Runswif: [8D]


Aspex: Totally agree with your examples of gearing and the sharemarket. I would like to comment that the examples you have given are faitrly advanced trading techniques and the average mum & dad (and "who" exactly we are hypothetically talking about is just another perfect example of why copmparing these asset returns against each other is very much a waste of time) investor is hardly going to run out and jump straight into that kind of thing. People who excell at the kind of share trading you are talkign about tend to have a higher understanding of general finance & mathmatics, have a higher risk profile along with the ability to analysise and minimise risk and generally probably be a little more intelligent than your average mum & dad. (ok so i am generalising, but thats all one can do in this context and its all IMO).

this is not to say your points arent right on the button. There is alot of money to be made in the sharemarket and leverage is a great tool when used correctly and not just limited to property.

i think macd's point originally is that for your average person its easier to understand, find information about and enter the property market and make decent long term average returns with leveraged investment property. I dont disagree with him at all really, but i think, that everything has its place depending on the person and the circumstances/opportunities/experience and you cant really try and argue either way.

In regards to your comments about risk, just like the sharemarket you can make property investment as risky or conservative as you like at the expense of returns.

For instance you could buy a low yeilding property in a good area that is solid, put 40% deposit down to ensure that the low yeild covers all outgoings and then put the property on a 20 year principal and interest loan. In this scenario regardless of any capital gain,worst case scenario (within reason) at the end of the 20 years the house is owned outright and the income is ours, and we only paid 40% of the initial capital but the income paid off the rest. The returns are low comparitively, but with very little risk and a clear goal. Obviously the preferable option for someone like myself (young - no kids) is to gear up 100% and go interest only on the term - but the risk is much greater. There are an infinite amount ways to structure these things, with both shares and property, but each person has to work out where they fit into it by analysing their age, sleep-at-night, capital requirements, income, family situation etc etc etc.

Does anyone actually want to make the statement that property is better than shares or vice versa? IMHO its much more complicated than that statement.

All I can say, is start as young as possible, with no family to feed and learn as much as you can and you would be unlucky (or stupid) to not make it to where you want to be.

Regards,

(Sunburnt) Sauce [}]


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