Thread: share market crash

I think calling an investment a scheme ,as you have done here, indicates that it isn't a legitimate investment at all and whoever poured their life savings into didn't perform due diligence in entering the aforementioned scheme.

ie, with a bit of research they could have found out how much risk was involved.
Of course risk is a relaitve thing, what is risky for one person is not for another.
Risk is often inversely proportional to knowledge, the more knowldege the less risk.
Hence I am happy buying the occasional house and I don't think it is risky (I have some knowledge in that area), but I don't invest in the share market because my knowledge base is not broad enough, nor specific enough and I don't have the interest to invest the time to learn.

Mind you, now I am just getting pedantic over terminology .

Yes mate, you are getting pedantic , scheme, share trading, investment strategies,....call it what ever. The point is that Bushie is correct and not being negative, maybe just interpreted incorrectly. Sensible investing in anything, whilst taking calculated risks, is investing with what can be lost if it all goes wrong. If you put your life savings onto the roulette table and bet black, then you have to wear the consequences ie all eggs into one basket.

Regards

Stevo

I agree with most of what you say . I don't put all my eggs in one basket, hence multiple properties.

Originally Posted by stevo68

Correct if I am wrong Bushie, but I think what you may have been saying and I agree is that you invest what you can afford to lose, if it happens that things go pear shaped. That is in fact sensible as opposed to negative. Time and time again, people have put their lifesavings into some scheme ie things that if it does go pearshaped they lose the lot. At some point in time whether it be property or the sharemarket, it does go pearshaped, its the ones that have invested what they can't afford to lose..................that lose. An example, was speaking with the old man last night, yesterday his share portfolio lost over $800k, he's not happy about it , but it doesnt threaten his lifestyle or "existance". For others it would,

Regards

Stevo

Well he must be lucky to have a portfolio so huge as to drop that much.

i hope so the price of property in melbourne is ridiculous, over priced and not worth what they think it is

Originally Posted by waynep

I suppose it'll be those who geared up heavily ( ie borrowed money ) to invest who'll really feel the pain ... would that be part of the reason why there's been such a big fall .. i.e. highly geared investors being forced to sell to meet their margin calls ?

Sorry to put a dumb question at the end of this long post, but can someone tell me simply what a margin call is..... and why it is causing so much grief.

Tks

Originally Posted by BigJon

Good example, my Mum bought a house in Roxby Downs a few years ago. Cost about $300 000 with no loan required. Rental return was in excess of $300 per week. Recently (in the last 12 months) the property was revalued and the rent was adjusted accordingly. Capital value is now said to be in excess of $500 000 and rental is over $500 per week.
.

But that value rise is just the OOM in BOOM. Say it's gone from 300 to 500 in 3 years. That means that 60% every 3 years. That means in 3 years it will be worth 800. In 6 years 1.28 million. In 9 years 2.048 million. Clearly this is an exception. Not the rule.

Originally Posted by spudboy

Sorry to put a dumb question at the end of this long post, but can someone tell me simply what a margin call is..... and why it is causing so much grief.

Tks

Basically ... you can go to a bank and take out a "margin loan" to buy shares. It's a special type of loan with certain conditions attached.
One of those conditions is that if the shares fall so far in value that they do not cover the loan, the bank will force the borrower to inject some cash. ( ie the bank will make a "margin call" )
If the borrower does not have the ready cash, he or she will be forced to liquidate (sell) some or all of their shares at whatever the value is on the day. ( usually in unfavourable conditions )

I think that's right, I've never taken out a margin loan but had a couple of financial advisors try to push them on to me.

Like all gearing ( ie borrowing money to invest, and that includes property ), if the markets are rising, your gains are magnified, but if the markets are falling, you losses are magnified.

Originally Posted by Captain_Rightfoot

But that value rise is just the OOM in BOOM. Say it's gone from 300 to 500 in 3 years. That means that 60% every 3 years. That means in 3 years it will be worth 800. In 6 years 1.28 million. In 9 years 2.048 million. Clearly this is an exception. Not the rule.

I never said it was a rule, merely an example.

Clearly you can't use hard and fast rules for real estate values any more than you can use hard and fast rules for shares.
Everything rises and falls at different speeds and at different times, to different highs and lows.

It has been said previously in this thread that the share market outperforms real estate. Once again, it is clear in my mind that it is very dependant on what shares you are comparing to what real estate.

I am sure in my above example, it would be very easy to find some shares that performed far worse over the same time frame.

You must compare apples to apples, not apples to interstellar rocks, if you get my meaning.