$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?
Anyway, you are great example of the old maxim - "a fool and his money......" etc.
Spot on. When gold was plummeting he held on because the people selling told him he was a 'strong hand'. Absolutely scammed him. "You're no lily-livered, panic merchant. You're a Strong Hand and the weak will pass their wealth to you."
It's like looking for masculine reinforcement in a 1300cc motorbike.
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
Thanks for the advice everyone, there's a lot to think about!
To answer some of the questions, I'm 32, I may or may not sell after the 3 years, probably not, if it's doing well after three years why sell it I suppose.
I rent a unit with my gf at the moment and don't have other investments, just nearly 250k in savings between us.
Of course I know what "risk adjusted return" means , and at it's heart is the amount of money you will need to prop up your overleveraged properties in the worst case senario, ie: Interest rates shooting up and house prices tanking. You do not calculate this with gold because gold has no risk unless you buy it with leverage. You pay for it once and it's yours, whereas your property can be taken off you legally by several means. Foreclosure the most obvious of these.
Now go back and re-read the OP's post. He said
He did not imply he would sell after 3 years. Surely you know the difference between returns on property over time and the profit of selling a property, he could have meant either.
Your opinion on shares is wishful thinking at best and your analysis of the gold market is flawed based on numerous points I wont go into. The only thing in your post that has a measure of reality to it is the final paragraph where you admit your advice isn't worth a pinch of salt. Thank you for your honesty. Why don't you guys stick to what you know best, buying property in a bubble, and leave the important matters to those of us who actually know what we are talking about. Gold went up for ten years without a down year and gold stocks languished the entire time.
Here, go educate yourself, and don't bother coming back until you have something to offer. P.S. Good luck with your gold stocks, you'll need it.
Gold producers (I'm not talking explorers) actually significantly outperformed the price of gold during the gold bull market. The capital gain was more, and in addition they paid dividends. Go look up the charts of NCM and PRU and compare it to the gold chart. Granted since the gold price peaked they have massively underperformed. Like I said though, a higher risk/reward profile but linked to the price of gold. I would have thought a goldbug such as yourself would know all this though.
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:
+1. Agree on all points. 3 year horizon makes property at 80% LVR a high risk. 50% margin loan on stocks is incredibly high risk. Any drawdown whatsoever will mince you up. Even a cursory glance at the technicals should tell you that even if you are a goldbug you should should not be starting or adding to a gold position right now.
I would do none of the above.
If you said 30% margin on the stocks I would say go for that. Mind you, since you are saying 80% LVR is an option for property, the implication is that you have other cashflow to cover interest, so in that case a 50% margin loan might be OK because you have cashflow to cover margin calls in the event of a drawdown.
Frank Castle
10 Sep 2013, 02:50 PM
Option 4) Pay CASH for a regional property in an area with good fundamentals and pocket $250 a week
Now that is something where it is hard to lose, as long as you don't buy in a 1-industry town.
But it wouldn't appeal to someone who is proposing casino-like options because there is no theoretical way to double your money in 3 years.
...casino-like options because there is no theoretical way to double your money in 3 years.
I think one has a good chance of doubling their money within the next 3 years with silver.
Would I go out and buy $200k worth of silver on that belief?
Certainly not...
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.
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