What to do with $1mil?

[JIT]

People always assume that shares are the 'default' asset class to invest in if they don't like property (commercial or residential) because they are 'high growth'. I find it extremely annoying because that is simply not the case.

At the end of the day, you either invest in business, which the stock market is a derivative of, or property. Whichever class you invest in requires research and an undertaking of risk. While I prefer property (personally), I get annoyed when people simply assume that the sharemarket is 'easy' and 'high growth' just because that is how big fund managers have promoted it. It is far from the case. You can argue the same thing applies to property but at least I have a better level of control over it.

Ok fine Aaron, but I never commented about any of the above, this is just your true feelings coming out...

You haven't answered my question though, how else do you suggest people generate passive income (for retirement)...

(Asides from what I've already mentioned, and yes of course, Nathan's low-end residential strategy.)

Through high-end residential townhouses in Richmond?

 

[Aaron_C]

Ok fine Aaron, but I never commented about any of the above, this is just your true feelings coming out...

You haven't answered my question though, how do you suggest people generate passive income (for retirement)...

(Asides from what I've already mentioned, and yes of course, Nathan's low-end residential strategy.)

Through high-end residential townhouses in Richmond?

Nope, I don't think high-end residential townhouses in Richmond are a good retirement strategy. It's an active property strategy for people, basically a business. I do think, however, they make good retirement living

Re your question, if you are competent to pick stocks or property, then by all means invest in either. But if you are simply ignorant about everything, and don't want to educate yourself, then sticking your money in bonds or a savings account would be your best bet.

 

[lizzie]

$1,000,000 would net a $100,000pa in residential using just that and no loans. Say properties with 10 - 15% yields and 5% for running costs, no need for finance.....

That was similar figures we were looking at ... but wanted to keep some aside for a ppor as well - so, we'd be looking at around $60k/pa from the new ip's ... with another $80-100k/pa kicking in around 3.5 years time.

 

[jaycee]

People always assume that shares are the 'default' asset class to invest in if they don't like property (commercial or residential) because they are 'high growth'. I find it extremely annoying because that is simply not the case.

At the end of the day, you either invest in business, which the stock market is a derivative of, or property. Whichever class you invest in requires research and an undertaking of risk. While I prefer property (personally), I get annoyed when people simply assume that the sharemarket is 'easy' and 'high growth' just because that is how big fund managers have promoted it. It is far from the case. You can argue the same thing applies to property but at least I have a better level of control over it.

Aaron, you dont have to like shares.

It's OK

And of course you shoudl do what you feel is more comfortable for you

 

[Belbo]

Right now has to be a very risky time to be invested in just about any asset class; property, shares or fixed income. Even cash and gold have proven to be at risk in the hands of the wrong institutions.

Let's be honest: These are radically uncertain times for the world, and as a consequence, for Australia. No-one even remotely knows where we'll all be in 3 months' time, let alone in 12.

A rational debate is almost impossible on the cusp of such radical uncertainty. Both JIT and Aaaron are completely right in their 'horses for courses' replies, but neither can confirm that any particular course won't be a volcano tomorrow. Therein lies the real problem today.

 

[JWR]

uncertainty = cheap
certainty = rising prices/competition/more expensive

I know which market I'd rather be buying in!

 

[Belbo]

uncertainty = cheap

certainty = rising prices/competition/more expensive

I know which market I'd rather be buying in!

Relative to . . . ?

 

[oracle]

Relative to . . . ?

I guess your own valuation. If you are investing and not speculating surely you would have an idea on how much the asset is worth based on your valuation metrics.

Cheers,
Oracle.

 

[Deltaberry]

What valuation metrics though? How to value something like this: Pluton Resources.

 

[oracle]

uncertainty = cheap
certainty = rising prices/competition/more expensive

I know which market I'd rather be buying in!

Agree.

For eg. There is less risk of losing money when buying a blue chip property in Sydney when the yields are 6-7% than when it's is 1-2%.

Cheers,
Oracle.

 

[oracle]

What valuation metrics though? How to value something like this: Pluton Resources.

Each individual investor has their own metrics by which they value the asset.So there is no right or wrong answer.

For me when valuing shares. It is a combination of historical earnings, cash flow, dividend growth, ROE and payout ratios + future prospects of the business (this bit is subjective).

I also like to see behaviour of management in terms of outstanding share dilution, debt/equity and liquidity ratios.

If you can provide me the above info for Pluton Resources, I might be able to value Pluton, otherwise for me Pluton as an investment is a pass.

Cheers,
Oracle.

 

[Belbo]

Each individual investor has their own metrics by which they value the asset.So there is no right or wrong answer.

For me when valuing shares. It is a combination of historical earnings, cash flow, dividend growth, ROE and payout ratios + future prospects of the business (this bit is subjective).

I also like to see behaviour of management in terms of outstanding share dilution, debt/equity and liquidity ratios.

If you can provide me the above info for Pluton Resources, I might be able to value Pluton, otherwise for me Pluton as an investment is a pass.

Cheers,
Oracle.

That subjective is the little scary bit.

 

[oracle]

That subjective is the little scary bit.

All you need is bit of common sense and due diligence usually. If you can answer the question what does this company do to keep its competitors at bay and it does not lose customers even when the company raises prices of it's product. And do you believe this advantage the company possess is sustainable in future then you have a candidate for a business with bright future prospects.

Cheers
Oracle.

 

[Belbo]

All you need is bit of common sense and due diligence usually.

I couldn't agree more.

It's the greater than usual likelihood of a full-scale global economic meltdown that I was however alluding to in my posts above.

A small risk, I accept, but in the present environment still of some many thousand of times the usual order or magnitude.

I'd even go so far as to suggest that purchasing a concrete bunker right now wouldn't be completely contrary to common sense (if admittedly a tad a alarmist).

But you seem very calm. Is there something in your online name that you're not sharing?

 

[oracle]

But you seem very calm. Is there something in your online name that you're not sharing?

Nope. No hiding.

Basically, if you look at the history of the past 100 years, we have had 2 world wars, the great depression, 9/11, severals stock market boom and busts. Inspite of all this here we are today, leading the best quality of life we have ever lived. Dow Jones Industrial Average was somewhere around 66 points some 100 years ago. Today we are almost 12000. Boy have we made progress even after so much uncertainty of the past 100 years!

What we are experiencing today is not going to end the world as we know it. This too shall pass. If you are concerned about European crisis the ECB can easily fix it by buying Euro bonds and I am sure they would do it if that was the only option left.

If you are worried about US. You have got some of the most powerful ppl (Obama, Bernarke, Geitner) who have said in the past they will do whatever it takes to avoid a recession/depression in the US. I personally would not bet against them.

If you are worried about China. You need to consider certain facts about China. The Chinese government have got some of the largest amount of cash, no borrowings and 1 billion population who needs food, employment and their growing ambitions to lead a western lifestyle. The government will do everything in it's power to continue the strong economic growth cycle.

The worst case scenario that I can think of is high inflation in the coming years. But that is a small price to pay for the governments. Remember, governments love inflation. For them it's an invisible tax, but ofcourse they will never admit it or support it in public.

Cheers,
Oracle.

 

[jaycee]

I think what concerns a lot of people, and we aren't all knowledgeable enough to know the answers, is how long before markets "Recover" ?

If it recovers in "30 yrs time" (so to speak) , it might be too late for me and I my indeeed be better off doing something different for example than hanging on saying it'll come good like it always has.

 

[Aaron_C]

Well no one knows for sure jaycee. All you can do is make a punt.

 

[jaycee]

Yeah cheers Aaron.

I meant my post as on the subject of the thread and as a question to the post by oracle.

 

[oracle]

Yeah cheers Aaron.

I meant my post as on the subject of the thread and as a question to the post by oracle.

Jaycee,

The ASX is basically at the same level as it was 7-8 years ago, still I can show you atleast a dozen or so stocks that have shown outstanding returns due to the reasons outlined in my previous email. These companies are fundamentally strong with sustainable competitive advantage so they are able to grow in good times as well as bad times by increasing market share as their competitors struggle to survive.

I am not saying it is easy to find such companies, but you got to start looking somewhere and once you start asking the right questions about the company and the economy of the business you will automatically know when you come across such a company.

Cheers,
Oracle.

 

[Melbournian]

there is always the casino.