Why Shares Suck

First of all don't shoot the messenger. Up for discussion
Cashflow capital blog

http://www.cashflowcapital.com.au/update/why-shares-suck/#e_anchor

Extract below:

Share indices overstate performance… by design!

If I try to bump up a property’s value by adding another bathroom, or doing a work over of the back garden, I can end up on the cover of “Better Homes and Gardens” magazine.

But if I try and bump up a share’s value somehow, it’s called fraud and I end up in jail.

You can’t do anything with shares. It’s totally out of your hands. It’s all comes down to what your company is doing, and what the market is doing.


Let’s take the ASX All-Ordinaries. Right now, the All-Ords are still lower than their GFC peak.



Yep. 10 years on, they’ve gone nowhere.

But the thing to remember is that the All Ordinaries isn’t a measure of all stocks in the Australian market. The All Ordinaries only tracks the biggest 500 companies.

Now the biggest 500 companies in Australia is fairly stable, but it can change over time.

So let’s say one company does particular poorly one year. And it goes from being the 400th biggest to the 505th biggest.

That company drops out of the All Ords.

That means the poor performance of that particular company doesn’t affect the index.

And what that means is that the index is consistently biased upwards by design.

It’s always going to inflate the results.

But if you want superior returns, and you want the ability to actively work your investments, it’s really hard to go past property.

 

Look at that graph. See all those ups and downs. That's where the money is made (and lost lol).

 

That chart is pretty much meaningless. A chart of the equivalent accumulation index is of more use.

ASX 200 Accumulation Index Values:

As at 30 June 2000: 15,628
As at 20 June 2007: 39,119
As at 16 Jun 2017: 56,051

 

Hi Mtr

I take it that from the chart( all ordinaries) you posted that you also do not count the cashflow you receive from your properties as part of your investment return or you lack an understanding of investing in shares?

 

IMHO , Property investment is only more advantages for the initial portfolio expansion and leverage which is not present to such an extent in other asset classes. It would not be as good an option for a higher net worth investor who is not looking to use too much leverage(double edge sword)

Superior returns are easy in stocks if you have the skill and temperament to hold long term. In fact one can hold property stocks as a proxy instead of owning property and have to deal with PMs, tenants, maintaineance, etc...

Let's just take a popular developer like Mirvac for example. During GFC shares were going for about a dollar and 72c at the lowest point. Without picking the bottom an investment there would have yielded dividends and capital gains. Mirvac has been a steady gainer and above $2 so far this year. Dividends annually havent been too shabby either.

What about Australand shares which went up and was eventually privatised by the Thai beer tycoon at a premium?

Or Westpac, sub $20 during GFC times and currently $30 to $40. Pretty good dividends annually as well and also up 50-100% over past $10 years??

So property might double every ten years, but so do stocks.

Its really a matter of choosing when in the cycle to buy, applies for stocks or property. and picking stocks is a little like picking property, stocks within sectors and property markets within markets.

@MTR look at the share prices for the big american property developers, i am sure they have gone up a lot as well from their lows.

Looking at the all ords 500 companies is also not useful as a comparison. Since to make a similar observation you would have to include a property portfolio which also includes properties which have been hit hard in places like Perth and Darwin, as well as mining towns.in such a case, that property portfolio would have had performance quite similar to ASX indices.

Overall property or stocks , they are just assets that provide a return on your investment and will keep up with inflation. How much return you get will depend on what you buy and when you buy and how long you hold. Of course you can manufacture yield by renovations or adding a granny flat, but for stocks you could just buy a property based Developer or REIT when its UNDERVALUED and they will manage the property portfolio, buy land, do asset enhancement, development, build stuff and pay you dividends without you breaking a sweat or much involvement.

My 2 cents.

 

this is a thread about shares for discussion, its not my opinion, I am not the writer of this blog

I am interested in comments/opinions so I can learn.

 

Well... its easy to buy a tiny slice of the whole "consistently biased upwards" index. You do so by buying an index fund, for a mere 0.15% per annum... so if you're worried about underperforming, why don't you just do that?

It may be a bias, but its working in your favour.

 

Positive Geared Cashflow Properties | cash flow investment property

Doesn't seem to be much bias in this blog at all.

 

That's why you pick the shares that you think will go up and not the whole index, companies that you think will make more than what the public thinks. It isn't for everyone, for example less than 50% of players in the 2017 ASX Sharemarket game had overall positive returns.

 

Yep, if you happened to buy at one of the worst times in recent history you would have 'gone nowhere' (also conveniently forgetting about all the dividends paid in the last 10 years, because that suits his argument of course).

Noone has ever bought a property and had it go nowhere for 10 years. Ever.

Could there be any bias based on the fact we've just gone through one of the biggest property booms ever? Nah, couldn't be. Property always goes up. Property doubles every 10 years. It's so easy!


The blog is complete and utter rubbish. The analysis is for dummies. But I'm sure it'll drum up some customers for Spiro and his business, pulling in some suckers who are easily impressed by a graph.

 

Unless you buy in a downward spiral. Does an index fund then outperform the market by dropping further?

 

If you look at the shorter timeframe 2009-17, the marked has doubled, so I'd agree @Ran Gus, graphs can hell whatever story you want to spin, just like stats.

Ask any of the long term investors on ghetto gold coast, regional cities etc, it goes in fits and spurts.

 

I think you have to compare apples with apples.

Assume two couples.....

Both have exactly the same house, exactly the same equity..... $300k.

One couple accesses their equity to buy shares, the other accesses their equity to buy IP's.

After 20 years; who has made the most dough - nett cashflow after tax, and Cap Gain?

Keep it real, and not some fantastical fringe high risk speculations in either class.

 

Lol, funny.
Really not worth the trouble of trying to explain things in response to this kind of article.
Better stay out of shares I reckon, I heard human endeavour is a thing of the past.

 

All i know is i know many, many ppl who started with nothing and managed to build wealth amounting to millions in net worth through various types of real estate ventures and investments. I am yet to meet 1 average person who started with zero and systematically built up their wealth using stocks. I'm sure they are out there but i never met them. I meet alot of investors though so to me the conclusions I've made from my observations are significant.

 

MTR, I think you get along very well with Peter Thornhill

 

Shares people can be discreet and quiet, and not crow about their portfolios! It's possible to build massive shares portfolios though then gift the money to charity as a legacy.

 

A bit like the median house price, tracking only sales

Think house and median again

Population growth, new stock, inflation, increases in wages and pricing etc benefit both

If you went Rip Van Winkle in 2000 and slept through 2007, waking up in 2017 it would look like this



Then add dividends as per Bob over that period and it's a 7.8% growth rate

If Mrs Van Winkle invested throughout the period, or went all Austing in the drop after 2007 adding extra funds, you can add a few more % points for old Rip when he woke up

 

Can't wait for Gladstone and karratha to get back above their peak prices... They were great cash positive plays weren't they?

Funny when I look at the aord chart in spiro's example I see a steady increase over the last 17 years, with a few ups and downs in between. Edit: @Redwing beat me to it

 

If Rip woke woke briefly during the troughs of 2009, 2012 and 2015 to purchase more shares before nodding off again, the returns would be exponential.