Property vs. Shares (again) - but do shares work in reality?

Making money without much money, say a salary or a small amount of equity is definitely possible. Plenty of people have done it with property and shared their stories on Somersoft, bootstrapping your way up (leapfrogging TM) and so forth. I'm yet to find someone who has done it from the SPI or from shares however. It's always been the other way around in my experience, the people who do well out of the market as a retail schlub have made their money from property or a business first, and are enhancing it through the markets. Returning 20% on a few M is rarely the focus point of the education industry however.

Access to the big guys? Well I don't circulate in conventional financial circles and have never had a conventional job in the industry so I miss out on a lot I'm sure. I'm not your 5k on the SPI type of guy, I have been making a salary from the markets for a few years now, so.. have some insight into the matter!

Best case scenario is you are going to need outsize skill to generate a salary from the markets.. to generate a fortune you will need a fortune, my experience says that property is absolutely the better choice for zero (or low base) to hero for the average joe.. Love to be proven wrong on that matter.

I'm also in a situation of having made more money from the property equity fairy over the last four years than all the thousands of hours I have sunk into understanding and playing the markets.. It's a bit vexing to me still that thought.

 

Insight,

If you are making some money in the market, you know that it’s possible..
If you are willing to make big, you need a big capital.
I am not talking about small amount. That is why I said that you can not make money without money (I meant big money without money).
Few guys I know, made quite big money via trading, but none of them is claiming that it happened overnight or that it’s an easy way to riches.
No doubt that for average Joe property is a better choice, if we assume average salary. Also without skill there is not much average Joe can do in the market.
If you are making more from property, that is fine.
Others are making more in the stock market, and only very few are doing well in both markets.

“.......the thousands of hours I have sunk into understanding and playing the markets”

Do not worry.....I am longer than you in this game and I am still getting headache from time to time. No pain – no gain.
Anyway....Happy Trading.

 

It is amazing how many people are making money on stocks. And yet, sophisticated companies, some of them with inside trading, years of experience, massive brain power and almost unlimited resources behind are loosing billions? It shows that if you play with fire you occasionally get burn. Hey, at least hell will feel like an average place to be
I would say if you know what you doing do it! No matter what, shares or IP as long as you don’t put all eggs in to one basket. Both have times of gains and if you time it nicely to get rewarded with the bonus.

 

Thanks Bella,

Agree with it all - I don't talk about investments for similar reasons. This site is one of the few places can get sensible opinions.

I grew tired of people asking how things were going, secretly hoping I'd failed in some way, so they could feel good about themselves.

Then there were the academically clever people who could explain exactly when and how to invest, but 'now' was never the right time - that way they could be justified in doing nothing and feeling content.

Then, at some point, if you accumulate a bit, people start calling you 'lucky'. Forget the countless hours spent learning, forget the countless hours working/renovating/researching while they are asleep, forget the calculated risks you've taken while they justify inaction - it's just luck

The dilemma is that if not born into a wealthy family with the right connections - have to start from a low base, it's difficult to accumulate wealth. Need to talk to people to try to learn, but most people are negative influences - so it becomes a fairly lone pursuit

I'm sure the property vs. shares debate will go on forever and people will inately favour one over the other - I'm also sure propery works well for some people and shares work well for others.

Thanks again for thoughts...

Regards, Ilori

 

Ilori, are we some how related? Do you have a twin brother?

I wouldn't put it better, you got it all in one post.

 

Thanks Insight,

That's very impressive.

Don't want to know your secrets, but do you mind if I ask generally how you do it? Example, what do you trade - ASX? What approach do you take - trend trading? What timeframe - during day, end of day, weekly? Do you follow any particular person's style?

Very interested to get idea of how you go about it.

PS - agree with you other comments re. property and shares -

Thanks, Ilori

 

*smile* - I've heard might live in a universe of up to 11 dimensions - anything could be possible

Thanks

 

If you subscribe to M-theory it could be up to 26 dimensions.. Lets hope we don't get some mini black holes created from LHC that don't happen to evaporate as per Hawkings theory..

Anyhow, in regards to trading the markets, I'm currently giving myself a market education, its a very slow and expensive process!

For those interested, the following books might help you:
Van Tharp - Trade Your Way to Financial Freedom
Jack Schwagger - The New Market Wizards
Curtis Faith - The Way of The Turtle

Your Trading Edge magazine is also worth taking a look at.

Best of luck,
Kris

 

Thanks Kris I'll check those out!

 

There's an article on this site titled 'Property vs Shares - the real story!' - part of it in quote above. The conclusion is around what the 'average' investor can achieve and the natural leverage of property as an investment. This seems to be quite a sensible conclusion and would help to add weight to the impression property generates greater equity than shares.

 

Ilori, seems like you are switched on and have worked out a few seldom spoken truths for yourself, at least you are making sense to me!

There's some info about my trading here

 

Thankyou for that - lot of info there, will have a read.

Re. working out a few seldom spoken truths - that's a clever way to put it. Indeed it does feel like that sometimes... wade through truckloads of information only to finally arrive at a 'truth' - then someone says, geez... I could have told you that years ago

I think it is a truth that real estate investment does work, leverage + time + compounding + low volatility etc. slowly but surely generate wealth. It has been written about for years and the basic principle remains the same.

The reason I raised this discussion is that I wanted to see how shares compare - in reality.

Generally there seemed to be a view that share investment does work and successful investors are out there but they don't have media coverage or (for personal reasons) don't talk about it - that may be the case - don't know. Maybe it's in the realm of a religion and becomes a faith argument - logical debate breaks down at that point though.

Thanks again.
Ilori

 

Property is only good if you can achieve a high level of gearing. Once you continue to purchase property, your serviceability will not allow for more IP's.

Generally a house will be negative $10,000 PA. And you need to work out how many of these $10k losses you can afford. Off cause if you can buy qualities IP's with lower negative gearing, then you can buy more! Prehaps with raising rent and lower interest rates, then these opportunities may come up again.

Once your overall LVR dropps, then its more effective to just margin loan shares at 50%. If your going to hold property at 50% LVR, or shares, then shares will win out due to their lower transaction/holding costs.

 

From what I can gather is it's easier to buy an IP than shares if you have no money. Sure you can do a ML but a lot have lost using those this year From our experience of investing some 30 years there is no easy way to make it. Well some have but easy come easy go. I also don't hold a lot of faith in articles that say someone has 10 properties and have made so much. At the end of the day they only make anything when they sell for the price they value those property at and then take away what they've depreciated and any interest bills along the way. For many if you do the sums they don't make much for their effort.

We don't like negative gearing as an investment strategy and we have done reasonably over the years. But for us we like to OWN our investments not the bank.

 

Hell yes, brother! Debt is essential to get a foot in the door, but I, like you, prefer to own my assets. I look at businesses that I would like to invest in and one of the first things I look at is the amount of debt. The less, the better. Strong businesses with low or no debt have a much better chance at survival than businesses loaded up with debt.

If it's good enough for businesses worth millions or billions, then it's good enough for me!

Mark

 

Good point. I agree with all your saying. Sometimes when you add up all the holding costs associated with property, you find out that your really not that ahead.. at least thats the result I got from holding 3 IP's for 5 years.. 5 years of negative gearing, combined with buy and sell costs, I really would have been in a similar position had I just saved into something more simple..

If you don't have anything, and have a job, yes buying a property is a good way to get started, and will give you a great investing base. So in this regard is can be easier to get started with property.. both investment tools have their benefits and disadvantages. you need to calculate the true cost and expected result and consider your situation. There really isn't one size fits all. Just because you buy a property, doesn't mean you will be rich, and the same as shares. But using a combination of both, and having a 10 year investment horizon, you will do well..

 

Mark, we meet again... I agree, debt is what brought down many companies of late! So using it carefully when building your investment portfolio. But I say when you progress down your investing path, you should consider reducing your overall LVR to reduce risk.

Cash is king!

 

crc, I think this is the second time we've agreed on something. Maybe we should be worried *wink*. Although I dont believe that cash is king. For a long term buy and holder, cash is important to take advantage of bargains. But holding cash is an inflation adjusted nightmare. Keep in mind that in real terms, cash does not hold up against inflation.

There are plenty of examples out there available that show that holding cash long term is not the most preferable method. I would like to point you towards the first few chapters in Peter Lynch's book 'Beating The Street' which I feel shows unequivocably that holding growth assets *over the long term* beats out cash every time. Well, every time except for the most extreme of circustances.

Mark

 

Mark, lets make this the third thing we agree on.. Yes holding cash over the long term certainly isn't king.. I was just stating that during this market cycle, or downturn, holding cash could be king.. but you will miss out on any up-swings if you don't act quickly to re-enter the market or use it to pickup bargins.

 

I subscribe to the views of the likes of Peter Thornhill and Anton Tagliaferro. Hence investing to me is all about industrial shares and their dividends.

It is worthwhile getting hold of a chart showing the growth of Industrial shares and their dividends (ie The Industrials Accumulation Index) going back over 100 years. Even during market crashes, oil crisies, financial market meltdowns, world wars and great depressions etc the dividends hold up remarkably well and even rise during some of these crisies.

I have confidence that dividends will continue to rise overtime as they always have. As for price it can be as volatile as it likes along the way. Volatility on the downside is an exciting time for me as it allows me to pick up wonderful future income streams at a steal.

I can't locate the longer term chart but attached is one of Industrials Vs LPT accumulation index back to 1980. I have seen a chart showing cash in comparison and it looks much worse again for cash. I can't find the 100 year chart at the moment but it portrays the same story.

Cheers - Gordon