Exactly, they both add nothing to the economy, a zero sum game as you put it. This is why negative gearing should be abolished on all forms of investment.
Disagree with your conclusion. If you are thinking of short term speculative trading in both cases - like share day trading, property flipping, then I agree in part. Although remember that to get the CGT discount you have to hold for 12 months or longer, and for shares to get the dividend franking credit you have to hold for (I think) 45 days. NG is neither here not there IMO - it's a tax mechanism that legitimately allows costs of an investment / business activity to be claimed against any income earned, in aggregate, to compensate for the fact that your income tax thresholds (marginal rates) are also determined in aggregate. EDIT - and even if NG were not allowed, then the costs would simply be accounted for on the capital side of the taxation arrangements, so that would only impact the timing of any deduction ultimately being realised.
Now in the case of both shares and housing, if an *investor* holds for the long term, then that is more beneficial in both instances to the economy - the share investor gets a say in the running of a business and earns a share of any profits that are distributed. The housing investor provides rental accommodation, maintains a property, and received a rental income stream in return.
Disagree with your conclusion. If you are thinking of short term speculative trading in both cases - like share day trading, property flipping, then I agree in part. Although remember that to get the CGT discount you have to hold for 12 months or longer, and for shares to get the dividend franking credit you have to hold for (I think) 45 days. NG is neither here not there IMO - it's a tax mechanism that legitimately allows costs of an investment / business activity to be claimed against any income earned, in aggregate, to compensate for the fact that your income tax thresholds (marginal rates) are also determined in aggregate.
Now in the case of both shares and housing, if an *investor* holds for the long term, then that is more beneficial in both instances to the economy - the share investor gets a say in the running of a business and earns a share of any profits that are distributed. The housing investor provides rental accommodation, maintains a property, and received a rental income stream in return.
The 45 days part is right, I'd just like to add that if you are a Share Trader as opposed to a Share Investor the CGT is not an issue as it becomes a straight profit/loss transaction.
eg if you make $100k in a year profit trading shares you would pay the equivalent tax that a wage earner who earned $100k a year did. Less of course allowable deductions.
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
And while we're on stocks, I did give a bit of thought to them some time back and one of thoughts that occurred to me then seems to be being agreed with by this dude here where he writes:
"Underperformers are eliminated
The second reason why the Dow inevitably rises over long periods of time is that under performing companies are periodically removed from the index and replaced by companies that are performing better.
Replacing under performing companies that have a falling stock price, with companies that have a rising stock price ensures the index continues to climb over the long term."
Seems he (Jay L. Zagorsky) has bin an "economist and research scientist" at Ohio State Uni since 1995.
Is he talking shite or wot?
Were my suspicions on such stuff some time back, right or wrong?
Hmmm - I guess what I'm suggesting is (that IF Zagorsky IS correct), stocks as an investment class (generally), just might not necessarily be such great performers (long term) that a pretty much ignorant layperson on 'em (like me), just might tend to assume, having looked at some charts on how some general indexes on them have changed (or rather more specifically, gone up) over time?
And while we're on stocks, I did give a bit of thought to them some time back and one of thoughts that occurred to me then seems to be being agreed with by this dude here where he writes:
"Underperformers are eliminated
The second reason why the Dow inevitably rises over long periods of time is that under performing companies are periodically removed from the index and replaced by companies that are performing better.
Replacing under performing companies that have a falling stock price, with companies that have a rising stock price ensures the index continues to climb over the long term."
Seems he (Jay L. Zagorsky) has bin an "economist and research scientist" at Ohio State Uni since 1995.
Is he talking shite or wot?
Were my suspicions on such stuff some time back, right or wrong?
Hmmm - I guess what I'm suggesting is (that IF Zagorsky IS correct), stocks as an investment class (generally), just might not necessarily be such great performers (long term) that a pretty much ignorant layperson on 'em (like me), just might tend to assume, having looked at some charts on how some general indexes on them have changed (or rather more specifically, gone up) over time?
No he is correct. All stock indices are like that. For example the ASX 200 are the top 200 stocks on the market, but under performing stocks drop out of that index and better performing stocks take their place.
A stock that goes into bankruptcy for example is taken off the index and replaced, whilst someone who held shares in all the index stocks would suffer a loss on those shares, the index doesn't because it dumps that stock and picks up a better performing stock. Hence the index is a bit more optimistic than real life.
No he is correct. All stock indices are like that. For example the ASX 200 are the top 200 stocks on the market, but under performing stocks drop out of that index and better performing stocks take their place.
A stock that goes into bankruptcy for example is taken off the index and replaced, whilst someone who held shares in all the index stocks would suffer a loss on those shares, the index doesn't because it dumps that stock and picks up a better performing stock. Hence the index is a bit more optimistic than real life.
This is why passive strategies using index ETFs are not a bad way to go - the ETF manager behind the scene's is buying and selling as required to maintain the "survivor" bias that is built into the index for you, at very low cost. Personally I like a "hub and spoke" type portfolio where a chunk of capital is in passive index ETFs (tracking whichever markets you happen to like), then the remaining portion of capital is invested in specific stock picks that you choose with the aim to pick smaller cap / high growth potential stocks - giving the opportunity to outperform the index over-all, *if* your stock picks are good ones.
Of course historically it was much harder to track an index performance, as products like ETFs were not around until fairly recently, so you had to use an off market managed fund or similar, which was more expensive.
Poontang
5 Sep 2017, 01:55 PM
The 45 days part is right, I'd just like to add that if you are a Share Trader as opposed to a Share Investor the CGT is not an issue as it becomes a straight profit/loss transaction.
eg if you make $100k in a year profit trading shares you would pay the equivalent tax that a wage earner who earned $100k a year did. Less of course allowable deductions.
Thanks for the confirmation. And yes you are also right I believe re the CGT issue going away for "declared" active traders, if the ATO designates you as such, and then as you say it's all income, not capital gain.
This is why passive strategies using index ETFs are not a bad way to go - the ETF manager behind the scene's is buying and selling as required to maintain the "survivor" bias that is built into the index for you, at very low cost. Personally I like a "hub and spoke" type portfolio where a chunk of capital is in passive index ETFs (tracking whichever markets you happen to like), then the remaining portion of capital is invested in specific stock picks that you choose with the aim to pick smaller cap / high growth potential stocks - giving the opportunity to outperform the index over-all, *if* your stock picks are good ones.
Of course historically it was much harder to track an index performance, as products like ETFs were not around until fairly recently, so you had to use an off market managed fund or similar, which was more expensive.
My concern about ETF's is what if they aren't well managed or aren't ethically run - what are the safeguards.
Take risks - if you win you will become wealthy, if you lose you will become wise
My concern about ETF's is what if they aren't well managed or aren't ethically run - what are the safeguards.
Well you need to look at who the fund manager is, what's their track record for the ETF you are looking at, brand / reputation etc. If you ever see anything you don't like, then sell and change to another one. All these same issues existed when investing in unlisted managed funds in the past as well - but worse as that market has always been much less transparent than the listed ETF market fund managers are.
Well you need to look at who the fund manager is, what's their track record for the ETF you are looking at, brand / reputation etc. If you ever see anything you don't like, then sell and change to another one. All these same issues existed when investing in unlisted managed funds in the past as well - but worse as that market has always been much less transparent than the listed ETF market fund managers are.
Well I would never have trusted an unlisted managed fund in any case, I would prefer a direct share investment or property. I wouldn't be comfortable with anything that I can't see or understand.
I do like the idea of ETF's though. Perhaps I need to do more research on them.
Take risks - if you win you will become wealthy, if you lose you will become wise
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