http://www.youtube.com/watch?v=3WkpQ4PpId4&feature=related
The first 1 min answers your question.
Cheers,
Oracle.
Shares Vs Property
- Thread starter devank
- Start date
http://www.youtube.com/watch?v=3WkpQ4PpId4&feature=related
The first 1 min answers your question.
Cheers,
Oracle.
Firstly, Berkshire Hathaway never has to retire. Secondly, it's one thing if you're in a position where if your share portfolio is cut in half close to retirement you still have enough money that you're going to be ok. Average joes are not going be in that position.
I don't understand. Are you saying people liquidate their portfolio when they retire or about to retire? Anyways, as Charlie mentions if you can't handle the volatility of the stockmarket you should stay away from it, especially if you are about the retire and want to liquidate your portfolio.
There are several studies done where they have proved the longer you are invested in the market the greater is the probability you will come out in front. Infact, it is during the bear market that you should be looking to invest as much as you can.
Cheers,
Oracle.
I think people are missing Aaron's point, which is a very good one.
Another way to look at it is to compare two options, when you have say $100k in LOC / equity to play with:
- Invest in shares without a margin loan and get $100k of exposure
- Invest in shares with a margin loan and get whatever exposure you're comfortable at maxxing out the LVR going in - say 50% at the most to try to manage the risk of margin calls. This gives circa $200k of exposure and potentially some disturbed sleep.
- Invest in IPs with good cashflow and 70-80% LVRs, sleep well and get circa $450k exposure after costs.
I know which I prefer....
Another way to look at it is to compare two options, when you have say $100k in LOC / equity to play with:
- Invest in shares without a margin loan and get $100k of exposure
- Invest in shares with a margin loan and get whatever exposure you're comfortable at maxxing out the LVR going in - say 50% at the most to try to manage the risk of margin calls. This gives circa $200k of exposure and potentially some disturbed sleep.
- Invest in IPs with good cashflow and 70-80% LVRs, sleep well and get circa $450k exposure after costs.
I know which I prefer....
Tom ,,that was the problem during that period look at all the top 4 banks
CBA went from the high $$50's back too the mid $$20's,NAB were all the same,but as always it hits the bottom at one stage then it's a slow rapid rise in value again,i did not sell anything during that period and bought back into
CBA in the $$28--$$30 range and Cba still went into the $$26 buy range
after i put 2 free titles up too reinvest,,no one not one soap box opm's picked the entry point no one ever does no matter what anyone tells you because the market within itself is "KING" it alone make the levels by high speed volume and greed always overtakes fear,then fear overtakes greed and what happens in-between is where the $$$$ are made..imho..
BTW, anyone that used high lvr's on any equity learn very very quickly just how much control you have when MR Market
and margin calls combine,just like nature no one can control a run away train going down hill with no brakes and both the drivers drunk with greed..
Have to laugh as we go through the usual "this time is different" and "buy and hold is dead" type commentary after a share market crash.
Firstly these remarks assume that all funds are invested at the peak of the bull market. Anyone who is silly enough to invest ALL or most of their funds into the market at these stages is of course taking on greater risk. The same applies to property. Even then most assets typically do recover over time.
Secondly this assumes that one is focused mostly on "capital" return rather than "income"!
Our share dividend income has continued to increase right through the whole GFC saga and still is.
And given that shares were purchased overtime and topped up when great buying opportunities presented themselves during the most pessimistic times during/post/continuing GFC (hardly rocket science) the overall capital value of the portfolios is in the black.
It all depends on one's investment objectives. Those chasing capital returns and trying to live on equity etc are taking on a lot more risk than those seeking a conservative long term growing income stream. Hence some of these investors/traders can become very nervous when capital values nose dive.
So to apply a blanket statement such as "buy and hold is dead" to all investors is very much an untruth as there are plenty of long term "buy and hold" investors around who through experience have proven so accordingly.
Well put austini nothing wrong with buy and hold especially when you pick up LICs trading at good discounts to NTA when the market is down, I know you know this ofcourse 
... nothing wrong with buy and hold especially when you pick up LICs trading at good discounts to NTA when the market is down ...
He, he - yes I know boring is my middle name when it comes to investing
Better things to do in life than to be following the market day in and day out. In regard to proven older LICs my opinion is that they have to be the closest thing to a "set and forget" asset that one could possibly have. It always surprises me when I see stories and comments stating that one needs to spend a few or more hours a week running a SMSF and keeping an eye on related investments etc. I would be lucky to spend more than a few hours a "year" doing this. Same goes for other non-IP investments in the Disc Trust and own name.
So in summary, from an investing perspective what more can one ask for. The above is pretty much a "set and forget" growing income stream approach. Just keep some spare cash/LOC(s) on hand to pick up some bargains during times of gloom. Plus no tenants, maintenance and rental related headaches etc which my IPs have given me at times (most IPs are sold now and rest will be sold progressively in the future). Pure bliss in my mind. Only thing to worry about is spending the money and enjoying life.
Of course there are a thousand and one ways to achieve one's financial goals. I choose the above because that is what I'm comfortable with and I'm certainly not suggesting that it is the best or only way....
If you actually look at the figures buy and hold was a poor strategy for most of last century. Nearly all the gains from buy and hold came from the 1980's and '90's. So I guess how optimistic you are about buy and hold depends on whether you think we are going to see something close to the 1980's/'90's period or whether we go back to what we saw before that.
Just saw something today where the well known investor Jeremy Grantham is seeing a low growth future for decades to come.
http://www.businessinsider.com/grantham-on-the-road-to-zero-growth-2012-11
What figures???
of course in retrospect because the time frame you are using is correlating with the time of structural change in the underlying secular market. Its a time of change, with regards to recent times past.
And yet
there is nothing new under the sun
We live our live in a certain point in time, attempting to extropolate, but when we extrapolate we do so from the near past, foregetting the lessons of our forebearers.
So again my overall hypothesis still holds, the underlying key to these basic investment allocation/trading decisions envolves understading the underlying secular nature of the market.
I have watched your development over the years on his forum Oracle.
No matter what others may say, you inherintly understand.
All i can say is hold to your beliefs and you will do fine over the long term.
I read his quarterly essays with interest. Smart guy.
But there is still money to be made, look at Buffett's very early days.
i dont know how to phrase this properly, tactfully.
At the end of the day the result is the result.
The get of of jail card excuse card with Warren Buffett is his person wealth. Yeah yeah Warran can do it, but we cant.
This is b**ll sh**t.
Go back trough time, look at his earlier work, when he wasnt Buffett the billionaire just Warren. This envolves research, but there are secrets to be learned.
As for the average joe bloe. Well the average joe bloe is a schmuck. His wealth will always be redistributed away from him by the very nature of the fact that he is a schmuck. This fundamental rule applies in the animal kindom and unfortunately it applies just as validly to human being. Accept it and move on.
Just make sure you are not one of them.
I'm not saying there's not money to be made. Plenty of people made money in in the 1960s and 1970s. I am saying "average joe blow" is probably not going to do very well through buy and hold over the next 30 years or so.
If the average joe just invests in a low cost index fund periodically (so purchases are averaged out) for a long time (15-20yrs) I think he would do very well out of it. I think his results would be better than the majority of the professionals.
Buffett strongly advises the above approach to the average joe who doesn't know much about investing.
Cheers,
Oracle.
Can you please let me know when we are in 'greed' zone please?
Interesting topic, something I've been tossing up in my head for a while now. I'm unashamedly a big fan of shares, love their history, love their prospects and I know an awful lot more about company value and sharemarket psychology (slight advantage as a buyer) than I do bricks and mortar (my disadvantage as a buyer).
For me the pros of shares seemed hard to beat- liquidity, diversification, cheap entry price, volatility and prices that move quickly and often don't match value (good for me as I like to buy when people panic sell), easy access to my money if needed, leverage of up to 75 or 80%, nice tax benefits (franking credits, deductible interest, 50% CGT discount for shares held over a year, being able to write off capital losses against capital gains if I want to do some portfolio tweaking etc).
The main cons being related to having a margin loan- potential for margin call, higher interest rates (no PPOR to borrow against) but also hey, who knows what industries and companies are going to be booming for decades to come- a fair amount of active observation and ongoing education required.
For me the main three advantages of property were that you could manufacture capital gain through renovation, lever up to 95% and no such thing as a margin call even in a falling market.
I still wasn't convinced and sat on my deposit for a while thinking about the next move until I read a good quote in a property investment book which related to how shares have historically outperformed and could potentially still outperform but then said 'the question shouldn't be should I buy shares or property, it should be WHEN should I buy shares and property'.
Because property is clearly an important part in a long term investment portfolio and there is very little access to residential property on the sharemarket The argument there was you can jump in and buy dribs and drabs of shares whenever you want but how often do you have enough money to put a deposit on a house. I liked the point and have decided to branch out into my first investment property, who knows it might end up being the only one but I'll be happy to tick the property box.
For me the pros of shares seemed hard to beat- liquidity, diversification, cheap entry price, volatility and prices that move quickly and often don't match value (good for me as I like to buy when people panic sell), easy access to my money if needed, leverage of up to 75 or 80%, nice tax benefits (franking credits, deductible interest, 50% CGT discount for shares held over a year, being able to write off capital losses against capital gains if I want to do some portfolio tweaking etc).
The main cons being related to having a margin loan- potential for margin call, higher interest rates (no PPOR to borrow against) but also hey, who knows what industries and companies are going to be booming for decades to come- a fair amount of active observation and ongoing education required.
For me the main three advantages of property were that you could manufacture capital gain through renovation, lever up to 95% and no such thing as a margin call even in a falling market.
I still wasn't convinced and sat on my deposit for a while thinking about the next move until I read a good quote in a property investment book which related to how shares have historically outperformed and could potentially still outperform but then said 'the question shouldn't be should I buy shares or property, it should be WHEN should I buy shares and property'.
Because property is clearly an important part in a long term investment portfolio and there is very little access to residential property on the sharemarket The argument there was you can jump in and buy dribs and drabs of shares whenever you want but how often do you have enough money to put a deposit on a house. I liked the point and have decided to branch out into my first investment property, who knows it might end up being the only one but I'll be happy to tick the property box.
