General Opinions on Property VS Shares

Thanks @Gockie for sharing these points. There are some advantages in property investment and it may be useful for some investors. It's always good to have perspectives from all angles.

 

Interesting paper from Cufflinks forecasting the next 10 year return: topped by Aus Equity, mostly from yield.

http://cuffelinks.com.au/wp-content/uploads/FIIG-10-year-asset-class-.pdf

 

Hi, I had posted elsewhere about the various asset classes I invested in over a 20 year period.

Shares: 17.5% Property 40% Forex 20-25%

These yields are actual yields calculated on the amount of money I put into the investments.

they are also done and dusted, meaning that the investments had all been disposed of.

I might add that some years were dreadfully bad but I didn't sell out. With shares, I had to do double up and double type transactions.

And I took a LOT of risks along the way.

I was first a novice investor then a more practiced one and I think finally an experienced one.

These numbers may offer some perspective to those starting out.

KY

 

Was your bumpiest ride in Shares or Forex?

What was your general strategy with both Shares and Forex?

 

Interesting topic and for me it's a case of not one vs. the other, but they compliment each other and both offer excellent opportunities providing a good over all strategy is used. I hold both (some outside super and some inside SMSF) and have done for over 20 years.

As a few posters have already mentioned it's best to be open minded about both these assets classes as both certainly have their pro's and con's. More importantly each individual direct property/share is an individual case and needs to be researched on it's own merit.

IMO the biggest reasons for the widespread attraction to property are
1. Higher leverage available and banks will lend against it more easily.
2. Direct Property is tangible and visible where as share ownership is more conceptual.
3. Almost everyone buys a home so it's easier to buy more of the same due to a feeling of being 'familiar' with the asset class. (almost everyone has shares in super too but it's not the same kind of experience).
4. Property is heavily promoted in Aus by various parties with vested interests.
3. Property has more scope for strategic equity gains with specialised strategies - eg, renovation, subdivision etc.

Quick summary of characteristics of 3 traditional assets classes....

Cash - Income only (no growth)/low rate of return/income is taxable/no cost of ownership/highly liquid.

Property (Direct) - Growth and income/medium to high rate of return/high cost of ownership/income is taxable/highly illiquid.

Shares - Growth and income/high rate of return/income has significant tax advantages from franking (Aussie blue chip)/almost no cost of ownership/highly liquid.

Most of the time any negative stories you hear about shares involve speculation NOT investing, many people just don't understand the difference.

Another issue around liquidity that I am finding more and more common amongst clients is this: if a client is overweight direct property in their SMSF and goes in to pension phase where they are required to draw a minimum amount of income per annum to satisfy the pension rules (depending on the yield) they can find themselves quickly run out of liquid funds and then be forced to dump a property in order to fund the pension drawdown requirement. If the property happens to be in a area that means it's not so easy to sell this can create serious issues and even lead to the SMSF being in breach if not resolved.

Therefore for ease of income stream management and planning there is a strong case for selling down some or all direct IP's held inside an SMSF prior to entering pension phase and shifting the funds in to high yielding, quality managed portfolio assets to ensure enough ongoing liquidity.

 

Hi, definitely forex. Shares are more forgiving, property most forgiving. The most heart stopping moment was I'd just opened 2 contracts on USD/Yen when the 9/11 bombing occurred. USD tumbled 7 yen with me just dithering whether to cut loss or to ride it out. I saw a slight bottoming and decided I could go $100K more and it continued to slide. At 3.30 a.m. the market closed and there was nothing further I could do. I got a couple of hours sleep wondering if the next morning I would wake up bankrupt! As it happened, my last purchase was a few ticks above the morning price and my average price was ridable. I went on to make about 30 thousand after 2 months. My big winner was buying 600K AUD at 0.49 cents

Another hairy moment was when I pressed the wrong key. Instead of buying Swiss francs, I sold. It cost me 2000 to undo immediately.

Nowadays, I don't have the courage to dabble in forex mainly because I no longer have the high disposal income I used to have.

I'm still a very high risk individual when I deal with the ASX.

KY

 

Agree mostly with your view but not the selling of direct IPs prior to entering pension phase UNLESS ABSOLUTELY NECESSARY. Why pay unnecessary CGT? Instead consider keeping enough cash in the fund to get one through the first year or two preferably of minimum pension payments. A wise strategy regardless of what assets one holds in the Super fund. Once in pension mode one can then start selling off the IPs CGT free. If one thinks cash flow might be a major problem due to property market conditions and / or not enough liquid assets then selling the minimum number of IP(s) might be required.

Of course if the proposed Super changes are legislated and that is looking increasingly likely then given the $1.6 Mil pension limit any IPs over this limit could be sold off prior to commencing a pension as the CGT will be the same in either case.

The biggest problem going forward given the likely $500K non-concessional limit and the lumpy nature of IPs will be getting IPs in the Super environment.

I think what's important is to start planning ones Super pension strategies well in advance of the event to avoid forced sale of assets. Plus the importance of always holding a couple of years minimum pension payment in cash cannot be overstated.

Not advice.

 

Late nyt reading and I came across this! Coke has certainly nosedived of late! Topping up @Anne11 ?!

 

I think it's a fizzer!

 

I sold CCL some time ago fortunately at a profit. My final remaining bit of enthusiasm for owning direct shares has run out. Only three direct stocks remaining now and they will also be sold in the not too distant future.

 

Buying lic's whilst on special! Sounds a lot like Charlie munger who had a saying of having 10mill in the bank for when great opportunities arise! Currently reading the TAO of Charlie munger great read! Reads over 600 pages a day now that's impressive!

 

Be careful @pippen, reading can be an investing hazard. It might encourage the urge to fiddle.

 

Haha I know my limitations and I'm defiantly not smarter than the market (I'm reading a property forum for Christ's sake) I believe the price of Australian business will be higher in 20 to 30 years hence I believe the value of lics with an index proxy tilt i.e. argo bki etc etc will do me just fine!

 

I did look but agree with Austing that the up and down of direct stocks is too much to take, while those LICs I watch are still at premium. 7.5% if is not a good enough reason to buy I know i am changing with time

 

@pippen, I know about and hold argo and bki but could you tell me about etc and should I buy it now?

 

Haha etc and etc are the new age fund managers you will need a license to dividend anonymous club and only then you can get exclusive membership to buy into etc and etc!

 

Not only does @pippen like ETC I seen him mention another stock once or twice called AGRO. Must be backdoor listings as I can't find them.

Investors Anonymous doesn't even know about these so perhaps @pippen drinks a lot more home brew than me.

 

Haha ARGO! I'm never going to live that one down am I!