$200K to invest. Property at 80% LVR vs Shares at 50% margin loan vs Gold unleveraged?; Which will give the best risk adjusted return over next three years?
I have $200K to invest. I was thinking one of these options:
1. Property at 80% LVR (Sydney or Melbourne)
2. Shares with 50% margin loan (probably an index fund)
3. Gold unleveraged? (or maybe silver?)
Which will give the best risk adjusted return over the next three years?
Or can someone suggest something better?
Thanks,
Wesley.
People have done well out of all three asset classes if they have timed their purchase well. Property will probably surge almost everywhere at current interest rates.
You don't give any information as to how beneficial NG would be to you (that's available on both property and shares) and there is little information supplied on your age bracket and future needs.
I think that it's naïve to post a simple question like this on a forum and expect a profound answer. You need to do more research into your own needs and then ask specific questions rather than broad questions like this. If there was one magic answer that was guaranteed to make you wealthy, everyone on this forum would be rich - but we're not.
Any expressed market opinion is my own and is not to be taken as financial advice
2. Shares with 50% margin loan (probably an index fund)
3. Gold unleveraged? (or maybe silver?)
Which will give the best risk adjusted return over the next three years?
Well Gold obviously if you look at risk adjusted. It has no counterparty risk whereas the other two have a lot of couterparty risk. And the risk of shares and property falling precipitously in the next 3 years is high indeed given the current state of the Australian and global economies. Buying shares on margin is not an investment BTW, it is a gamble. A gamble another GFC wont happen on Wednesday and wipe the markets out like in 2008. And unlike houses or gold, stocks can, and sometimes do, go to ZERO. The tech bubble stocks proved that.
But using the past to predict the future is rarely a good way to invest, the fundamentals of a market over time will always drive the market. If you see short term gains in a market that seem at odds with fundamentals, look for a mass psychology that is temporarily driving it higher. The two most common mass psychologies in the minds of western populations are
1/ Stocks for the long run, buy and hold. 2/ Bricks and mortar, houses always go up in value over time.
For the past few years the major gains is stocks has come about from billions of superannuation dollars automatically pouring into the market and bidding them up, and from companies sacking workers and downsizing. These drivers don't really point to an investment vehicle that will assure good returns in the future.
The major gains in houses have come from investors out bidding each other to buy properties, a path that assures the asset will be over priced. But houses are a long term bet anyway and the vaunted yield is not a yield at all until the loan is paid off. Until that point it is really just a repayment on a very long mortgage.
Gold has gone up a lot over the last 10 years but there is no mass psychology at play in the western world to purchase it as yet. And this is important, because most of the wealth of the world is in the western world. But as mel's comments above clearly show there is a mass psychology against buying it, one that derides Gold as a barberous relic. Of course people like mel would not have been around telling you to buy 10 years ago. The gold bull caught nearly everyone by surprise and those that missed out on the earlier gains are even more anti-gold now because they missed out on big profits, and that's a mass psychology in itself.
It is a common misconception that gold investors buy and never sell, but in reality many of us sell off portions from time to time to cover our capital investments and to diversify. Personally I think land is a good investment, I just think suburban land is not.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
Well Gold obviously if you look at risk adjusted. It has no counterparty risk whereas the other two have a lot of couterparty risk.
You have no idea what the term "risk adjusted return" means, do you???
To the OP, with only a 3 year investment horizon, all three options carry high risk.
* Sydney property - with that 3 year timeframe you are talking about a "flip" play only. It *could* work in the right area of Sydney in the next 3 years, but there are no guarantees, and if you don't pick the right property / area, the transaction costs could easily wipe out any nominal profit you might make. Rent income of course will basically offset your 80% LVR financing costs. Would have been better to have bought a year ago for this strategy - aint hindsight wonderful??
* Shares - timing wise this is probably the most likely option to give you a solid return over 3 years, with minimal downside risk (but still always the possibility of a big correction of course, I just don't think so at this stage in the cycle for a while now), plus you get the dividend stream. at 50% LVR, you would be cashflow positive as well by a fair margin, although margin loan interest rates are not as good as mortgage rates (which property owners are able to use for leverage share purchases).
* Gold - riskiest of all in current environment IMO over the next 3 years. The gold bubble clearly topped out/burst 2 years ago, so I reckon Gold will range trade for many years now. Plus no income stream, large buy/sell spread for physcial, and incredible volatile price all = lowest likely risk adjusted return profile.
PS: The above is not financial advice, just the ramblings of a 40-something mid-career Sydneyite..... and it's probably worth about what you paid for it! :pop:
For Aussie property bears, "denial", is not just a long river in North Africa.....
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy
