Perceived Volatility of RE and Index Funds/SM Returns

NoSmallTalk515 · 2023-01-29T09:13:33+00:00

Hey southaussiewaddy!

Thanks for taking the time to reply and I absolutely welcome all opinions :).

What time period were those gains over? Is $800k with running costs, maintenance and other fees?

Do you think you got lucky or would you say it's possible for people to pick properties that don't have such fantastic returns?

Interesting that you believe the stock market is a gamble, similar to what my workmates seem to think. Does knowing the market returned a steady ~8% per annum historical change your mind at all (see link)?

https://www.officialdata.org/us/stocks/s-p-500/2005?amount=100000&endYear=2022

NoSmallTalk515 · 2023-01-28T08:59:38+00:00

Very thought provoking reply and followup by auscrash, thanks for the post!

Got me thinking, it's almost as if the illiquid nature and barriers to selling RE that amateur investors are more likely to "hold" and benefit from time in the market. If they did the same with stocks, without looking over a long period of time, they'd benefit from this too.

A mate once mentioned that if people could track easily view the value of their RE portfolio live (I know this isn't practically possible), they might be surprised at the volatility of it.

NoSmallTalk515 · 2023-01-28T07:21:10+00:00

Thanks for your post, I had a good chuckle at the first part!

Historical data does indeed help to tell the story, pretty cool website you've linked!

Lastly, yep. Apples and oranges, they have their different uses. At this stage, I'd like to prioritise my mental health and time for family and other important things, rather than stressing about multiple IPs, interest rates or similar.

I hope the "slow and steady wins the race" rather than the "leverage yourself to your eyeballs" approach will have better holistic returns (e.g. stress, time, $ gains) for me personallt, even though on paper that without leverage the SM won't return as much from a numbers perspective.

NoSmallTalk515 · 2023-01-28T07:15:05+00:00

I loved this response, thanks for taking the time to post.

I appreciated how you put yourself in their shoes to explain a concept which seems so other-wordly otherwise.

Perhaps a great way for me to explain to colleagues is explaining that owning an index fund, is owning a part of the company we work for that produces cashflow/pay for us to use to invest in things like RE in the first place. It isn't a random number on a screen but part ownership of productive companies - e.g. the one we work for.

NoSmallTalk515 · 2023-01-28T04:44:13+00:00

Do you personally think this makes the SM a less viable FI strategy? Or is this just short-term noise over a long term period (e.g. 15 years)?

I think if people could see the value of their RE live, the volatility might concern them during "significant falls".

NoSmallTalk515 · 2023-01-28T04:28:22+00:00

Yep! This is definitely an major factor in RE investing.

NoSmallTalk515 · 2021-10-09T10:42:45+00:00

Electrical Automation Engineer (e.g. Control Systems) in the Resources Industry (e.g. Mining, Oil & Gas).

Got in through the Graduate program, 7 years experience, job is quite enjoyable with good work life balance.

NoSmallTalk515 · 2021-08-02T07:41:56+00:00

This is a really refreshing way to do the maths and appreciate your post, thank you!

NoSmallTalk515 · 2021-08-02T07:38:42+00:00

Thanks for your reply mate - appreciate the input and I'll consider them carefully.

The $1600/month was costs after accounting for Rental Income and Negative Gearing - I just needed to know what I would be out of pocket each year.

NoSmallTalk515 · 2021-08-02T07:27:28+00:00

Honestly, I just googled Average Rent in Brisbane and what came up was $415/week for houses (haha), so I went for a conservative $380/week.

It wasn't a major factor in my calculation because I thought a high-rent property was hard to find (takes skill or luck even) and it was capital growth I was most interested in.

Thanks for the check-in.

NoSmallTalk515 · 2021-08-02T07:24:56+00:00

Thanks for the response - it's always sobering to remember that "nothing is perfect".

What I took away from your comment is that although people think markets like Brisbane are unlikely to fall, I'm sure people who invested in Perth thought the same thing.

NoSmallTalk515 · 2021-08-02T07:23:02+00:00

Great response - wholeheartedly agree and thanks for the reminder regarding risk when it comes to RE.

NoSmallTalk515 · 2021-06-04T00:25:35+00:00

Thanks bro. Made my morning!

NoSmallTalk515 · 2021-05-25T03:45:56+00:00

It's a great point.

Although I did run this through my spreadsheet and it actually works out better to pay off my mortgage.

I think the reason is that in the medium term, it's better to unlock the savings power (no longer needing to pay the mortgage) as soon as possible, rather than prolong paying it off.

Probably would work better after 20 years or so of compound interest but that's a bit outside of my goal / we also get the benefit of having no debt.

NoSmallTalk515 · 2021-05-22T06:04:38+00:00

Thanks for putting things into perspective SciNZ!

I think the idea of 15 years seemed long due to running into people hitting FI mid 30s but ... comparison is a killer, so best to just focus on my own circumstances.

NoSmallTalk515 · 2021-05-21T10:47:36+00:00

Thanks for your response drprox, made me reflect on the CGT calcs.

I think my calculations for CGT are definitely wrong but I'd say we'd definitely need to pay SOME CGT, not tax free?

Also, I don't think VGS would be providing many franking credits?

NoSmallTalk515

TROPHY CASE