

JIT. Please don't use faceless people on a property forum to advise you on shares. There is a lot of opinion presented as fact with no supporting proof.

 

[Piston Broke]

I have to say that it has, to my surprise, made me re-consider my "property bull" status! - and consider putting more of my $ into shares.

I'd be very careful with this type of investment.
His website says: "As a successful investor himself"
So where do I find the numbers & performance of his investments mainly those pertaining to equities?
And I have'nt read the book, but if it's another of those "buy anytime" I think it's a waste of time. It's a sucker strategy.
Unless you have enough income that loss making investments are not of concern of course.

There's been plenty people advocating the index fund $ cost approach as well, Noel Wittaker was doing it 20 yrs ago in some book & tapes course.
But from where I sit, making good returns from shares without timing the market is just about impossible over the long term.

At the end of the day, the MOST important message i can impart on people, is that investing in shares is very similar to investing in businesses.
In todays world there is too much removal of ownership of businesses (and that is all that a shareholder is)

I strongly disagree that share prices are correlated to business "ownership" data (P/L & balance sheets).
Buying XYZ shares may in theory give you ownership but the share price is very vaguely related to the actual business performance.
There's a lot more going on.\

the key to dollar cost averaging in an indexfund is to maintain it regardless of timing.
Someone might out there might want to do a statistical analysis of the Japanese market with dollar averaging.

From what I see the equities bear market n Japan has been 20 yrs.
40-20 yrs ago they were going to take over the world.
But looking at this chart, I can't see any great results coming from this strategy.

I'm glad that the statistics support the theory behind this approach.

Statistics can support or not support pretty much anything.

 

[Amadio]

Trying to wrap my head around it

So you get offered to purchase new shares upto a certain amount Eg. $15,000 at a discounted rate and no brokerage fee's, but if you don't want to purchase them you can actually sell your entitlement to those benefits (or collect them to sell at a later date) and collect some cash.

so you can either

1.) purchase the shares under the new issue
2.) sell the rights for some cash?

Ohhh does the amount of shares you get offered to purchase based on the amount you already own?

let me know if im on the right track or totally off

Yes, you are on the right track.

Sometimes the amount of shares you get offered have no bearing on the amount you already own.

Here's an example of an offer I had:
I've owned shares in a little gas company called Karoon for years, and some time last year they offered non-renounceable shares (so I could not on-sell ) in amounts from $1000, $2000 and so on up to $5000. Even huge shareholders couldn't buy more than the $5000 worth.

Right before the deadline I bought the maximum available - the share price was something like $11 or $12 at the time but the rights issue price was only $6.70. It was a total no brainer.

When the offer came through I immediately turned around and sold on market and made a very easy profit.

It doesn't happen so dramatically like that with companies like ARGO or banks because they are not as volatile as little mining and gas companies.

In your case with ARGO you'd take up all the rights issues offered as a strategy to build up your holdings at a discount.

The one thing you have to consider about rights issues is that if you don't take them up, and other people do, then the value of your own shareholdings can be slightly diluted. But this is of more concern with smaller companies and big shareholders.

 

[Intrinsic_Value]

From what I see the equities bear market n Japan has been 20 yrs.
40-20 yrs ago they were going to take over the world.
But looking at this chart, I can't see any great results coming from this strategy.

Statistics can support or not support pretty much anything.

i deliberately used Japan as an example just because the long term returns have been sooo p**ssy.
Trying to get a feel for dollar cost averaging in such an environment over the long term (together with dividend reinvestment).

 

[D.T.]

I bought and read the book after someone on here recommended it. It wasn't very good in my honest opinion.

It just kept repeating that the share market is worth a billion times more than it used to be, therefore buying and holding forever is a good idea. I was already of this belief. It didn't specify any means as to pick one company over another though, or part any advice on how to read fundamental nor technical information on them. It also had a lot of negative things to say about property which I thought were an unnecessary attempt to further flog it's maxim of buy anything, hold it forever and prosper.

My portfolio/strategy includes both buy and hold real estate and shares. The book hasn't provided me with any insight on this, unlike jan somers, robert kiyosaki, peter spann, et al

 

[Intrinsic_Value]

I strongly disagree that share prices are correlated to business "ownership" data (P/L & balance sheets).
Buying XYZ shares may in theory give you ownership but the share price is very vaguely related to the actual business performance.
There's a lot more going on.\

In the short term i agree with you, and i think the 'non-business ownership' influence is increasing.
Over the longer term the market eventually prices the share within a correct range.

But herein lies one of the keys in my opinion, which do you want:
short term out performance or long term out performance.

I believe its nearly impossible for ANYONE to consistently outperform the market in the short run, medium run and long run.

With market pressure for short term results (monthly reporting, quarterly reporting, annual reporting of results), i believe a sensible private investor can achieve outperformance by concentrating on the medium to long term.

Please also note, my original comment was badly written (hey whats new), i was trying to highlight that a focus on dividends doesnt remove the obligation to look at the underlying business. If one doesnt want to look at the underlying businesses, then they have to use a 'scatter gun' approach, but this involves significant amounts of capital.

 

[.toe]

Personally I dont care whether shares or property performs better. For me it's more important to know whether Property Investors or Share Investors perform better.

It's not just about the asset class, it's about a whole lot more, leverage, tax, control of the asset, reliability of information, liquidity, risk.

How many share investor millionaires are there vs property investor millionaires (excluding super & family home)? How fast can a person of specific skills and means increase their wealth investing in each asset class? Thats way different to whether shares or property perform better.

 

[D.T.]

How many share investor millionaires are there vs property investor millionaires (excluding super & family home)? How fast can a person of specific skills and means increase their wealth investing in each asset class?

I don't really understand how that's relevant. Both vehicles are required in my journey, and perhaps one or the other in some people's. That doesn't make one asset class better than another. They achieve different things at different times in the cycle.

 

[.toe]

I don't really understand how that's relevant. Both vehicles are required in my journey, and perhaps one or the other in some people's. That doesn't make one asset class better than another. They achieve different things at different times in the cycle.

Agree, but the point I'm making is that at any point in the cycle the important question will be 'which asset class would I profit from most?', rather than 'which asset class will perform better?' during the next period.

 

[Sunfish]

Most people I know who are doing nicely and living well at the same time (a big boat anyone?) are in business. They use property where required and shares for retirement.

The best way to retire is to sell the business complete with a 5X5 lease on your commercial premises. But they don't seem to want to retire early.

 

[Sunfish]

Agree, but the point I'm making is that at any point in the cycle the important question will be 'which asset class would I profit from most?', rather than 'which asset class will perform better?' during the next period.

Nobody can tell you that. They can talk of investment cycles but history doesn't repeat. You must make your own judgement after doing a lot of reading, way beyond this narrow interest forum.

Ya pays your money and ya takes ya chances.

 

[.toe]

Nobody can tell you that. They can talk of investment cycles but history doesn't repeat. You must make your own judgement after doing a lot of reading, way beyond this narrow interest forum.

Ya pays your money and ya takes ya chances.

Yeah yeah, but I think I put the wrong emphasis on my statement. I'm not saying you have to predict the future, I'm saying that other things about the asset classes are prolly more important than performance. Such as greater liquidity in shares (quicker exit in front of disaster), or greater leverage in property (more buying power).

If we think there'll be a difference in asset performance, it'll prolly be offset by making the right (or wrong) individual decision on those other issues.

 

[Piston Broke]

Please also note, my original comment was badly written (hey whats new), i was trying to highlight that a focus on dividends doesnt remove the obligation to look at the underlying business. If one doesnt want to look at the underlying businesses, then they have to use a 'scatter gun' approach, but this involves significant amounts of capital.

I get what your saying, my point (though a bit radical for some) is that from the outside you don't know what's going on inside any of the listed corps.
You cannot rely on "experts", stock pickers, analysts, brokers and least of all company press releases etc.
Surely the drop of 08/09 made this obvious once again.
All you or anyone else can have is an opinion, because the facts you wont have until long after they've happened.

Nobody can tell you that. They can talk of investment cycles but history doesn't repeat. You must make your own judgement after doing a lot of reading, way beyond this narrow interest forum.

I agree that putting history in nice cycles is very convenient and an easy sell, but far from reality.
But I do believ "conditions", "situations" & "circumstances" will repeat, and what happened once before can happen again given the same "conditions". Sure the catalyst for those situations may be different, but human nature and the biz of BS hasnt changed for a quite a few centuries.
So I don't see it changing anytime soon.

 

[Sunfish]

We're saying the same thing PB (like your nick BTW).

But I do believ "conditions", "situations" & "circumstances" will repeat, and what happened once before can happen again given the same "conditions".

That's why we've got to do a lot of reading.

For example: Printing too much money as most nations are doing now will, inevitably, lead to high inflation. But they've been doing it for years so why aren't we in inflation? I suggest it's because there is still no velocity of money but that is simply my interpretation. My reading says the US in particular is in deflation and that is not about to change any time soon.

All I can do is make my own decisions and hope.

 

[Player]

................. Printing too much money as most nations are doing now will, inevitably, lead to high inflation. But they've been doing it for years so why aren't we in inflation? I suggest it's because there is still no velocity of money but that is simply my interpretation. My reading says the US in particular is in deflation and that is not about to change any time soon.

All I can do is make my own decisions and hope.

I'm trying to understand all this so a few comments posed as questions?

Is velocity down because of sentiment, mood and the white wash of the US (and global) smoke and mirrors?

To increase spending they can increase supply of money.........printing presses working overtime and provide hand outs...stimulus packages.

They could also reduce the cost of money...........not so relevant here as our interest rates have increased, however most of the world is at historical (or near historical) lows.

If they overstimulate the patient, then the sudden sugar rush will lead to an eventual let down and the patient becomes diabetic or worse still lapses into a diabetic coma..............hyper-inflation.

Is that how it goes?

 

[Sunfish]

I'm trying to understand all this so a few comments posed as questions?

Is velocity down because of sentiment, mood and the white wash of the US (and global) smoke and mirrors?

It is down because of "deleveraging". Most of the trillions of almost free money Obama has given to the banks has stalled in their own balance sheets. The are aware that they can't continue with 99% LVRs in todays climate.

To increase spending they can increase supply of money.........printing presses working overtime and provide hand outs...stimulus packages.

Only if someone has a reason to borrow with a good chance of making a return good enough to repay P&I.

They could also reduce the cost of money...........not so relevant here as our interest rates have increased, however most of the world is at historical (or near historical) lows.

Yea. Australia is a pimple on the bum of an elephant. In the big wide world, JP Morgan Chase (for example) has access to more money at 0.25% than their clients will borrow.

Edit: Maybe that should read "More than they want to lend to their over-streached borrowers".

If they overstimulate the patient, then the sudden sugar rush will lead to an eventual let down and the patient becomes diabetic or worse still lapses into a diabetic coma..............hyper-inflation.

Is that how it goes?

About that. But don't overlook the deflation. The Greater Depression is still a real possibility but I still lean towards an inflationary depression. Just don't ask me to describe that.

 

[JIT]

Also JIT how often do you do you plan to do your Dollar cost averaging? every month, 6 months, 12 months?

I'm planning to do monthly

Haven't decided yet, but from what I've read in the past there's no evidence that there will necessarily be any difference whether you do it monthly or 6 monthly etc.?

 

[JIT]

I'd be very careful with this type of investment.
His website says: "As a successful investor himself"
So where do I find the numbers & performance of his investments mainly those pertaining to equities?
And I have'nt read the book, but if it's another of those "buy anytime" I think it's a waste of time. It's a sucker strategy.
Unless you have enough income that loss making investments are not of concern of course.

You should read the book PB, would be interested in your thoughts on it.

But from where I sit, making good returns from shares without timing the market is just about impossible over the long term.

I would disagree with this.

I think for the most part that it is very hard to outperform the index in the long-term, regardless of what strategy you use.

And making ''good returns'' depends on what your primary use for this asset class is, ie. growing your capital base, or growing your long-term income stream.

If the income continues to increase over time and remains relatively stable, and if this is what sets you free and allows you to retire, of what significance is the gross value of the shares you hold at any one particular point in time?