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Old 05-15-06, 01:50 AM   #1
yendor28
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- the sky is falling - update on my investment/use of money threads

Hi everyone,

OK. I really appreciated the information of everyone on the forum last time. Much appreciated!

update: I decided to buy an apartment for my first investment

I have saved up the necessary deposit. Organised finance through a reputable mortgage broker and am pre-approved but now to find the place.............

Two main factors are making me cautious about my decision.

a) The Market: I have been looking for the last couple of months to no avail. The market is crazy. Places are selling the same day that they are listed on the internet, without inspection for generally 10%-20% more than the asking price.

b) The bull craze here: Everyone is spend, spend, spend. Buy, buy, buy. So many persons are getting 100% loans right now and recommend it. Seriously guys on the street are all talking about it like it was nothing. I was always told when your hairdressor says buy then be careful. That is what is going on.

Can anyone please share your comments, wisdom and experience as just hearing others thoughts and stories is very beneficial to me.

- I saw a financial planner (FP) last week who was very impressed with my personal finance plan (savings and expenditure) which I have created in excel. FP recommended managed funds.

* remember that I live in Australia

thank you
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Old 05-15-06, 07:59 AM   #2
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Heh definitely need to be extremely cautious.
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Old 05-15-06, 10:49 AM   #3
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Yeah, I'd be cautious too, the market here seemed to have peaked and we're in an interesting stalemate situation. In S.D. I saw an interesting scenario where sales have dropped tremendously, yet sellers are still asking for high prices, yet the buyers aren't knibbling. Combined with foreclosure rates that are +20-25% higher each month than the previous year's month, these sellers can't hold out for long. The market in S.F. has actually been dropping this year. If you recall the real-estate recession from the mid-'80s, it took about 10-years to break even. When Alan Greenspan, George Soros and Warren Buffet are scared, I'd be very careful.

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Originally Posted by yendor28
- I saw a financial planner (FP) last week who was very impressed with my personal finance plan (savings and expenditure) which I have created in excel. FP recommended managed funds.
I'd recommend that too. You'll earn more for your money and this is especially important if you're younger.
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Old 05-15-06, 10:59 AM   #4
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Well, based on last month's housing starts in Lithuania...

Getting financial advice on the internet isn't a very good idea in my opinion.
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Old 05-15-06, 06:01 PM   #5
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I am not asking for financial advice, just financial experience!

I.e everyone elses experiences in times like this and thoughts.

i.e discussion
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Old 05-15-06, 07:43 PM   #6
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In my experience I can recommend that you make extra principal payment every month that you can. Make sure to ask the mortgage company if there are ANY prepayment penalties, and is extra principal payment is OK each month. If you do this regularly you will save a great deal of money in interest, and pay back the loan much more quickly.

I have also been buying as many shares as I can in REITs (real estate investment trusts). They buy property, usually a certain type of properties like hotels, malls, retirement homes. They have been paying a great dividend with the market run up, and they make money on rent and when they sell property. The shares also can increase in value, look for a company with a good track record, in the US a company called CNL has done well. They are good if you want income, they seem to pay dividends regularly.
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Old 05-15-06, 07:49 PM   #7
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Quote:
Originally Posted by Shifty
In my experience I can recommend that you make extra principal payment every month that you can. Make sure to ask the mortgage company if there are ANY prepayment penalties, and is extra principal payment is OK each month. If you do this regularly you will save a great deal of money in interest, and pay back the loan much more quickly.

I have also been buying as many shares as I can in REITs (real estate investment trusts). They buy property, usually a certain type of properties like hotels, malls, retirement homes. They have been paying a great dividend with the market run up, and they make money on rent and when they sell property. The shares also can increase in value, look for a company with a good track record, in the US a company called CNL has done well. They are good if you want income, they seem to pay dividends regularly.
I heard on NPR (Marketplace) today that speculators were bailing from the Real Estate market in the US (read REITs). Hopefully you're not one who'll get left holding the figurative bag.
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Old 05-15-06, 08:58 PM   #8
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Originally Posted by USAZorro
I heard on NPR (Marketplace) today that speculators were bailing from the Real Estate market in the US (read REITs). Hopefully you're not one who'll get left holding the figurative bag.
Price fluctuations can be your friend, I'm selective and if the price drops I buy more at a lower price. You are right though, don't want to buy high and sell low. Good companies and stable properties are the key. I bought a fund that specialized in fast food properties, bought land, built a Jack in the Box (or other), and leased it to the franchise, long term it was a winner.
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Old 05-15-06, 11:44 PM   #9
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yendor28, as I recall, your job has you often traveling for extended periods of time. And as I recall, this also means you won't really be living at your apartment much, and without an apartment, you wouldn't be spending much on rent anyway. So the apartment's almost purely an investment. Have you decided how you would manage your apartment when you're away?

I also question the wisdom of buying an apartment as your first investment. There is one obvious "advantage" (with its attendant risks). You are highly leveraged in the early years, so any gains (and losses) are magnified. But your portfolio will be undiversified to the extreme. Not diversified across different types of investments, not across different markets or industries, not even across different choices within one sector. It doesn't fit any sort of rational asset allocation you might draw up.

I continue to stand by my belief that you're best off with the core of your portfolio in a diversified portfolio of global equities and fixed income investments (through mutual funds), with your age and risk tolerance probably dictating a relatively high percentage of equities.

Of course, the standard caveats still apply. I have interacted with you, but I don't really know you. I don't know your country. And you're reading something a chemist typed up late at night. Hardly the description of trustworthy advice.
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Old 05-16-06, 08:06 AM   #10
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Quote:
Originally Posted by Shifty
Price fluctuations can be your friend, I'm selective and if the price drops I buy more at a lower price. You are right though, don't want to buy high and sell low. Good companies and stable properties are the key. I bought a fund that specialized in fast food properties, bought land, built a Jack in the Box (or other), and leased it to the franchise, long term it was a winner.
I need to talk to you
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Old 05-16-06, 04:52 PM   #11
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Listen to jschen, he's a smart guy...

Quote:
Originally Posted by jschen
I continue to stand by my belief that you're best off with the core of your portfolio in a diversified portfolio of global equities and fixed income investments (through mutual funds), with your age and risk tolerance probably dictating a relatively high percentage of equities.
Righto, at his age, he should even have about 3-5% in options and commodities as well.

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Old 05-16-06, 05:24 PM   #12
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Danno, question for you. I know that having a small amount of one's portfolio in "non-traditional" investments (ie other than equities, fixed income, and cash) allows one to work in some combination of potential for outperformance and potential for risk control due to the lack of correlation with the "traditional" investments. It's easy to build the traditional portion of one's portfolio. With a prudent selection of a few funds, one can cover the world's equities markets, roughly in proportion to the world market at large, with a mix of large and small companies, growth and value. And even get different approaches: indexing, traditional bottom up picking, quantitative attempts to add alpha relative to an index. It's not so hard with fixed income, either, though I don't maintain any long-term savings in fixed income at the moment due to my age and risk tolerance.

But what are the small investor's choices for further diversification without having to actively watch over one's investments and the markets? I would be willing to diversify outside equities, but I don't have the time/inclination/knowledge to handle investments on a regular basis, and I don't have the large account balances to justify personalized professional wealth management. Even with a portfolio of, say, low six digits, the amount of money in non-traditional investments, would only be very low five digits. Split across multiple investment classes.

There's REITs for real estate, and there's funds that allow diversified investments in REITs at low cost. Convertible securities can be covered in the same fashion. But what about everything else under the sun? For example, I'm not aware of great choices for low cost hands-off investment in options or commodities, but I'm aware of their value to one's portfolio. What's a small investor to do to gain exposure to the other markets at reasonable cost? Keep in mind that for any one investment, we're probably talking about low to mid single digit thousands of dollars initial, with additional amounts in the hundreds of dollars.
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Old 05-16-06, 06:11 PM   #13
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Thank you everyone for your replies! Much appreciated!

Keep them coming!
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Old 05-17-06, 11:05 AM   #14
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We need to start an investment thread
I have sooooooooo
soooooooooooo many questions i would want to ask.
I should probably find a book or 2 to read first
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Old 05-17-06, 11:28 AM   #15
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Quote:
Originally Posted by TexasGuy
We need to start an investment thread
I have sooooooooo
soooooooooooo many questions i would want to ask.
I should probably find a book or 2 to read first
Nonsense . Just rely on the advice of random people who can't use puncuation correctly. Books, after all, are simply the advice of random people that can actually punctuate correctly.*

*and usually have some type of firsthand training or knowledge about the subject.
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Old 05-17-06, 11:42 AM   #16
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Well, 6 months ago the housing market was still hot as crap here. It peaked in February and has been dropping at an increasing rate since then. Dunno how the US economy interacts with Oz, but 6 months ago would have been a REALLY LOUSY time to buy in my area.
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Old 05-17-06, 01:03 PM   #17
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Nonsense . Just rely on the advice of random people who can't use puncuation correctly. Books, after all, are simply the advice of random people that can actually punctuate correctly.*

*and usually have some type of firsthand training or knowledge about the subject.
Ehh. I would trust the offhand knowledge of a person over a book, as a book has to have met some sort of political standard usually to get published.
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Old 05-17-06, 01:12 PM   #18
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Ehh. I would trust the offhand knowledge of a person over a book, as a book has to have met some sort of political standard usually to get published.
Political standard? Not really... Editing standard maybe. Publishers often (although not always) check that the author actually has some sort of knowledge of the subject before publishing the book (they have their reputation + the money they're investing in the first print run to think about before publishing pure junk).

But there are a ton of small independent publishers. No matter how non-politically correct your work, you can probably get it published somewhere.
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Old 05-17-06, 01:15 PM   #19
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Political standard? Not really... Editing standard maybe. Publishers often (although not always) check that the author actually has some sort of knowledge of the subject before publishing the book (they have their reputation + the money they're investing in the first print run to think about before publishing pure junk).

But there are a ton of small independent publishers. No matter how non-politically correct your work, you can probably get it published somewhere.
Tell that to the hundreds of thousands of unpublished people. Heck tell that to Steven King. It wasn't until he wrote one book that conformed to the politics/views of the publishing company that he was able to get his book in. He then found out what he needed and modified all the prior books he had written that had gotten rejected upon rejected.


It is very much a political/bigoted world.
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Old 05-17-06, 01:28 PM   #20
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Tell that to the hundreds of thousands of unpublished people. Heck tell that to Steven King. It wasn't until he wrote one book that conformed to the politics/views of the publishing company that he was able to get his book in. He then found out what he needed and modified all the prior books he had written that had gotten rejected upon rejected.


It is very much a political/bigoted world.
That's the point, there isn't "the publishing company"... there's lots of 'em. Plus, most of the hundreds of thousands of unpublished people are unpublished because they suck as writers, not because of their views. I can't imagine more than a tiny minority get rejected because of their viewpoint or the positions they take.

I don't know details on Stephen King's start, but he's written (and had published) an awful lot of seriously messed up stuff, so I'd hardly call that supporting your argument.

Hmmm, a tad bitter about this... perhaps TG is one of the unpublished masses?
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