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Property then income-producing shares?

Discussion in 'Investor Psychology' started by James Bond, 17th Aug, 2015.

  1. James Bond

    James Bond Well-Known Member

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    Now I have a few properties, I've started buying income-producing shares. I figure I need a mix of investments, shares are more liquid, and it is easy to buy shares with a spare $5000, then another load with another spare $5000 etc, and re-investing all income (currently around $5000 pa).

    Anyone any insight into whether this is a good approach? I've still got no idea what I'm doing really, and just going ahead on the premise that doing something is better than doing nothing.

    Thanks

    JB
     
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  2. BingoMaster

    BingoMaster Well-Known Member

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    Great set and forget strategy, as long as what you're investing in is well diversified - e.g an index fund, an LIC, or even a managed fund (my preference is for cheap LICs and index funds).

    I wouldn't recommend buying individual shares unless you really know what you're doing
     
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  3. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Individual approach depending on your goals. From my perspective and everything I know about wealth creation, i would be building quite a large, diversified property portfolio first and then perhaps look at income producing shares later on. I have nothing against shares, i am just looking at it from a leverage perspective, property allows much more leverage to build a wealth producing base much larger and faster than 5k here and there in stocks (not counting freak stocks that go from 5k to 200k in a short time) will. Again, it depends on your goals. Different peoples goals, incomes and risk tolerances vary greatly.
     
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  4. The Y-man

    The Y-man Moderator Staff Member

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    Nothing wrong as such.
    Just check dividend stability (most big companies on ASX are pretty stable).



    The Y-man
     
  5. D.T.

    D.T. Adelaide Property Manager Business Member

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    Property then shares (whether they be normal shares, lic, etf, etc) is a sound idea imo, simply because property is an excellent away to amass a bunch of equity.

    Income producing shares shine more when you have lots of them and are no longer in acquisition phase, imho.
     
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  6. willair

    willair Well-Known Member Premium Member

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    Maybe look at the facts,the vast majority of traders out there are not going to make big money in the equities markets,because most maybe over 80% are all focussed on the short term outcome,and don't plan nor look at the process,or focussing on the wrong goal anyone that bought into one high end bank just a while back when it was over 95bucks if they looked today they would be overtaken with fear,when they bought into at 95bucks plus it was all greed,that backfired margin called big time..

    Trading should never been taken as a monthly hobby,revise your trading plan every 12 weeks,read everything you can even from equities trading magazines they are no different from fast bucks property magazines you only read about the ones that make they rest hit the snapping point never to heard again"Greed always overtake Fear,then Fear overtakes Greed" inbetween you find entry exit points that's what to look for.imho..
     
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  7. James Bond

    James Bond Well-Known Member

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    Sorry, maybe I wasn't clear, I have no intention of trading shares, just buying and holding ones that pay reasonable dividends. I don't have the time or nous to trade.

    So the short-to-medium term share price doesn't worry me, although I would like to see the companies I invest in doing well!!

    JB
     
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  8. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Roughly speaking:

    Lets say you buy 5 stocks, $10k each stock and in 7 years your capital on average doubles to 100k, so you made 50k.

    Or you put the 50k into a property worth 500k for example. Over 7 years at 5% growth average a year with compounding, you will have over 200k equity, grossing 3 times the return of the stocks.

    Comparing uses of deposits with average returns is important imo to get a better picture. Yes there will be variances here and there
     
  9. James Bond

    James Bond Well-Known Member

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    OK - but in the shares scenario above, the shares will have given me an income during the 7 years. Whereas the 500k property will have cost me money each year won't it? So I'm not convinced the maths is quite as simple, but happy to be proved wrong, as I don't have as much experience as many on this forum.

    JB
     
  10. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Depending what you buy it may cost you a little each year. Lets say the property costs you 7k/year times 7 years is 49k, that's not taking into account any rental increases. If you do the maths you will still be ahead. Keep in mind this is not even taking into account extracting any equity in say years 3 to re-leverage into another asset, increasing the base and increasing the compounding returns.

    This is simply how many people build multimillion dollar portfolios with increasing net worth over the years while others still dabble in shares. All I'm saying is whatever you decide, don't dabble (especially with shares as they can be very unforgiving). Do your research and choose a path you think makes most sense for you.
     
    Last edited: 17th Aug, 2015
  11. See Change

    See Change Timing Lord Premium Member

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    Again timing with come into it . One poster who has done shares and property is Keith J . Check out some of his posts on somersoft .

    Again for me , timing is important .

    Property goes sideways for long periods as do shares . The share market has been volatile since the GFC . happy to watch from the sidelines .

    With shares I think you take a very hands on approach or let other people do it for you in one of the multiple funds around , either index or actively managed , but I'd be doing a lot of DD on the active ones .

    Cliff
     
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  12. willair

    willair Well-Known Member Premium Member

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    s
    Target the ones that are fully-franked,with dividend reinvestment plans in place,then any offers like several had and CBA now has in place buy into everyone,then when the time comes as time goes very fast one day you will walk up the letter box 2 times a year a pick up the cheques and the flexibility with dealing with different economic slowdowns that span out every 7-9 years or so from bitter experience..
    ..imho..
     
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  13. MTR

    MTR Well-Known Member Premium Member

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    I like the idea of both, but for me it's what provides the best opportunity at the time. I suppose property has advantage of leveraging, in a booming market attractive.
     
  14. Beelzebub

    Beelzebub Well-Known Member

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    My theory on shares: I buy properties and also save 9% of everything I earn to invest in shares (Super)?

    So thanks to super, the way I see it, is that I am diversifying.
     
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  15. The Y-man

    The Y-man Moderator Staff Member

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    @James Bond

    FYI - we do that with listed REIT's where the yield is above current interest rates. So instead of paying off principle or sticking money in the offset, I have listed REIT's that generate say 6%pa, against an interest rate of sub 5%.

    This pays for the interest, and surplus can then go into the offset etc.

    The Y-man
     
  16. wategos

    wategos Well-Known Member

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    Shares all the way for retirement income for me, the income is around double what you can from property after tax and expenses. For example I sold a property last year and put almost the lot into shares, cash flow improved over 20K pa.

    You can retire on shares with half the equivalent in property.
     
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  17. OC1

    OC1 Well-Known Member

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    I just hate the "sell property-pay tax-then buy shares" part of the equation :(
     
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  18. devank

    devank Look, lets just get on with this, ok? Premium Member

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    Apart from our 'year buffer', I try to pump about 10K for each IP into options trading. Kind of having second set of buffer but still doing something with it.

    Probably the end-game would be to sell everything and invest in shares.
     
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  19. BingoMaster

    BingoMaster Well-Known Member

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    I would just like to add something - if investing in something well diversified like an index fund, etf, LIC etc... then contrary to what some people have said, don't read the financial media or shares stuff at all. Building wealth through shares, like property, is a very long term game. But unlike in property with shares you can jump in and out of the market easily, which almost always delivers poorer results.

    IMO the best way is to spread your risk by dollar cost averaging in - i.e. take a set amount that you want to invest regularly, and buy shares every month with it. Can be a very small amount. When shares are expensive, you naturally buy less of them, and when they're cheap, your dollar goes further and you buy more. If you just stick to this, over the very long term, you'll get great results

    Edit - this requires setting up some sort of account which minimises transaction costs, like an unlisted fund. Otherwise brokerage is too expensive on small amounts. To take it even further, setting up an automated investing system where a certain amount is taken out every month, is even better
     
    Last edited: 17th Aug, 2015
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  20. Be Developer

    Be Developer Property Developer Business Member

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    Income producing shares are good idea. If you are out our acquisition phase in prop or don't want to have larger property debt, property maintance, teneat darma etc.

    Know enough investors on forum that has substantial investments in both class various reasons!

    Mate of mine picked up $120k worth of Netflix at beginning of the year...not only he made money thru ever climbing share price but made decent coin on FX rate too..