Gut Feel

[mercturbo]

With job security becoming a thing of the past, incomes dropping or at least stabilizing, (Coalition IR laws), interest rates up a bit or stable at present, share market booming at record highs, property values stabilizing on average, commercial investment property returns appear low, what is everyones "GUT FEEL" for the future ie: where would one be investing into at present? as it appears quite tough to call at the moment, dont worry disclaimer: no legal action for any opinions here refer to "gut feel"

Cheers

Rob

[Mondie]

Merc, my gut feel remains with property. l have dabbled in the sharemarket and done ok but get much more satisfaction from owning property and, after the big run the s/market has had over the past couple of years, would be leaning back towards property. While its true the property market is flat you need to find the pockets where the opportunities still are.

l like propoerty because over the long term you are always going to double your money about every 8 years and your invesments value can never go to zero like shares.

Of course l fully expect someone else to post something 100% opposite to my thoughts but we are all different with different risk profiles and tolerances. A skilled share investor who micro manages their portfolio can easily outperfrom property, l just dont have the energy or interest to become one of them.

Cheers

[wicksy]

well my investments will be in property I plan to buy my first next year, live in it for a year and then start to rent it out and look for another house somehwere in nsw or victoria to live in, I wanna start young to st myself up, I have alway thought about shares but to me they dont feel as secure as I would like them becuase you never know what could happen to the company your investing shares in, it could go bust, but on the bright side it could expand and then you will earn more

[TurboDewd]

I am totally biased and totally prefer shares.

Its best to put ya money into what is performing best and since mid 2002 it has been shares - hands down. Property outside of Perth and Darwin has performed worse than 12 mth term deposits. Interest rates, however, probably wont move this year.

Will shares continue to outdo property? I believe so, but not quite as spectacularly as in the past 3 yrs.

* China & India are sucking in resources which is good for our mining industry. The Dow and FTSE have finally cracked 5 year highs which has taken them a long time, this bodes well for non-resource stocks in my amateur opinion.

* shares are more transparent, you know your portfolio value at any given moment

* if you make a bad decision in shares you can get out of it in seconds, not weeks/mths like in property

* you can buy and own shares in seconds and the acquisition costs are tiny

* shares are higher return and higher risk in general...but if u choose wisely and spread ya portfolio across industries then in the long term

* with shares you dont have to deal with real estate agents

******************************

My brother has never touched shares, we set up a pretend portfolio for his savings on xmas day after a chat.

I put him on to AMP, BHP, Rio Tinto, Rinker and QBE Insurance - he's up 11% in 2.5 mths...and we still havent added the dividends to that.

[Nerazzuri]

If you're in it for a quick buck, then I think that stock is still probably the way to go. China and India will drive the market higher for many years in my opinion so this is a fairly safe bet. Property does fluctuate a fair amount, but again, you can be pretty sure that over time it will be increasing steadily.

If I had the money, I'd invest in property, because at the end of the day, no matter what goes wrong, you still have your very real, very useful property, and there will always be a demand for that.

[exahsix]

You will probably get the whole range of replies from different people.

I have invested in shares (through superannuation) and they're currently returning real well - but 4 years ago they went backwards.

I also invested in Property in Perth and have been real lucky the last 4 years as it's gone mental. So I just cashed out of 66% of my investments there while the going is good. The cash will now allow me to pick something else that is undervalued.

I would perhaps pick some resource shares for 6-12 months as these should continue to drive some quick cash gains. I would then look around at medium to long term investments with a reasonable level of security and buy into the Sydney property market which should be about bottommed out. When it all goes up again in the next few years, there should be some spectacular returns.

Of course each decision depends on your goals as an investor and the amount of time you can dedicate to tuning your investments. Don't forget the tax implications of (a) negative gearing and (b) capital gains.

I suggest you spend a couple of hundred dollars with a financial advisor to plan out your goals/timelines and risk profile. This is money well spent considering you will be toying with hundreds of thousands/millions of dollars in investments and/or loans.

[pelican]

PROPERTY

PROPERTY

PROPERTY

PROPERTY

Shares are ok if you want liquidity, but at the end of the day, all you have is paper..... How would you feel if all your savings were in HIH/FAI shares right now ???

Property may be boring as hell, but it works, and it works WELL......

It's a Turtle & Hare situation....... Ive been backing the turtle..... so far it's got me 50 properties, and a 5hitload of income......

(my opinion / views anyway.... your needs will no doubt be different.... )

[F6 RAPID]

Guess what I do for a job..........................

Unless you are an active trader and know what you are doing, stick to Managed Funds. A good quality vale manager preferably given the market we are now in. Might I suggest International equities also.

Domestic property, yuck. The market is soft, while interest rates are stable, unemployment is a little on the rise and the vacancy rate is increasing daily. If you can beat around 25% returns in residential property (which is what a first quartile managed fund is producing) with suitable franking credits, you are doing extremely well and might I say, out of the norm.

It has been a remarkable five years for the Australian sharemarket with strong gains. However, the Australian sharemarket has not only performed strongly on an absolute basis, but also on a relative basis.

In fact the local sharemarket has outperformed the global sharemarket in each of the past five years. The most important thing an asset manager can do with this sort of outperformance is to understand what has been driving it and then to gauge what is the likelihood of it continuing.

Although official interest rates and oil prices rose in 2005, the buoyancy of the global economy continued to support earnings growth and share price rises.

The Australian economy and sharemarket continue to perform solidly, with price gains underpinned by solid earnings growth reflecting a solid economy, low and stable interest rates and the positive impact of the emerging markets’ resources boom.

In addition, the Australian market has been characterised by increased P/E ratios, which has been associated with strong returns in 2005. The sector of the market which recorded the strongest returns last year were low-quality growth stocks.

In 2005 resources outperformed industrials for the fourth time in 5 years.

The margin of outperformance was very large last year as resource stocks rose 50% (which represented their third year in succession of 20% plus returns) and industrial shares rose just under 20%, which enabled investors to experience strong investment returns for the third year in succession.

The primary reason for the strong performance of resource stocks has been higher commodity prices in the wake of increased demand from energy-dependant emerging economies. The increase in demand has been led by China and India and has been supported by other economies such as Russia, Brazil, our Asian neighbours like Thailand, Indonesia and Malaysia, some South American economies such as Chile, Brazil and Venezuela and various Eastern European Economies such as Latvia and Lithuania, which were recently admitted into the European Union.

The industrialisation of these economies has increased their demand for resources, which has led to higher prices in the wake of limited supply of minerals available on the world markets at present. Most commodity prices have increased well above their long-term average over recent years. For example. Aluminium is 64% higher than its long-term average, copper is 132% above its average and even gold and oil are well in excess of their historic averages.

This rise in price has positively influenced the revenue of companies exposed to the resource industry.

The increase in commodity prices and a slight increase in volume has culminated in strong earnings growth for our resource companies. In particular, resource sector earnings have increased by 50% over the past three years, which is well in excess of previous earnings peak recorded in 1991, 1996 and 2002.

In comparison, earnings growth for industrials stocks were lower, but still very strong at around 20% - which is around previous earnings growth peaks recorded in 1991 and 1996 and well in excess of Australia nominal economic growth rate of 5%.

The impact of rising earnings growth on share prices has been enhanced by the price that investors have been willing to pay to access rising share prices. This has been reflected in the rise in P/E ratio of stocks in the S&P/ASX 300 Index.

In particular, the share of companies with PE ratios between ten and twenty times earnings has fallen from around 65% of stocks in the index to around 45%. Furthermore, the percentage of stocks in the Index with a PE ratio greater than twenty times earnings has increased from around 25% to just over 40%.

This indicates that prices have increased at a faster pace than earnings, which has positively impacted investment returns, but makes finding good and attractively valued companies more difficult.

Style results in 2005 were quite strong. Growth stocks outperformed value stocks over the year to 31 December 2005 for only the second year since 2000.

In addition, stocks that pay low dividends outperformed high dividend paying stocks by 25%.

Furthermore, high beta (or high risk) stocks outperformed their low risk peers by a wide margin, which indicates that value managers typically had a tough year in 2005.

Nevertheless, we continue to believe what history has repeatedly demonstrated – that value investing produces stronger long-term returns in Australia.

The long-run outlook for share prices is determined by the outlook for corporate earnings and interest rates. Over the past few years, Australia has experienced an economic sweet spot, with earnings growth fuelled by productivity improvements, low interest rates, rising commodity prices, strong consumer expenditure and moderate wages growth.

This background has fuelled earnings growth, which increased over 20% per annum for FY2004 and FY2005 - the first time it has risen above 20% in consecutive years for a decade. Importantly, unlike the growth in experienced in FY1996 to FY 1999, growth in FY2006 and FY2007 is expected to remain above 10%, which indicates that the outlook for earnings growth remains intact, which should positively influence sharemarket returns.

The worst thing about abnormal profit growth that we have experienced in resource stocks over the past three years is the knowledge that it doesn’t last forever. Knowing this an investment manager needs to understand the drivers of the earnings growth and its sustainability.

The primary cause of the large earnings growth recorded by resource companies has been the exceptional increase in resource demand from emerging economies.

With demand increasing strongly and supply increasing at the margin, commodity prices have risen beyond long-term sustainable levels.

While, we believe in the sustainability of emerging markets growth, we believe that domestic sharemarket valuation has gone a bit far at this stage of the cycle.

Once supply eventually increases, commodity prices should begin to normalise

Over the past few years, the Australian market has been re-rated relative to its global peers with the PE ratio of our market is now trading around the levels of the global sharemarket.

Our market has traditionally traded at a discount to global shares due to our index composition. In particular, our market is dominated by mature business such as banks, big resource firms and many privatised government assets. These business are reasonably mature and as such trade on a low PE multiple. Conversely, the global market has a higher share of high-growth companies and industries which are associated with higher PE multiples. Putting these two points together indicates why Australia has traditionally traded at a discount.

However, nowadays, the Australian sharemarket has moved significantly away from its 11 year average of 82%. In fact the market is now around three standard deviations away from this mean, which indicates we are in unchartered territory. Interestingly, since the end of the tech bubble in 2000, the Australian market’s relative valuation has increased by almost 50% from 71% to 98% in early 2006.

So we conclude that our market has been re-rated well above its long-term average compared to global markets.

[TurboDewd]

  pelican said:

PROPERTY

PROPERTY

PROPERTY

PROPERTY

Shares are ok if you want liquidity, but at the end of the day, all you have is paper.....  How would you feel if all your savings were in HIH/FAI shares right now ???

(my opinion / views anyway.... your needs will no doubt be different.... )

<{POST_SNAPBACK}>

How would u feel if you put all your savings in Westpoint?

How would you feel if you put all your savings in Zinifex (zinc miner, up 240% in 12 mths) or Paladin (uranium miner, up 300% in past 12 mths)?

*check*

Whatever one does make sure you get several opinions first and diversify!

[F6 RAPID]

Mezzanine mortgages (and credit securities in general) bring about a whole different ball-game when investing.

Don't get these things confused with equities - completely separate animals with far different characteristics.

As for HIH shares etc, as I said, if you reckon you can do better than a fund manager, go for it. But be prepared for excess risk when you don't know exactly what it is you are investing in.