Investing in Stocks vs Real Estate

[PerryM]

Paying big money to fail...

This seminar has a positive outlook and outcome - therefore a fee must be charged. The drive-by media is "free" it forces a steady diet of doom and gloom on us through thousands of newspapers, TV, cable, books - humans seem to need to feel guilty about something to feel good about themselves (I said that) - go figure.

Anyway, I suspect that 95% of the folks paying money fail at this scheme and the 5% that do succeed go on to sell books/courses to the 95% that fail.

It's not just this real estate scheme - the stock market has the same track record of failures but folks pay big money to learn how to fail there too.

Oh well, enough doom and gloom from me today - see how easy it is.

P.S.

BB all the best. Let us know how it goes.

P.P.S.
The DJIA has averaged 13.3% since 1933 (Before that the stock market was really a futures market with 5% cash - any wonder why the huge crash back then - thanks US government)

Maui has averaged 9% for 35 years.

My suggestion to those who want to invest in real estate is to buy something you can use and enjoy it. If you want fast action try Pork Bellies - I know it puts a little kick in me.

It's hard to outdo the DJIA over a long period of time. Just buy DIA (Diamond trust which is an artificial stock that mimics the DJIA)

On Oct 9, 2006 the DIA was $118.62 a share - this very second it is $140.52 - (Throw in 4% dividends for the year) that's a 22.5% increase in 12 months. You can margin 50% of your portfolio and in essence double that to 45% in 12 months.

It is a VERY liquid market and in 3 days you can have your cash in your hand. If you want fast action with all kinds of protection then just leverage (margin account) your savings to the eyeball and you will do much better over any period of time.

That's what I do - I just by DIA and never sell it. I don't margin much - just for some excitement. Now compare this to wheeling and dealing and see which is going to do better for you over 20 - 40 years of investing.

I can not overemphasize what I just said:

In the past 12 months my net worth is up 22.5% - what's in your wallet?

 

[Steamboat Bill]

http://finance.google.com/finance?q=dia

I did not realize DIA paid such a nice dividend.

 

[BocaBum99]

This seminar has a positive outlook and outcome - therefore a fee must be charged. The drive-by media is "free" it forces a steady diet of doom and gloom on us through thousands of newspapers, TV, cable, books - humans seem to need to feel guilty about something to feel good about themselves (I said that) - go figure.

Anyway, I suspect that 95% of the folks paying money fail at this scheme and the 5% that do succeed go on to sell books/courses to the 95% that fail.

It's not just this real estate scheme - the stock market has the same track record of failures but folks pay big money to learn how to fail there too.

Oh well, enough doom and gloom from me today - see how easy it is.

P.S.

BB all the best. Let us know how it goes.

P.P.S.
The DJIA has averaged 13.3% since 1933 (Before that the stock market was really a futures market with 5% cash - any wonder why the huge crash back then - thanks US government)

Maui has averaged 9% for 35 years.

My suggestion to those who want to invest in real estate is to buy something you can use and enjoy it. If you want fast action try Pork Bellies - I know it puts a little kick in me.

It's hard to outdo the DJIA over a long period of time. Just buy DIA (Diamond trust which is an artificial stock that mimics the DJIA)

On Oct 9, 2006 the DIA was $118.62 a share - this very second it is $140.52 - (Throw in 4% dividends for the year) that's a 22.5% increase in 12 months. You can margin 50% of your portfolio and in essence double that to 45% in 12 months.

It is a VERY liquid market and in 3 days you can have your cash in your hand. If you want fast action with all kinds of protection then just leverage (margin account) your savings to the eyeball and you will do much better over any period of time.

That's what I do - I just by DIA and never sell it. I don't margin much - just for some excitement. Now compare this to wheeling and dealing and see which is going to do better for you over 20 - 40 years of investing.

I can not overemphasize what I just said:

In the past 12 months my net worth is up 22.5% - what's in your wallet?

Perry,

Did I read this right? You have 100% of your net worth tied up in DIA?
I don't think there are many investors here that are impressed with that strategy. Congratulations on a good year.

Let's look at your 7 year return. On Oct 11, 1999, the Dow Industrial Average closed at 10,648.18. On Oct 5, 2007, the same average closed at 14,066.01. Over 7 years, that represents a total return of 32.1% or a CAGR of 4.06%. Adding your 4% dividend back and you are averaging about 8% compound annual return on your money pre-tax. Disney Vacation Club owners who rented their points out to other owners made that much money over that time period.

Let's contrast that with the Hard Money Lending business that Neil is in. He probably loans money between 12-15% interest with 1-4 points upfront and turns his money 2-3 times per year.

Let's run the numbers. Let's assume 3 points, 12% and 2.5 turns. That would be 19.5% return using simple numbers. I'd rather be in that business. Given that Hard Money Lenders loan at LTV of 60-70% of underlying real estate, I'd say that the risk is lower than investing in the Dow as long as you know what you are doing.

 

[Steamboat Bill]

Disney Vacation Club owners who rented their points out to other owners made that much money over that time period.

Yes...I agree...DVC has been a good "accidental" investment for me.

I also agree that DIVERSIFICATION is key. I like SPY, DIA, and QQQ. I also like many dividend paying stocks. I made a lot of $ in the 90s tech boom...but had a hard time sleeping.

Real estate investing or any type of sophisticated investing (stocks, bonds, etc.) is not for STUPID people. Having a good education or street smarts is critical to be a success in these industries.

 

[PerryM]

Perry,

Did I read this right? You have 100% of your net worth tied up in DIA?
I don't think there are many investors here that are impressed with that strategy. Congratulations on a good year.

Let's look at your 7 year return. On Oct 11, 1999, the Dow Industrial Average closed at 10,648.18. On Oct 5, 2007, the same average closed at 14,066.01. Over 7 years, that represents a total return of 32.1% or a CAGR of 4.06%. Adding your 4% dividend back and you are averaging about 8% compound annual return on your money pre-tax. Disney Vacation Club owners who rented their points out to other owners made that much money over that time period.

Let's contrast that with the Hard Money Lending business that Neil is in. He probably loans money between 12-15% interest with 1-4 points upfront and turns his money 2-3 times per year.

Let's run the numbers. Let's assume 3 points, 12% and 2.5 turns. That would be 19.5% return using simple numbers. I'd rather be in that business. Given that Hard Money Lenders loan at LTV of 60-70% of underlying real estate, I'd say that the risk is lower than investing in the Dow as long as you know what you are doing.

If you want to invest in the stock market there is but ONE stock to buy - DIA.

We have real estate holdings too. I'm not addressing them right now.

But yes, 95% of our stock portfolio is DIA. You can then use all kinds of creative things on top of this.

P.S.
When comparing rates of various investments you must use the longest average you can find. For the DJIA you get 13.3% for 74 years. That's 13.3% compounding year after year with NO decisions needed - just buy and hold.

Now I do day trading but that accounts for a fraction of our net worth.

 

[Kagehitokiri]

there is but ONE stock to buy

perry, you are speaking for conservative stock investors, no one else..

my uncle is pretty conservative. he does S&P500 spiders, and 2 stocks - apple, and 1 pharmaceutical. hes been selling a lot of his apple stock (gradually) over the past few years. he has an account with fidelity where he can do everything himself.

 

[PerryM]

perry, you are speaking for conservative stock investors, no one else..

my uncle is pretty conservative. he does S&P500 spiders, and 2 stocks - apple, and 1 pharmaceutical. hes been selling a lot of his apple stock (gradually) over the past few years. he has an account with fidelity where he can do everything himself.

Why does one invest?

If the goal is to accumulate money for retirement then DIA is the SOLE answer.

If the goal is to play Vegas at home then you can pick any stock you want and flip a coin - Heads; I'll go long, and Tails; I'll go short.

I'm accumulating money to be self sufficient and retire.

But everyone has their own reasons to invest - that's what makes America so great.

 

[BocaBum99]

If you want to invest in the stock market there is but ONE stock to buy - DIA.

We have real estate holdings too. I'm not addressing them right now.

But yes, 95% of our stock portfolio is DIA. You can then use all kinds of creative things on top of this.

P.S.
When comparing rates of various investments you must use the longest average you can find. For the DJIA you get 13.3% for 74 years. That's 13.3% compounding year after year with NO decisions needed - just buy and hold.

Now I do day trading but that accounts for a fraction of our net worth.

You are using the rear view mirror to assess investments. That is always dangerous. But, since you are so diversified, you should be okay over the long run.

Even then, you need to make adjustments for the over all macrolevel economic conditions to forecast your likely return.

Over the last 25 years, I just calculated that Dow Industrial average has a capital appreciate of approximately 11.1% CAGR. If the dividend was 4%, that would be an annual return of about 15% for 25 years. That is a fantastic return.

However, during those 25 years, there was also a corresponding dramatic reduction in interest rates. Interest rates tend to be inversely related to stock prices over the long haul. So, there is reason to believe that over the next 25 years, the Dow will under perform the last 25 years. 11% seems more reasonable.

Not bad if the alternative is cash. But, not great if you want to do more than passively invest for modest gains.

 

[PerryM]

Look to the moon....

The best way to appreciate the stock market is to go down to the beach (by a sea) and watch waves crash on the beach.

Now try to guess when the next one will come in and how high it will be. – It’s all random.

How would one make money betting on crashing waves? Simple – look up the moon tides and bet longer term – the highest wave for the day and the lowest wave for the day based upon a sea rising and falling twice during the day.

Same with the stock market. ALL stocks are bound to the DJIA – do a study of any stock and watch it’s Alpha and Beta – they are ALL tied to the market which is the DJIA in one way or another. When panic sets in and the DJIA is tanking its very hard for folks to buy anything. The opposite is true to – DJIA up 300 points today and folks buy stocks, any stocks. The talking heads simply hype the fact that the market is up or down - they don't know a thing.

There are stocks that move opposite the DJIA, like gold stocks, but on the whole gold is simply just a “Place Holder”. 1 troy oz of gold could buy you 2 nice suits 500 years ago and that’s what it will do today.

So buy any stock you want and you are just buying a poor substitute for the DJIA (DIA is the DJIA) why not just buy the DJIA? The DJIA is displayed on buildings, the talking heads each night report it, it’s all over the internet. Everyone kind of knows what the DJIA is – about 14,000 now.

Any stock you pick is based upon the DJIA and has random oscillations thrown in which are impossible to forecast. The DJIA I can forecast – 13.3% is its average in the next 12 months. What’s your average for any other stock? It’s anyone’s guess.

DIA is composed of the 30 dow stocks - plenty of diversification around the world.

 

[Steamboat Bill]

DIA is composed of the 30 dow stocks - plenty of diversification around the world.

I agree with 90% of this.

Yes, 95% of all professional stock managers (and novices) can NOT beat the Dow over a 10 year or longer period...I find that amazing.

Thus, putting everything into DIA is not a bad idea....it is just not a good one either.

I would suggest something like this for a stock portfolio.

50% DIA
25% SPY
25% International

Of course your stock portfolio should not represent 100% of your net worth....I am guessing something like this distribution for total net worth.

40% Stocks
20% Bonds
10% Cash
30% Real estate (including TS, fractional, DC, condo-hotels, etc.)

 

[PerryM]

My chili recipe is...

I agree with 90% of this.

Yes, 95% of all professional stock managers (and novices) can NOT beat the Dow over a 10 year or longer period...I find that amazing.

Thus, putting everything into DIA is not a bad idea....it is just not a good one either.

I would suggest something like this for a stock portfolio.

50% DIA
25% SPY
25% International

Of course your stock portfolio should not represent 100% of your net worth....I am guessing something like this distribution for total net worth.

40% Stocks
20% Bonds
10% Cash
30% Real estate (including TS, fractional, DC, condo-hotels, etc.)

Sure, everyone has their own recipe for chili and how to divvy up their net worth - I have mine, you have yours.

We do have gold and silver coins and 30 days of emergency food and water - we live in one investment, our home. But my recipe after spending 20 years of day and night analysis of investment vehicles is the DIA.

Take it for what you paid for it.

 

[Bourne]

I follow a different rule of thumb for my investing style.

50% of it is liquild assets i.e. Equities, Private Equity, etc... that are managed by Northern Trust. The wife gets a 33% discount off management fees.

The other 50% is in real estate. I started with my own home and took out a HELOC on it. Bought the unit next door at 30% down using the HELOC. The rent covers the payments, assesement, taxes etc. Once the HELOC was paid off, we bought another one with 30-33% down. Have been repeating the process every year for the past four.

The 50/50 split is rebalanced every other year for sanity check. It is a risky bet but it is paying off. The idea is to get to a point where I have a large enough HELOC to buy units outright and turn around and refinance them. Nothing speaks louder than CASH in a real estate deal.

 

[PerryM]

Read this..

Here is an example of the lunacy of individual stocks.

Does anyone think Google is worth the total assets of Coke and GM?

Buy all the Google you want - eventually reality will rear it's ugly head.

 

[Steamboat Bill]

I actually thought Google was overvalued at $100 per share in 2004.

An interesting fact as I have several friends and VCs in Silicone Valley...many Googlers are starting to cash in a leaving the company to work for Facebook and other web 2.0 companies.

I guess that are taking the money and running.

Google is even predicted to hit $1,000 per share. I am really eating crow now.

The overvaluation of Google vs other companies could lead to a stock market crash or severe correction and I HATE it when one stock gets so much attention.

 

[vineyarder]

The best way to appreciate the stock market is to go down to the beach (by a sea) and watch waves crash on the beach.

Now try to guess when the next one will come in and how high it will be. – It’s all random.

Tangential to the whole stock market issue, but the above statement is not true; wavelength and amplitude are not random. It is simply higher order wave interactions, and with a knowledge of the surface properties of the ocean floor, currents, wind, etc., the wave patterns can be predicted short term as well as long term; it just may not be intuitively obvious unless you are used to adding polynomial waveforms in your head. Unfortunately the stock market is affected by other (non-physical) properties, variables & interactions, so it is much less predictable...

 

[PerryM]

Tangential to the whole stock market issue, but the above statement is not true; wavelength and amplitude are not random. It is simply higher order wave interactions, and with a knowledge of the surface properties of the ocean floor, currents, wind, etc., the wave patterns can be predicted short term as well as long term; it just may not be intuitively obvious unless you are used to adding polynomial waveforms in your head. Unfortunately the stock market is affected by other (non-physical) properties, variables & interactions, so it is much less predictable...

My point is why try to guess at anything? Why try to figure out if a stock is too low or too high in price - just buy the ocean and let all boats float at various rates.

 

[GOLFNBEACH]

If you want to invest in the stock market there is but ONE stock to buy - DIA.

.

Why not SPY? Go back 60 years and the S&P 500 has outperformed the Dow.

Why not QQQ? Go back 20 years and the NASDAQ has outperformed the Dow.

Want some real kick to your portfolio? Take a look at a few funds I have owned for the past 5 years that put the Dow to shame: FIGRX (International Discovery), FSENX (Select Energy), FSDAX (Select Defense and Aerospace).

What I am trying to say is that there are many different approaches to investing, and an investment portfolio must be monitored and updated as your risk levels and timeframe changes. To suggest that there is ONE stock to buy is nonsense.

 

[Steamboat Bill]

Google's stock price has passed the psychologically important but otherwise meaningless $600 barrier for the first time. Want some other high-flying tickers? Try the Washington Post Company at $803 or Warren Buffett's Berkshire Hathaway -- currently trading around $121,000 per share. Of course, despite the difference in absolute stock prices, Google and Berkshire Hathaway have roughly the same market capitalization -- a perfect illustration of why the price of a stock, out of context, has no meaning.

 

[GOLFNBEACH]

I actually thought Google was overvalued at $100 per share in 2004.

.

I bought 1000 shares of GOOG at the IPO price and doubled my money in one day. I thought I was a smart investor - surely this stock would fall from the loftly multiples it was trading at. Today it is over 600. It I had held onto it I could easily afford to join ER.

I'm sure everyone has a bunch of "if only" tales...

 

[Steamboat Bill]

I bought 1000 shares of GOOG at the IPO price and doubled my money in one day. I thought I was a smart investor - surely this stock would fall from the loftly multiples it was trading at. Today it is over 600. It I had held onto it I could easily afford to join ER.

I'm sure everyone has a bunch of "if only" tales...

How does it feel to have a technical paper loss of $430,000-$500,000?

 

[Kagehitokiri]

Date____Volume____High____Low___Close
08/19/04 22,353,092 104.060 95.960 100.335
08/20/04 11,429,498 109.080 100.500 108.310

10/22/04 36,919,840 180.170 164.080 172.430

how long did you hold...?

 

[GOLFNBEACH]

how long did you hold...?

I held for about 3 months...sold just before the end of the year in '04. Wanted to lock in my profits.

 

[PerryM]

Why not SPY? Go back 60 years and the S&P 500 has outperformed the Dow.

Why not QQQ? Go back 20 years and the NASDAQ has outperformed the Dow.

Want some real kick to your portfolio? Take a look at a few funds I have owned for the past 5 years that put the Dow to shame: FIGRX (International Discovery), FSENX (Select Energy), FSDAX (Select Defense and Aerospace).

What I am trying to say is that there are many different approaches to investing, and an investment portfolio must be monitored and updated as your risk levels and timeframe changes. To suggest that there is ONE stock to buy is nonsense.

Quick - what's QQQ tonight? what about the S&P 500?

Everyone knows the DJIA - it has the longest record out there. They are but distorted images of the DJIA.

But to each his own.

I understand that folks want flashy new things to buy - I just buy the old reliable that has been through hell over the years.

 

[Steamboat Bill]

Is this a Non-Traditional Interval Ownership forum or an "I'll top that" investment forum?

Joining a DC will always "top" a TS in my opinion....

 

[Steamboat Bill]

LTTraveler and PerryM - Let's try to keep focus on the topics and not get too personal.

I like to give the members of this forum "more latitude" than the other forums as I find all the discussions very interesting and the posters better educated.

I feel that that a discussion on stocks and other investments is appropriate in this forum as DCs, fractionals, and hotel-condos cost a lot of money and this money "could be" better spent in other areas like stocks, bonds, etc.

I personally like diversification and balance in my life....and I feel that joining a Destination Club has actually improved the quality of my life and vacations. Joining a DC was not something I did because it was a good investment, I did it because I felt that it represented good use of my money. I have tried almost every type of investment there is and the KISS concept (keep ti simple stupid) usually works best. High Country Club is about as SIMPLE as it gets.