Thoughts on my investment Strategy

Mugged by 6 dwarves, not happy

 

I could have thought of many others things I could have p*ss*d $120,000 or so dollars on. So yeah not to extatic about it.
But like I said 3 years ago I didn’t know any better. Heck 3 weeks ago before I started conversing on here with you gentleman I didn’t know much better. So thank you all for your invaluable input.

Look the good thing about my journey so far is that I have become comfortable in investing in shares. 3 plus years ago I would have laughed at the suggestion of sticking millions of dollars in shares.
I can look at it from this angle. I once considered putting it in term deposits. So I would be up 3% rather than the current 5%. So I could say I’m 2% up rather than 2% down.

Next few weeks I’m due for a face to face with the adviser. It’s going to make for an interesting meeting. Maybe I should send him a link to this thread first.

 

Wait till @Big Al gets his invoice from PC Not Advice Community, his FA fee will look like a bargain in comparison.

We don’t come cheap here @Big Al.

You might be known as @Big Al but collectively we’re known here as BIG BILL.

 

Do you take cheque?

 

He’s anti paperwork. But he’ll take Bitcoin

 

I think you got mixed up there @Snowball. This is what you actually sent me:

 

Thanks @Big Al I’ll make sure I invest it wisely.

 

Didn’t get much response to my post on page 9 about the australian unity product from the rational people of PC.
Keen to hear anyone’s thoughts / counter argument on my view of the product and the risks associated.

 

It was a great post thanks. Not much I could add as I suppose I’m biased or have been brainwashed toward equities.

In the past I’ve often read of high yield property / mortgage trusts etc in many cases being a yield trap. That is, high yield up front but less growth in the income over time.

This following graph from Peter Thornhill compares industrial shares against listed property highlighting the difference in income growth over time. I personally feel the starting date of the chart and perhaps other factors make property look worse than it is but it illustrates the point:



Round and Round We Go – My Say No. 53 | Motivated Money

This might be of interest also:



But even if we look at the ASX instead of Industrial shares have your Unlisted property investments in general despite the initial high yield achieved this level of income growth:


Not suggesting at all that what you’re investing in isn’t good @Big Al but simply putting the reasons forward why I’m biased toward equities. That said the ASX which I invest in through an ETF is roughly 8% listed property. I’m simply happy to accept market weight rather than overweight property.

The other important reason is I have no interest in researching / analysing direct property trusts trying to decide which ones to buy. I suppose it’s a bit like your active funds chosen by your advisor vs index funds. Over the long term does all this extra work trying to select best product end up doing any better than simply investing in passive index funds?

Happy to be proven wrong but at least that should liven up the conversation somewhat.

 

Good on you for writing this. It needs a explaination like you gave. It’s not something that can be explained in just a few words, and the graphs tell the story.

 

Thank you for the feedback @Nodrog. The way I looked at it was not about wether it was better investment compared to equities but just something different all together. Early on I was very reluctant to put to much in equities. But the more I learn and understand the sharemarket the more comfortable I have become directing capital to equities rather than other asset types.

 

Can’t argue at that, been wondering about that myself lately. Diversification, as they say is the only free lunch in investing. I suppose also given Unlisted property / mortgages isn’t an area I know much about I was trying to add something that didn’t sound too dumb.

 

What.....Diversification, next you'll be talking about asset allocation

 

I guess diversification into something you are comfortable in and believe in the fundamentals is not a bad thing, regardless if it returns are more or less than another asset class.

I like property but am no longer a fan of resi. So commercial is what I have moved towards. Good quality buildings in prime locations will alsways be in demand. Prime cbd land that some of these buildings sit on can no longer be found and I believe will always be valuable.

I’m slowly liking equities more and more each day. The only issue I still have is when it’s time buy in. With property trusts I can look at a offering even in today’s market and say yeah this is good value I will buy in and can commit $300-$400k. With equities, even when it comes to say VAS with all the continued noise about market crashes I never know when a good time is to drop $300-$400k in.

 

OK, if the investor is getting 10-11% of return, then the developer must be paying around 15%
(after the charges from lender, assuming they take 2-3% cut)?
Is that normal for commercial/development loan to have ~15% interest rate at the current market condition? I know for residential loan is only around 4-5%.

 

As an investor I’m getting 7-8%. The manager disclose there cut which is another 1-1.5%. So borrowing cost is 8-10%. Higher rates apply if they go over term or don’t meet certain pre sale requirements.

I would say that’s slightly higher than bank lending rates for development loans but in the current market where banks aren’t lending I would say that’s not too high. Remeber they are paying that rate for 12-18 months which is normally the turn over time to build and sell the project.

 

That makes sense. So the majority of the borrowers do not qualify for standard bank loans and hence willing to take the short term risk (higher interest rate).

I think from investors point of view, perhaps as you mentioned, diversifying into something with a "guaranteed" return and also capital "preservation" (can't go up or down) could be another option. At least, it's better than TD with slightly higher risk but you've already described in the previous on how you measure the risk. Thanks for the post.