Thread: share market crash

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

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

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 .

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

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.

If you have more than 10 % equity then they wouldn't even blink an eye...

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

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.

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.

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 .

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!

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.

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!

Spot on with that comment.

Money left in the back just about goes backwards, given that inflation can outstrip the interest earned.

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.