OK, I've finally made it to 1000 posts. So I thought I'd post something a bit different, and even a bit controversial.
There's been a lot of discussion lately on property being speculative (specufestors is a term often bandied about). And its far safer to put your money into shares. There's also a feeling that people who have purchased over the last 5-7 years were just fools who got lucky, rather than astute investors. And considering how much money people have made, perhaps they were smarter than some people give them credit for.
But here's the thing. I think shares are far more speculative than property. You see, when you buy property, you can go to the suburb, drive around it, look at the houses, shops, ammenities. Look at where the train stations are, bus stops etc. You can look up historic growth, crime rates and rental figures. You can compare that property with dozens of similar ones in the same area. You can even stop and chat to the neighbours about the area if you like.
Furthermore you can look at your prospective purchase and see it, touch it, even smell it (if you like!). You know how big the rooms are, the land, what the views are. You can get a licensed builder to do an inspection.
Essentially, there's very little you CANT find out.
Which means that, far from being speculative, there are probably no other investments you can make where you have access to so much information to make your decision on.
But with shares, you have access to so little information about the company. If there's a big problem looming in a mine, how will you know? Do you have access to the research on longer term commodity prices? No you dont.
Nor do you have information on the different types of borrowings ANZ has, and their exposure to 'sub-prime' borrowings.
Any number of things could be a problem for companies you can buy shares in, and you just wont know about them. You have to decide whether the shares are a good opportunity based on information that, even if you had access to it, would take far too long and be far too complex to decipher.
And hey, when you buy shares, you're buying because somebody else is selling. So why do you assume you know more than them?
I know there will be exceptions to these rules, such as property being impacted by the closure of major local employers or negative decisions, such as toxic dumps etc, but you can make a far more informed decision buying property than you can buying shares, so shares are a far more speculative purchase than property.
There's been a lot of discussion lately on property being speculative (specufestors is a term often bandied about). And its far safer to put your money into shares. There's also a feeling that people who have purchased over the last 5-7 years were just fools who got lucky, rather than astute investors. And considering how much money people have made, perhaps they were smarter than some people give them credit for.
But here's the thing. I think shares are far more speculative than property. You see, when you buy property, you can go to the suburb, drive around it, look at the houses, shops, ammenities. Look at where the train stations are, bus stops etc. You can look up historic growth, crime rates and rental figures. You can compare that property with dozens of similar ones in the same area. You can even stop and chat to the neighbours about the area if you like.
Furthermore you can look at your prospective purchase and see it, touch it, even smell it (if you like!). You know how big the rooms are, the land, what the views are. You can get a licensed builder to do an inspection.
Essentially, there's very little you CANT find out.
Which means that, far from being speculative, there are probably no other investments you can make where you have access to so much information to make your decision on.
But with shares, you have access to so little information about the company. If there's a big problem looming in a mine, how will you know? Do you have access to the research on longer term commodity prices? No you dont.
Nor do you have information on the different types of borrowings ANZ has, and their exposure to 'sub-prime' borrowings.
Any number of things could be a problem for companies you can buy shares in, and you just wont know about them. You have to decide whether the shares are a good opportunity based on information that, even if you had access to it, would take far too long and be far too complex to decipher.
And hey, when you buy shares, you're buying because somebody else is selling. So why do you assume you know more than them?
I know there will be exceptions to these rules, such as property being impacted by the closure of major local employers or negative decisions, such as toxic dumps etc, but you can make a far more informed decision buying property than you can buying shares, so shares are a far more speculative purchase than property.