Why Shares are Better Than Property

Incase I've missed something obvious, how exaclty does property provide more diversification?
Through a modest holding of etfs and individual securities I'm diversified across circa 5000 different businesses across the globe.

I couldnt even name half of those 5000 companies, but thats ok because specialists are paid to run them for me (aka directors), so I wouldn't say you need to know anything about how a business is run.

 

buying an index etf takes what knowledge?

 

Or worse, lose everything !

 

Until the CEO of your holdings goes on a Joe Rogan podcast and starts partaking in questionable activities

 

AH HEM, TO THE MOON<

or make more money on pseudo currency than their own major product.

 

Ah yes, unless of course the pseudo currency play was nothing to do with actually making money off it, in which case it might be viewed in time as a genius move.

 

I won't cover what has already been covered so many times here in terms of shares v property what I will say is as I have previously advised we moved out of our PPOR into a rental and rented out our apartment in Sydney nice suburb etc etc..
Our tenants have just moved out and the agency has just sent us the costs for new-leasing:
Internet listing - $300
Sign Board - $99
If required (already done recently) professional photography $220
maybe these are excessive doesn't really matter, what this confirms for me is I have no interest in acquiring multiple investment properties both based on the excessive costs associated with property and also the PITA factor not sure what price you can put on that!

PS also highlights why REA share price is doing so well haha

 

Just a thought. If from a pure total return lens, shares non leveraged were better than leveraged property. Couldn’t you simply leverage and buy a property that is cash flow positive after all expenses and that would give you a better return outcome than just shares.

This assumes that the excess net cash flow from the property will eventually outweigh its purchasing costs and such properties exist in this environment.

 

To me sharemarket is still like a pie, in comparison. It may have different topics on it but it is still a pie. One piece may have cheese, another may have mushrooms, another just vegan, and so on but still one pie. So we can diversify all we want but it is still stocks which are different but they are all still sticks, no?

 

How can you lose everything, wouldn't you at least gain back the land value or just down price but to lose all property and land I have never heard off?
Unless we buy on the moon or in some dessert?

 

That's a mighty big call. Tesla's incidental $1.5B USD bitcoin flutter represents about .2% of TSLA's market cap. TSLA gained a fair bit more than that during the final 5 minutes of trading yesterday. I agree with you about the 'pseudo currency' part.

 

You only need to miss couple of repayments, or there is massive -ve equity, even if houses. The bank can call in a loan at will, if you can't pay the bank can sell (give away) the property dirt cheap. There are more dud properties than people realise, actually 250,000 for sale and several thousand locations at any time. Like the couple paid $1.3m in mining town, no takers eventually sold $400k, gone bankrupt, thats what I call lose everything. Of course may be the same if you are highly leveraged to buy shares, but most buy with the money they have.

 

I think this would be similarly classified if you bought very speculative shares? Although I would think more could lose this way all funds? I Would be interested what $ value is lost this way from each asset class as 'minority' circumstances occur everywhere.
I personally stay away from mining towns or any place reliant only on one main source of income, and similarly would imagine most smart IPs investors would too, the way smart share investors would not have all their fund just in one stock?
I heard once that may lose because they are too greedy or too fearful, one over committing the other not taking any action.
Actually you are right know of one person whose spouse over leveraged into stocks before GFC hence needed to sell their PPOR, but managed to downsize from a house to a unit.

 

'Diversify' all you want. When a major global crisis hits the stock market, in many cases watch the moolah disappear.

Gimme me a break with all this stocks is better than real estate. I am not saying RE is better either.

There are so many factors and variables that will affect the financial outcome. To believe one is better than the other in any absolute sense is just silly.

 

No they are not 'still stocks', thats is a common misconception. They are different businesses.
One may be a debt collector (CCP), a supermarket (WOL), a hospital (RHC), or a retailer (HVN)etc.

Now suggesting that all the diversification in the world doesnt change the fact they are still 'just businesses' cant be reasoned with. That would miss the most basic point that the sucess of many businesses are negatively correlated to each other in the first place.

 

That’s market risk or systematic risk for which you expect to be compensated over the long term.

Diversifying across stocks eliminates unsystematic or idiosyncratic risk.

Stock market risk - Passive Investing Australia

Property prices also go up and down, it’s just you don’t see it happening between 10am and 4pm every day like you do with shares.

In fact studies have shown that people are willing to overpay for illiquid assets like property, private equity etc for this exact reason, lowering future returns.

Note, I hold both property and equities. Each has its advantages.

 

You could do both

e.g. instead of just buying $100,000 worth of shares with $100k cash, you coud
use $20,000 for the deposit on a property and borrow $80,000 to buy a $100k property and then invest $80,000 into shares.

 

What is it with property people and borrowing money?

You just don’t need personal recourse leverage with shares to achieve good financial outcomes.

Why is equity better than property? Because the potential to take on risk in eqiuity markets is un-bounded. The risk boundaries are drawn by the individual investor actions and you can adopt pretty much any risk profile you like without the 'need' for additional leverage.

 

If a person has equity and servicing why not borrow to buy property? If will likely have the rent covering the interest repayments these days or be very close. If you think prices will rise more than the rates there might be little downside.

 

well accor

sir, market cap = what the tesla its worth, got absolutely nothing to do with profits or profitablity.
, no matter how much trading is involved, money move 3 ways, buyer,seller & broker. tesla do not get involved. they get a big fat zero.

unless they do a share buy back or capital raising. former they dont have the cash for at current price, latter they do via convertable debt and other instruments.


as for profit of 1.5b

tesla has only to turn over a profit once in a calender year. that is in the millions not billions.
which might not be repeated in year of 2021, lets see how first quarter results are for 2021, from their recalls that happen (hence the dogecoin and bitcoin play) to divert attention, people are sceptical.


but hey what do i know. hindsight is perfect