Diversification Vs Repeat what you are good at
- Thread starter devank
- Start date
When I can't find property deals or see better opportunities .
The diversification is something they are taught in their training . My son who is in final year commerce engineering raised concerns about our exposure to the property market using the D word . Good opportunity to give the alternative view point
I'm sure there are good financial planners out there , but the ones I've met left me less than impressed .
The views are contradictory . My preference is get good at something and repeat , though it's nice to have more than one arrow in the quiver .
Cliff
If there was no margin calls on shares and it was as easy to borrow 80% of value as it is property then I would be a lot more balanced.
Also is a lot harder to create equity, how do you DA shares.
Saying that there can be great wealth created through shares.
I like sticking to what I know. Would love to be part of a share market listing for a company that I was involved in from the early days though.
Also is a lot harder to create equity, how do you DA shares.
Saying that there can be great wealth created through shares.
I like sticking to what I know. Would love to be part of a share market listing for a company that I was involved in from the early days though.
I've no doubt that if there was suddenly a cure for cancer made available, that all the highly paid cancer specialists would easily find their skills are transferable.
In diversification terms I'd suggest that it's not about property verses shares, it's about a concentration of property in a small area or demographic, verses spreading your portfolio far and wide.
In diversification terms I'd suggest that it's not about property verses shares, it's about a concentration of property in a small area or demographic, verses spreading your portfolio far and wide.
I aways ask the "experts", after they finish talking, when they became wealthy.....and why they are still working for the man....
Most are just doing it because they have no other thoughts in their head....no other knowledge or skill or experience....and are often too afraid to change.
My advice is to follow what works for you.....if your gut is saying ok, then do it.
Your question shows you may not be following your gut.....???
It is usually right!
Good luck!
I think diversification is a good general principle for the occasional investor or the lay person. However, for the regular investor, I think it is best to stick to winning techniques.
Even in shares, I do not believe in holding a broad basket of shares of which I have minimal knowledge about. Some of the biggest wins and losses of mine on the stockmarket have been risking a significant part of my net worth on one or two shares at certain points in time. Usually, I have been following and trading in this one share for some time, trading small amounts and then going all in. Sometimes its great, and sometimes it is hellish. However, it beats broadly committed to a large diversified portfolio wherein I am likely to get mediocre gains at best despite risking it all.
Even in shares, I do not believe in holding a broad basket of shares of which I have minimal knowledge about. Some of the biggest wins and losses of mine on the stockmarket have been risking a significant part of my net worth on one or two shares at certain points in time. Usually, I have been following and trading in this one share for some time, trading small amounts and then going all in. Sometimes its great, and sometimes it is hellish. However, it beats broadly committed to a large diversified portfolio wherein I am likely to get mediocre gains at best despite risking it all.
Why spread your money from A-Z when compounding interest is your friend?
I liken rinse and repeat to compounding interest. The more you do it, the better you get at it, the higher the return - all similar to compounding interest.
You can geographically diversify if you wish. Again though you lose some of your skill that you have learnt doing things in your geographical area of expertise. You either have to pay someone else for the skills or take the risk that comes with less knowledge of another state/area.
You can also diversify in terms of markets within your own state, types of dwellings, age of dwellings blah blah blah blah
I liken rinse and repeat to compounding interest. The more you do it, the better you get at it, the higher the return - all similar to compounding interest.
You can geographically diversify if you wish. Again though you lose some of your skill that you have learnt doing things in your geographical area of expertise. You either have to pay someone else for the skills or take the risk that comes with less knowledge of another state/area.
You can also diversify in terms of markets within your own state, types of dwellings, age of dwellings blah blah blah blah
Diversification if you don't know what you're doing
Concentration if you do.
I recall reading something in my DFP about some study they did a while back on random stock picking vs researched stock picking... end outcome was quite similar.
That said, concentration in multiple investments with minimal correlation.
Concentration if you do.
I recall reading something in my DFP about some study they did a while back on random stock picking vs researched stock picking... end outcome was quite similar.
That said, concentration in multiple investments with minimal correlation.
Diversification = jack of all trades, master at none = mediocrity
Diversification is having your assets in different class's like property, shares ect.
Most of us all have super as well as property so we're all diversified a little bit.
In property investment you could also look at Diversification as.
more than one IP. (wealth is split between more than 1 asset)
IP in different city, suburbs or state.
IP types like houses or units.
They all split up the risk so if one goes bad the others have a chance to be shielded from that due to there differences in location, type etc. Also as you wind down your IP buying in retirement you can sell property?s for other safe asset class, splitting your assets between two safe asset classes both giving solid returns. So maybe diversification is something that with property is achieved not at the beginning but towards the end.
Most of us all have super as well as property so we're all diversified a little bit.
In property investment you could also look at Diversification as.
more than one IP. (wealth is split between more than 1 asset)
IP in different city, suburbs or state.
IP types like houses or units.
They all split up the risk so if one goes bad the others have a chance to be shielded from that due to there differences in location, type etc. Also as you wind down your IP buying in retirement you can sell property?s for other safe asset class, splitting your assets between two safe asset classes both giving solid returns. So maybe diversification is something that with property is achieved not at the beginning but towards the end.
"Don't put all your eggs in one basket, is all wrong. I tell you put all your eggs in one basket, and then watch the basket. Look round you and take notice; men who do that do not often fail." - Andrew Carnegie.
Yes agree, it is very hard to skill up on investing techniques to consistently outperform when you are working full time and juggling many other things. Very few people reach at that stage where they develop the edge. But if and when you do, it is very lucrative to concentrate rather than diversify.
Yet, historically there have been countless studies proving that people who market time / stock pick over the long term (10-20 years) have not been able to outperform the buy and hold low cost index fund. Short term maybe yes you might be able to outpeform.
Cheers,
Oracle.
This would suit most people/investors.
Big investors stick to what they know, & follow the general idea that with big risk comes big reward. Billionaires have become bankrupt, or lost a fortune, only to get it back.
Diversification if you don't know what you're doing
Concentration if you do.
I recall reading something in my DFP about some study they did a while back on random stock picking vs researched stock picking... end outcome was quite similar.
That said, concentration in multiple investments with minimal correlation.
You've nailed it Nek. Diversification is a risk management strategy as it it rare for all investment classes to have a perfect correlation. Perfect diversification results in average results not exceptional results, why? You need to manage each part of the portfolio and optimise these as they perform or outperform other categories. That may been being overweight in retail shares and light on property but selling shares to pick up on swings in the property market. Unfortunately, you just can't move into and out of property at the drop of a hat and without major cost imposts.
Hi All
This question is very pertinent to my current situation and strategy.
My strategy is units and townhouses with a buy, renovate, and hold for the long term.
I have managed to make an average of 40-50k after revals from doing a 6 week reno and with excellent(to me) rental return.
Now all my units are in 1 quite large complex and I get told by different people to "diversify and not put all my eggs in one basket" but my thoughts are:
1. I know what the units are worth pre-reno
2. I know what the full Reno costs will be
3. I know that I can increase the value by 40-50k after all costs
4. I currently get higher than expected rents from them (RE agents quite surprised !! )
Tell me, would you all "rinse and repeat" or diversify into other suburbs
Regards
Little Rooster
This question is very pertinent to my current situation and strategy.
My strategy is units and townhouses with a buy, renovate, and hold for the long term.
I have managed to make an average of 40-50k after revals from doing a 6 week reno and with excellent(to me) rental return.
Now all my units are in 1 quite large complex and I get told by different people to "diversify and not put all my eggs in one basket" but my thoughts are:
1. I know what the units are worth pre-reno
2. I know what the full Reno costs will be
3. I know that I can increase the value by 40-50k after all costs
4. I currently get higher than expected rents from them (RE agents quite surprised !! )
Tell me, would you all "rinse and repeat" or diversify into other suburbs
Regards
Little Rooster
It also gives you more votes on the body corporate.
You can use the same method and buy in another block to repeat if you need to diversify.
You can use the same method and buy in another block to repeat if you need to diversify.
Not only does it give me more votes but I am also "El Pesidente" of the strata commitee
