Hiya,
See, I don't have either of those things. It probably would have been more accurate to say that I like the idea of gold.
Cheers
James.
Shares Vs Property
- Thread starter Croc Dundee
- Start date
Hiya,
See, I don't have either of those things. It probably would have been more accurate to say that I like the idea of gold.
Cheers
James.
A few years does not make a cycle. We will see with property in the next 5 or 10 years. I suspect in the long term it's return is the same as shares. I think every asset class has it's day in the sun. last week it was shares, yesterday it was property. Today it is cash and treasuries. Against everyones expectations, I suspect cash and treasuries may overperform for another few years.
Wonder how many people are saying the same. I'd say that's a contrarian indicator that we have reached the peak in relative price divergence between these 2 asset classes
Time will tell.That is an odd reply on a forum that worships the God of "capital gains" even if the investment needs a grand a month to keep it afloat.
But if you want an income (LOE doesn't cut it as income for me) trade!
ps Trading sounds a lot easier than taking a few weeks of work to do a reno.
I must ask: Why does everyone think some trading is harder and riskier than spending all your spare time finding ways to invest millions you don't have in property you must work at constantly?
Maybe its to build a future passive income stream rather than have to work for the rest of your life????
I'm with Chilliaa,
Passive income is what gives true freedom in life. Trading is just another job and high risk at that.
I'll stick to mostly dividend income which is relatively more stable than capital (see graph attached). Even back in the Great Depression I think the cut in dividends was at worst around 30% in aggregate. No problem. I allow for at least this and the possibility of a few stocks blowing up in calculating future income especially in the short to medium term. The downside risk of stocks is limited to the initial outlay but the upside is unlimited. Plus the longer the stock is held and hence more and more dividends are paid then progressively less of the initial outlay is at risk. And in our case we don't own anything that doesn't pay a decent dividend. Finally with a bit of common sense diversification of quality stocks along with other income producing asset classes the risk of a major dive in income is minimised. But a sensible person will also maintain cash or a buffer of some kind to get them through a few years of tough times in the case of a worst possible scenario.
However I have to agree that at the end of the day it's each to their own of course. I'm very conservative and need a strategy accordingly that allows me to sleep well at night and to be able to take off on long vacations, fishing or whatever for any amount of time without having to monitor our investments frequently.
Cheers - Gordon
Passive income is what gives true freedom in life. Trading is just another job and high risk at that.
I'll stick to mostly dividend income which is relatively more stable than capital (see graph attached). Even back in the Great Depression I think the cut in dividends was at worst around 30% in aggregate. No problem. I allow for at least this and the possibility of a few stocks blowing up in calculating future income especially in the short to medium term. The downside risk of stocks is limited to the initial outlay but the upside is unlimited. Plus the longer the stock is held and hence more and more dividends are paid then progressively less of the initial outlay is at risk. And in our case we don't own anything that doesn't pay a decent dividend. Finally with a bit of common sense diversification of quality stocks along with other income producing asset classes the risk of a major dive in income is minimised. But a sensible person will also maintain cash or a buffer of some kind to get them through a few years of tough times in the case of a worst possible scenario.
However I have to agree that at the end of the day it's each to their own of course. I'm very conservative and need a strategy accordingly that allows me to sleep well at night and to be able to take off on long vacations, fishing or whatever for any amount of time without having to monitor our investments frequently.
Cheers - Gordon
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Same same, I'll be flat out getting Radio and TV reception in a lot of the places we will be cruising, let alone phone or internet.
The Coconut telegraph just aint good enough for trading
Dave
Way to go Dave -sounds damn good to me. But are you reeaaallly sure you wouldn't prefer to be stuck in front of the screen trading commodities?
Cheers - Gordon
I love these sought of posts, people always reactive to near term data bias when making their investment decisions. I wonder how US investors with exposure to residential property in florida or Laz vagas apartments are comparing the share vs property argument
My portfolio of australian shares is up some 20% from its november lows, the current market price is around $900k and the gross dividends are around $105,000. I have a property portfolio that has a market price of around $2.1 million with net rent of around $89k.
thats a great effort in this market!
what shares are you holding chilliaa?
if we purchase them your price will go up so its a win-win disclosing anyway
thats the what, but whats the why?
why did you purchase these particular shares when you did?
thats a great effort in this market!
what shares are you holding chilliaa?
if we purchase them your price will go up so its a win-win disclosing anyway
thats the what, but whats the why?
why did you purchase these particular shares when you did?
B]The why [/B]
isnt so smart, just logical. Simple dollar averaging on fundamentally sound shares. I wasnt in the australian share market prior to 2008 (ok maybe i had a few stocks back then, but as a % of the size of the current portfolio its negligable) because i couldnt see value. I actually think that the market is 2007 wasnt crazily over valued, but it also wasnt cheap enough to compensate me for potential risk, ie the long term risk/reward didnt add up.
As the financial crisis has evolved into a liquidty crisis for non-financial stocks, i was forced to increase my stock screening process to eliminate stocks that had high debt ratios (even if their underlying business was perceived as strong).
This caused financial pain as certain stock loss positions were realised (hence the permanent erosion of that capital). However in hindsight it was beneficial as those exited stock positions are showing materially lower share prices now (In my case BnB, TIMPB, MQG, VGH, DEX, CND etc).
I also used critical points of market weakness to upgrade the quality of stocks (ie on really down days even the best of stocks get hammered, therefore you can switch from lower quality stocks into higher quality stocks because the diamonds are being thrown out with the chaff). This enabled me to acquire positions in QBE in early 2008, COH in mid 2008 and CSL in Nov 2008 at very attractive prices.
My favourite and least risky investment strategy is simple:
Buy strong companies at attractive share prices
buy strong companies at prices which are attractive on a long term basis (5yrs+). I cannot influence nor can i predict short term market prices, however if i invest in strong companies, i can get a fair view on where they should be over the long term (because of the consistency in their earnings). I can then use the markets short term bias to my advantage.
For example, lets assume i am familiar with company XYZ. Ive gone through their financial statements for the last 5-10yrs and confirmed that they have long term earnings growth stability, they have market leading positions (ie market dominance), free cash flow, strong ROE & ROIC, low debt to equity.
I can be reasonably assurred that they will grow earnings over the long term (short term downswings in earnings im not worried about, its longer term earnings power that i am focussing on).
So lets say that i feel that this stock would have a fundamental 'reasonable' share price of $5 in five years time. So thats my 5 yr target price.
Now lets say the current market price is $4. I look at the expected dividend stream (which is like income to compensate me for the time factor of holding the stock) and the future capital gain. At $4 i think its not worth the risk, but after waiting the market prices it down to $3. At this point i am happy and i buy. Afterwards the market price goes down to $2.5, do i sell, hell no. At $2.50 my estimated future return has just increased so i dollar average.
If the market price goes to $2, again the expected future return is higher again, so i just dollar average again, as that new money allocated will achieve a higher return.
The key here is to
1) make quite sure your stock can come out the other side, ie there is no point dollar averaging into a position that reaches zero. Just ask those investors who dollar averaged into BnB, Centro, ABC learning etc.
2) make quite sure you really understand the underlying business. If you understand the underlying business, then you are not so stressed when the market price falls as you can be quite confident that the market will one day reprice the security at its correct value. Its when you rely on broker reports, tips from friends the internet etc, that you get into trouble as you see the drop in market price as a potential permanent erosion of your capital.
When to Sell:
You sell when the market is pricing your shares at a level where you are no longer being adequately compensated for holding the stock, this is calculated as the sumation of the dividend stream + future share price as reflected by its long term earnings stream.
My second strategy is near term pricing inefficiences. This strategy is far more risky as you are investing in companies that dont have the same strength as in the first strategy (hence if you are wrong on your pricing point you have a greater chance of incurring permanent loss of capital).
I have used this second strategy with GPT to exit my position without incurring a capital loss. I acquired an average position in GPT at around $1.10 on the belief that the share price was significantly less than its NTA (hence giving me a margin of safety). What i didnt account for was the foreign exchange impact of its overseas loans. This increased my uncertainty and i was looking for a way to exit my position. When the company did its rights issue, i subscribed to the rights issue at 60c, and offloaded my orginal holdings at 90c odd. Incurring a capital loss of $0.2. Once i received the rights issue i offloaded them at 85c resulting in a net profit of 5c a share before transaction costs. People reading this however should take notice, that with all the additional capital placements since the GPT placement, the market is becomming fatigued, so this kind of exit strategy is becoming more risky.
I also used this strategy with GUD. GUD is not a great company, but in Nov/Dec i acquired a reasonable position at $3.85. At this price it was was trading at a PE of less than 8, it had high interest cover, gross dividend ylds of 23% and most importantly in its AGM (which was at the end of Oct and so management would have had a fair idea of the 2nd half result) the Chairman and CEO's address was reasonably upbeat.
The stock got repriced by the market and i offloaded half my holdings at $6. Why, because at this price as i said GUD is not a great company, at $6 the dividend yld drops to 15% (but with yld uncertainty because of the nature of this business hence there is no guarantee that i would actually get 15%) and the long term sustainable earnings growth of this company is only a couple of percentage points a year hence its not suitable as a long term buy and hold.
The what:
Great Companies (you need to work out the attractive price level, i can only give my opinion that the company is 'great', and remember for a successful investment not only do you need to pick the right company, you also need to enter at the right price.)
*All big 4 banks, CPU, QBE, COH, CSL, ASX, IRE, BHP, WOW and maybe CCL and LNN
Second tier companies:
*You must do your own research on this, there are too many variables and risk profiles on these stocks.
I currently hold investments in over 40 companies which is probably too many, but with the wild swings and uncertainty in the market i prefer to be overdiversified (between shares, not between industries, i dont diversify between industries just for the sake of it) than to take a major hit on any single stock.
I should also note that just because im up more than 20% since November im still down 25% odd since i started investing in the australian stock market in early 2008.
I think you've picked the wrong company there if you want to go into the whole shares vs property debate.
$1000 invested in Westfields when it first floated in 1960 with all returns re-invested would be worth just under $100 million today, and well over $200 million at its peak.
This can't happen to you with an IP portfolio.
[/QUOTE]
Originally Posted by topcropper
shares v property.
So property is the best investment class. Even I will admit that now, and I've been on plenty of arguments in favour of shares.
See ya's.[/QUOTE]
Yep, agreed. I've been pointing this out since the share market started it's plunge into hell. Funnily enough, there was a strong view on here that the share crash was going to mean a resi property boom like what happened in 87 and 2000 with the inverse relationship of shares and property. Some people were cheering on the share crash, hoping the commodity boom would end, etc. This crash I believe has shares and property directly related, like in 73/74, and 1927/33.
Time will tell though.
See ya's.
Originally Posted by topcropper
shares v property.
So property is the best investment class. Even I will admit that now, and I've been on plenty of arguments in favour of shares.
See ya's.[/QUOTE]
Wonder how many people are saying the same. I'd say that's a contrarian indicator that we have reached the peak in relative price divergence between these 2 asset classes
Yep, agreed. I've been pointing this out since the share market started it's plunge into hell. Funnily enough, there was a strong view on here that the share crash was going to mean a resi property boom like what happened in 87 and 2000 with the inverse relationship of shares and property. Some people were cheering on the share crash, hoping the commodity boom would end, etc. This crash I believe has shares and property directly related, like in 73/74, and 1927/33.
Time will tell though.
See ya's.
Its a shame I wastnt even born then to take advantage of that, so I suppose we'll just have to look at their performance during my investing timeframe.
How did they go between 2002 and 2009?
Dave
WDC is one of my biggest holdings - oh and the discount was 13%.
I see the current share price massacre as a great opportunity to buy more, but then again I'm in it for the long term, not short term profits/losses. In 10yrs time WDC will be a stronger company with another 50 malls under their belt many of which will be picked up cheaply from other co's stuggling in the current mess.
I love these sought of posts, people always reactive to near term data bias when making their investment decisions. I wonder how US investors with exposure to residential property in florida or Laz vagas apartments are comparing the share vs property argument
My portfolio of australian shares is up some 20% from its november lows, the current market price is around $900k and the gross dividends are around $105,000. I have a property portfolio that has a market price of around $2.1 million with net rent of around $89k.
Hi
I'm currently in South Fla right now at the heart of subprime land and have been meeting with agents and lenders / banks / solicitors etc etc.
BUT that being said... the property market here is horrible. Like nothing most would understand fully - not even myself until I'm seeing it. If you go to www.zillow.com, which is like re.com theres even a tab for foreclosures.
Sales - land for say 30k selling for 5k, houses original list price 800k now listed at 300k and not selling and getting forclosed on then will go for less. With the agents I was with today, original list 1.3M went for 819k. It just doesnt stop.
But even the prime property is taking a beating.
Interestingly enough you can still get a 90% no doc in Fla from private funders for non us citizens - all they say they want is your passport.
But in comparison to the shares - still taking a hammering here. Lots of people geared up on shares adn then got margin called and wiped out.
So while I too used to be very pro shares I'll admit I'm liking the property angle more and more... reason being is the banks dont want to forclose on the properties - theres just too many for them to do it, and simply they cant. So their illiquidity has actually been a savior
Commercial is getting ready to plop more, plus there were a lot of 0% finance deals on cars which the residuals are coming up in the next few years
All I can really think from the day to day stuff I'm learning is the us is slowing down and its too big of a juggernaut to stop, and its going to take a lot of victims with it.
Cant wait to get back to Oz... its different...
Sure i understand your viewpoint Lukendel.
At the end of the day the most important lession that can be teached, is to invest in an asset class you understand and are comfortable with. Too many naive investors diversify for the sake of diversification without understanding the inherent risks of different asset classes.
I merely used the example of some of the more distraut areas of the US to highlight a point with regards to near term data bias. At the moment many australian investors are still looking at residential property with glass tinted eyes because the asset class has yet to be stress tested.
And trust me, it will, when i have no idea, but just like every asset class, it will have its time in the sin-bin at some point in time.
At the end of the day the most important lession that can be teached, is to invest in an asset class you understand and are comfortable with. Too many naive investors diversify for the sake of diversification without understanding the inherent risks of different asset classes.
I merely used the example of some of the more distraut areas of the US to highlight a point with regards to near term data bias. At the moment many australian investors are still looking at residential property with glass tinted eyes because the asset class has yet to be stress tested.
And trust me, it will, when i have no idea, but just like every asset class, it will have its time in the sin-bin at some point in time.
One of the interesting themes running through the local market is the extent to which recent capital raisings have had on supressing market returns. Basically everytime the market tries to rise, the life gets sucked out of it to finance a new capital raising (as the institutional investors sell one stock to raise funds to participate in the capital raising of another stock).
Anway an interesting comment recently from one of the institutional trading desks concerning this issue (and sorry i cant name the institution on a public site):
One of the team has done a note looking at the quantum of raisings undertaken so far in our market, arguing that they are coming to an end. I don’t totally adhere to this thesis given it ignores repeat offenders (REITS, Banks???) however makes some interesting points.
# Outside the fiscal, monetary and lower fuel stimulus the Australian equity market looks like if could take off!
# Why, because we are coming to the end of the deluge of capital raisings!
# Further, the market is "fixing" itself ie raised capital well ahead of the global peers.
# Since June last year ~$38 billion has been raised by our market by way of DRP's, placements and right issues etc.
# The market cap of the top 100 companies is ~$706 billion. So put another way an average company had raised 5% of its market cap.
# This is pretty material give that many large companies are well capitalised and didn't need to raise capital ie BHP, TLS, WOW, ORG, FGL, BXB & STO.
# In fact if you were to strip out the market cap of BHP, TLS & FGL, the average company has raised 7% of fresh capital.
# A total of 43 companies have raised capital over this period.
# Of the top 20 stocks (where the big capital raisings come from) ~$24 billion has been raised by 12 companies.
# The following six companies in the top 20 stocks don’t require fresh capital => BHP, TLS, WOW, ORG, FGL, BXB & STO
# ANZ, WPL & RIO are the remaining stocks in the top 20 that the market has speculated could raise capital. Whether they do or not is debatable! Ie RIO could deal with the Chinese and hence not tap the mkt.
# In the next top 30 (ie 20 to 50 market cap companies), ~$6.7bn has been raised by a total of 12 companies. An additional 13 companies in this group don't require capital. There will continue to be speculation about IAG, MQG, AMC, OSH & AXA.
# If you were to think logically about the possible raising left in the top 50 => ANZ, WPL & RIO IAG, MQG, AMC, OSH, AXA, THEY REALLY DON’T AMOUNT TO MUCH GIVEN $38 BILLION ALREADY RAISED. Further, there is a very strong chance that the bigger end of town may not come!
# THE MARKET (PARTICULAR THE BANKS) HAVE BEEN A FUNDING TOOL FOR THESE RAISINGS. THIS IS ALMOST OVER!
# Below is the data (also in excel spreadsheet attached). Companies is Black don’t need capital, Blue have raised capital, Red could raise capital.
Now i dont use this type of information as a catalyst for buying and selling. However i do think that it provides confidence to me that the market is correcting itself. It is addressing one of the primary concerns of the market: re-financing risk. We are probably not over this risk yet. We could well see the smaller players come onto the market for capital raisings. Their impact on the market though is much smaller due to their lower weightings in the market and can be accomodated much more easily. Hence i see the fact that the market is working through this as a positive. Further more at its completion, one of the primary scarefactors of the market will have been removed, and the market shoudl revert back to using more traditional valuation techniques for pricing shares.
Anway an interesting comment recently from one of the institutional trading desks concerning this issue (and sorry i cant name the institution on a public site):
One of the team has done a note looking at the quantum of raisings undertaken so far in our market, arguing that they are coming to an end. I don’t totally adhere to this thesis given it ignores repeat offenders (REITS, Banks???) however makes some interesting points.
# Outside the fiscal, monetary and lower fuel stimulus the Australian equity market looks like if could take off!
# Why, because we are coming to the end of the deluge of capital raisings!
# Further, the market is "fixing" itself ie raised capital well ahead of the global peers.
# Since June last year ~$38 billion has been raised by our market by way of DRP's, placements and right issues etc.
# The market cap of the top 100 companies is ~$706 billion. So put another way an average company had raised 5% of its market cap.
# This is pretty material give that many large companies are well capitalised and didn't need to raise capital ie BHP, TLS, WOW, ORG, FGL, BXB & STO.
# In fact if you were to strip out the market cap of BHP, TLS & FGL, the average company has raised 7% of fresh capital.
# A total of 43 companies have raised capital over this period.
# Of the top 20 stocks (where the big capital raisings come from) ~$24 billion has been raised by 12 companies.
# The following six companies in the top 20 stocks don’t require fresh capital => BHP, TLS, WOW, ORG, FGL, BXB & STO
# ANZ, WPL & RIO are the remaining stocks in the top 20 that the market has speculated could raise capital. Whether they do or not is debatable! Ie RIO could deal with the Chinese and hence not tap the mkt.
# In the next top 30 (ie 20 to 50 market cap companies), ~$6.7bn has been raised by a total of 12 companies. An additional 13 companies in this group don't require capital. There will continue to be speculation about IAG, MQG, AMC, OSH & AXA.
# If you were to think logically about the possible raising left in the top 50 => ANZ, WPL & RIO IAG, MQG, AMC, OSH, AXA, THEY REALLY DON’T AMOUNT TO MUCH GIVEN $38 BILLION ALREADY RAISED. Further, there is a very strong chance that the bigger end of town may not come!
# THE MARKET (PARTICULAR THE BANKS) HAVE BEEN A FUNDING TOOL FOR THESE RAISINGS. THIS IS ALMOST OVER!
# Below is the data (also in excel spreadsheet attached). Companies is Black don’t need capital, Blue have raised capital, Red could raise capital.
Now i dont use this type of information as a catalyst for buying and selling. However i do think that it provides confidence to me that the market is correcting itself. It is addressing one of the primary concerns of the market: re-financing risk. We are probably not over this risk yet. We could well see the smaller players come onto the market for capital raisings. Their impact on the market though is much smaller due to their lower weightings in the market and can be accomodated much more easily. Hence i see the fact that the market is working through this as a positive. Further more at its completion, one of the primary scarefactors of the market will have been removed, and the market shoudl revert back to using more traditional valuation techniques for pricing shares.
Chilli an entire generation has been fleeced of their retirement income. The 1930's home truth of my parents generation that the stock market is no place for orphans and widows is back in spades.
Oh foregod sake NR stop going on with your scaremongering. Who has been fleeced of their retirement income, only those that invested in ponzi schemes.
For most people their retirement savings are intact, sure its been hit over 2008, but for those that have been putting their super into a balanced superannuation fund for the last 15-20years, is it still there?, or has it disapeared to zero?
As at December 2008, the 10year return for Hostplus (an industry based superannuation fund) is:
Capital Stable: 6.08% p.a
Balanced Option: 7.31% pa
Shares Plus: 6.37% pa
So even their most agressive option is still showing positive results over 10years.
You really are a wacko jackson.
