What to invest in?

[Invest]

Hi all,

Just wanted some guidance.

I have one PPOR and planning to buy a first IP within the next 12 months.

I also have around $8000 in an index fund that I kicked off in 2007. So far its been losing money although Ive been told to wait until 10-15 years into it to see how it grows.

Ive been playing with an idea to pull the money out of the index fund and inject into an IP deposit... but I am unsure if this is a good idea or not.

Property has been performing so well, while Australian share market has been under performing...

Advice?

 

[Sunfish]

I also have around $8000 in an index fund that I kicked off in 2007. So far its been losing money although Ive been told to wait until 10-15 years into it to see how it grows.

Wish I could get paid for advice like that.

This is free, but from an UN-QUALIFIED source: This is no time to be in index funds. If you don't feel you can stock-pick (and that's bluddy hard) go for a term deposit if you are saving to invest in a property or whatever or Au/Ag bullion coins if you are simply stashing it.

 

[Peter_Tersteeg]

Investing in the share market is very similar to investing in the property market.

You invested in 2007 which was at a peak. In 2008 the share markets worldwide crashed to less than half their values in many cases.

Since then, many markets have recovered. In some cases they've now passed the 2007 peak, on others they're almost there. The question is will they continue to rise from here?

Property markets do the same thing. Property values go up and they go down. The main difference is that when house prices drop, most people don't worry about it and sell. They shrug their shoulders, mow the lawn, have beer and go back to work on Monday.

Both the share and property markets fluctuate. Within those markets there are sub-markets that also go up and down in their own right. My opinion is that both are medium to long term investments and both usually perform quite well over the medium to long term. Just looking at the last 2 years is probably a horrible time frame to look at.

At this point you haven't actually lost money because you haven't sold. You've still got the same amount of shares as you had when you bought them.

Also keep in mind that $8000 isn't going to do much for you in the property market unless you buy through a property trust. The costs of entry are a lot higher than $8000 in most cases.

Keep in mind I'm in no way qualified to make recommendations on stock markets, these are my observations and opinions only.

 

[Simon]

I think it is wise to consider investing in both property and the share market. Investing via a fund manager allows a small holding to be spread over a number of companies.

The last few years have not been wonderful in the stockmarket. Some funds are doing well now - I got a report from Platinum today - one fund returned over 40% this last quarter - off the top of my head I don't recall which. But a volatile sector like that would show lower returns too.

$8000 isn't a lot in either sector.

When you start off yuou can't afford much diversification.

Pick the market you understand best and build an asset. But learn about the other one too. When you have a decent sized asset then consider diversifying.

There is no right solution or wrong one.

For every reason a fan could tell you why the stockmarket is better a property investor could match it and vice versa.

You will have good years and bad years. An advantage the property market has is that you don't have a daily price quoted to you at your fingertips - so it is easy to be ignorant of all the ups and downs it faces.

Imagine having a house and every day getting an offer. Some days it will be up and some days it will be down. Over time it will trend up. If you panic on the "bad" days then you need to mature as an investor before you face the share market.

Remember you only lose money if you SELL at the lower prices. Both property and shares.

I could rattle on for hours. Bottom line is that both property and stocks have made many people wealthy over the years.

Cheers,

 

[kum yin lau]

Hi, Simon is right. When you have little money, all you can do is try to make it grow. The 1st part is VERY difficult, money you have to pick from between your teeth as in don't buy that capuccino, walk instead of taking the bus.

Shares are available to the person who has $1000 but property isn't. I remember well my 1st share purchase, the princely sum of $6666.67 [the govt allowed us to use 60% of our super funds]

With very little knowledge and not much more capital but a heck of an attitude, I plunged headlong, found grief in years 2 and 3, hit the mother lode in year 5 and exited with a profit of $165000.

Bought my house with cash & the rest became history.

KY

P/S I thought I could try the same trick with the ASX and have indeed found some grief. On my track record, I have another year of grief so hod those cappucinos

 

[Sunfish]

I've been beating the "shares" drum for some time now but I like Lau's story.

Things don't always work but if you start young you have time to make them work.

Over the years I have "kissed a lot of frogs" but have only found one "princess". But the feeling of satisfaction is enormous. Lau found one which allowed him to buy a home and so have have I. But I am jealous because he did it younger than I and has more time to compound it.

 

[kum yin lau]

Ah Sunfish, that house bought with cash was the basis for buying 3 more in 2 years, which became the basis for 2 commercial properties albeit little ones, then the commercial properties gave me the power to buy 2 devt projects & 1 crappy PPOR

My mistake was to borrow 200 thousand to put into the share mkt which made 20 thousand VERY FAST and then tanked!!

Story of my life. Deja vu is really scary but if it's like the last time, I might find the mother lode in year 5. Meantime, there's tax write off.

Cheers everyone & good luck whatever you're doing.

KY

 

[Sunfish]

Ah Sunfish, that house bought with cash was the basis for buying 3 more in 2 years, which became the basis for 2 commercial properties albeit little ones, then the commercial properties gave me the power to buy 2 devt projects & 1 crappy PPOR

You've done well. I like a success story as much as anyone.

 

[Intrinsic_Value]

Property has been performing so well, while Australian share market has been under performing...

Advice?

VERY EASY QUESTION TO ANSWER:

are you investing or are you trading.

From a trading point of view:

Do more of that which works and less of that which doesnt.
If the share market is loosing you money, then from a trading perspective you should do less of it (at least until you can create an angle that makes you money).

If property is making money then additional funds should be allocated to property.

However having said that, property is illiquid, so how do you exit if the price starts to move against you.

Now why am i rambling on about this? because from your post, you are thinking like a trader but trying to act like an investor.

For most people this is a receipe for disaster.

So my advice to you is to work out whether you want to be an investor, or a trader.
Until you confirm this in your mind, you cant move on to the next step.

 

[Bill.L]

Hi all,

IV,

are you investing or are you trading.

What is the difference?? My research shows that over the long term all stocks have a 'life' and eventually die.

Not many properties 'die'.

bye

 

[Intrinsic_Value]

Hi all,

IV,



What is the difference?? My research shows that over the long term all stocks have a 'life' and eventually die.

Not many properties 'die'.

bye

Bill investing in individual stocks doesnt mean 'holding until death do us part.'

But to look at one asset class and say its 'loosing me money' so maybe i should divert the funds to the asset class that 'is making me money' is, prima facie, a trading mentality.

Now there is nothing wrong with this so long as you adopt a traders attitude.

Why was that index fund bought in the first place, was it because for the last 5 years before 2007, the index fund was showing good returns.

So was this index fund bought as an investment, or was it to play the rising trend.
If it was to play the rising trend, then as a trader a stop loss should have been applied.

If it was bought as an investment, why was it bought, what was the investment logic? does that logic still hold?, if the investment was justified in 2007, could the investment 'value' (ie not price) be better now than before.
If the investment value is better now, then why are we exiting the investment.

As i have said many times on this forum, people must recognise themselves BEFORE they invest.

 

[Bill.L]

Hi IV,

Bill investing in individual stocks doesnt mean 'holding until death do us part.'

Aha, so investing eventually means to sell a particular stock. That means that it has been traded. Bought at some point then sold at another. This is trading.

All stocks are bought with the eventual prospect of selling them at a profit. Trading and investing are the same thing, only investors think themselves different because they have a perceived longer time frame.

bye

 

[Reality Cheque]

Property has been performing so well, while Australian share market has been under performing...

Advice?

With regard to shares buy in gloom and sell in boom.

In regards to property be fearful when others are greedy and greedy when others are fearful.

Same basic principle except that you need to take into account the transaction costs when selling out of property.

These quotes get bandied around quite readily. It's developing the mindset to put them into practice that's the difficult part.


At the moment I'm fearful about property but have a reasonable hunger for shares.

RC

 

[Intrinsic_Value]

Hi IV,



Aha, so investing eventually means to sell a particular stock. That means that it has been traded. Bought at some point then sold at another. This is trading.

All stocks are bought with the eventual prospect of selling them at a profit. Trading and investing are the same thing, only investors think themselves different because they have a perceived longer time frame.

bye

buying/selling is just the execution.
Its the reasoning behind the execution that determines whether its a trade or an investment.

Some people get it, others dont.
It seems you dont, nothing further i can add.

 

[Aaron Sice]

oh i can see this thread going 6 ways from sunday.

$8000......i would pay down all my non-deductible debt.

 

[kum yin lau]

Hi again, this thread was started by someone who put 8000 into an index fund & is wondering he should take a loss & put into property instead.

$8000 is a big deal to one with not a lot of money & will be treated with respect.

I'd pay attention to Reality Cheque. Has a good head on those shoulders.

As someone starting out, you're beginning to want more active handling of your investment money. Good on you.

You've already put it in an index fund, why realise a loss instead of leaving it there?

It's more fruitful for you to examine WHY it was not the wisest move at that time.

And if you pull it out & put it into property, would that NOT also be behind the 8th ball?

Are you not chasing property investment AFTER the 28% gains have been realised?

It all sounds very glamourous but do make sure that the numbers work.

It's just as easy to buy a property and LOSE a lot of money on it.

Take care,

KY

 

[Aaron Sice]

....hence my suggestion.

 

[Intrinsic_Value]

Hi again, this thread was started by someone who put 8000 into an index fund & is wondering he should take a loss & put into property instead.

$8000 is a big deal to one with not a lot of money & will be treated with respect.

I'd pay attention to Reality Cheque. Has a good head on those shoulders.

As someone starting out, you're beginning to want more active handling of your investment money. Good on you.

You've already put it in an index fund, why realise a loss instead of leaving it there?

It's more fruitful for you to examine WHY it was not the wisest move at that time.

And if you pull it out & put it into property, would that NOT also be behind the 8th ball?

Are you not chasing property investment AFTER the 28% gains have been realised?

It all sounds very glamourous but do make sure that the numbers work.

It's just as easy to buy a property and LOSE a lot of money on it.

Take care,

KY

This is exactly what i am refering to.

A good idea for new investors is to document WHY they have bought an investment asset (whether its shares/funds managment/index funds/property/other).
Why was it bought?
What is the objective?
What is the goal?

If you cant have conviction in what you buy, you leave yourself open to the pyschology of Mr market (as an investor).

If you are buying to play a trend, then you must adopt a traders attitude and place stop losses. You are not investing, you are trading based on the movement in the trend, if the trend starts to move against you you exit.

The worst thing people can do is change a trade into an investment.

So again i state the answer to the posters question lies in:
'what was the purpose of buying the index fund in the first place?'
'And what is the purpose of buying a property?'

 

[Sunfish]

oh i can see this thread going 6 ways from sunday.

Me too. That's why I let BillL's post go through to the keeper.

 

[hobo-jo]

Invest, my stock portfolio is down over $8000 today, if you are looking for somewhere to place your funds I accept donations