share market crash

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24th January 2008, 09:34 AM
Bushie

Quote:

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

That was what I intended - Its not my quote but one you hear bandied around a fair bit.

Quote:

Originally Posted by numpty

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

Some one I work with (and you could probably guess who) stated a few days ago 'when BHP shares are at $32 he will buy 10,000'

Martyn
24th January 2008, 09:43 AM
stevo68

Quote:

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

Not so much lucky, just spends a lot of time researching, has different brokers he deals with and has the market live on his computer. Has done pretty well with it. Was happier yesterday as he gained around $500k, when I have some spare moola around ( bit tough with 4 kids a missus and one income) will be getting him to invest it for me,

Regards

Stevo
24th January 2008, 10:54 AM
mns488

Quote:

Originally Posted by BigJon

Incidentally, if shares outperform real estate so convincingly, why is it easy to get a loan to buy property, but hard to get a loan to buy shares?
The banks must know someting about it :p.

yeah they know you are going to pay them a truck load of interest and they have a right over the title of the property:p

a 400K loan over 25 years, you will pay interest over the term of $467368, not principal, just interest.

wonder why they say yes to that instead of shares. :angel:

If you have more than 10 % equity then they wouldn't even blink an eye... ;)
24th January 2008, 11:06 AM
BigJon

Quote:

Originally Posted by mns488

yeah they know you are going to pay them a truck load of interest and they have a right over the title of the property:p

Exactly. The real estate won't disappear like the shares might.

Interest rates for property tend to be lower than other loans, so they could potentially make more money from other loans (for shares, etc), but as a general rule they don't like making those loans. I am sure there are exceptions.
24th January 2008, 11:28 AM
mns488

Quote:

Originally Posted by BigJon

Exactly. The real estate won't disappear like the shares might.

Interest rates for property tend to be lower than other loans, so they could potentially make more money from other loans (for shares, etc), but as a general rule they don't like making those loans. I am sure there are exceptions.

I've had a margin loan in the past and wasn't hard to get. They are useful to create wealth while contraing the tax effect. But these days i prefer to own things outright (I'm not a fan of negative gearing - spend a dollar to save 40 cents). Yes the interest rate is higher on margin loans, but you might have forgotton the dividend yeild on shares can be anywhere between 5-15% which contras the loan interest to below that of property loans or near enough! Also, try and get an investment property yeilding anything above 3% - good luck. :)

Property markets also crash (and will probably do so again at some point in the future), remember the early 90's. you might be to young to remember? (although i was only 14y/o at that point!)

But at the end of the day, you make you own decisions in life and invest in ways you are comfortable. :)
24th January 2008, 12:07 PM
feraldisco

Quote:

Originally Posted by BigJon

Incidentally, if shares outperform real estate so convincingly, why is it easy to get a loan to buy property, but hard to get a loan to buy shares?
The banks must know someting about it :p.

there's no doubt that shares are more volatile on a day-day, week-week and month-month basis than real estate - however, if you're a long-term investor, you're looking at monthly and annual trend lines, not the fluctuations, and long-term, major companies like Woolies, Commonwealth Bank etc have proven to have better returns (capital gains plus dividends) and pretty safe returns than long-term real estate (what has happened in Australian real estate in the past 5-10 years is unusual and definitely outside of long-term trend lines). I would agree that real estate is 'safer' than many shares, and banks are more risk averse when lending for share purchases, because they don't have much control over which shares you buy and at what price - whereas they do get a chance to assess the particular property you are planning on buying and the price you plan on paying for it.

Of course, this discussion is probably pretty pointless - both shares and real estate done well are much better than leaving your money in the bank in the long-term... and you can always invest in both!
24th January 2008, 12:59 PM
Captain_Rightfoot

Quote:

Originally Posted by BigJon

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.

I wasn't really meaning to compare anything. I was just trying to get tot eh fact that there is a feeling amongst many people in the community that their house went up $xxxxx in the last two years, and that therefore houses will continue to appreciate at that rate. I'm not the only one who has noticed that. Apparently it's not a good sign when that happens as logic has left the room.

Clearly that isn't the case with you and I say again I commend you for investing!

I concurr with NM in that managing rental houses can be a nightmare. Of the few friends I have with rentals they all point to tennant problems from time to time.

My mothers house for instance had a single great tennant for 20 years. Then she had a number of tennants, and then one that wouldn't pay the rent, complained about everything, and then had to be evicted. It would appear to me that if you run a few rental houses it's not if, but when you will have problems like this.

We are hoping to start doing some investing in the next little while, and I think it's likely that we will end up with property, but I also intend to do a sharemarket index fund. They rise and fall with the entire index, but becasuse there isn't much managment they charge much lower fees.

With two kids and a busy job I'm flat out maintaining my own property let alone someone elses. But everybody is different.
24th January 2008, 01:03 PM
BigJon

Quote:

Originally Posted by feraldisco

Of course, this discussion is probably pretty pointless - both shares and real estate done well are much better than leaving your money in the bank in the long-term... and you can always invest in both!

:D:D

Spot on with that comment.

Money left in the back just about goes backwards, given that inflation can outstrip the interest earned.
24th January 2008, 01:07 PM
BigJon

Quote:

Originally Posted by Captain_Rightfoot

I concurr with NM in that managing rental houses can be a nightmare. Of the few friends I have with rentals they all point to tennant problems from time to time.

I also agree that it can be hard. One of our recent "tenants" was of the nightmare type, but we got rid of him (and his father and his dog!) and now we have brilliant tenants.

We look on it as a learning and life experience. We do expect to have the occasional bad tenant, but most are good.
25th January 2008, 07:52 AM
DiscoStew

Quote:

Originally Posted by waynep

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.

That is my understanding as well except that they do not wait until the share value drops below the amount of the loan, they use a preset percentage eg once the loan amount is more than 75% of the share value they ask you to pay off enough to get it back below 75%. I am not sure what a typical % figure would be.

And as someone else said, I have never had a problem getting a margin loan and I have done it twice now.

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