Index funds

There is often a debate whether it is best to buy shares or property.  My investment focus has been property.  When investing in shares, it seems that index funds (sometimes called exchange traded funds or EFTs) are the way to go.  See recent AFR article on this topic.

Property or Shares?

According to RP Data, on a capital appreciation measure over the past decade, the past half-decade, and over the past three years, residential property has well and truly outperformed shares.  Over the most recent twelve month period shares have outperformed the housing market.  Property has less volatility than shares, but less liquidity.

Property or Shares

I looked at my super account with BT tonight.  Invested all in Australian and international shares.  Over the past 11 months, I have added $24,000 to my super account.  However, despite this, the balance of my account is exactly the same as it was on 15 January 2011.  The losses on my super account are way worse than any losses on my property investments.

Maybe I should have followed the investment advice of the billionaire lawyer.

Invest in Brisbane

Shares or property?

• The Standard & Poor’s 500-stock index was off more than 14 percent for the quarter — and more than 10 percent for the year so far.
• The Dow ended the quarter down 12 percent and the Nasdaq lost 13 percent.
• ASX index of shares fell 13% in the September quarter; down over 15% for the year to date.

"The market has fallen over 15 per cent so far in 2011, putting it on course for the second sharpest annual fall in 2 decades and the heightened volatility has led strategists to take a cautious view -- despite historic low valuations."

Real estate investments are far less volatile than shares.

According to RP Data, Brisbane apartment prices increased 3% in the quarter ending August 2011 and prices are flat year to date.  RP Data believes Brisbane real estate is at the bottom of the market.  There is a significant price difference between Brisbane and the Southern capitals.  Rent yields are increasing.  It would appear that now is a good time to buy in Brisbane.

Before buying an investment property in Brisbane, read Investing in Brisbane Apartments - A Guide for Successful Investing.  You can read this ebook using a free Kindle Reading App, or you can buy a Kindle reader for use in Australia.

Housing Market Outperforms Shares

From Chris Joye:

"The chart suggests that a national portfolio of housing has comprehensively outperformed all other investment categories over this tumultuous period. What is also fascinating is that AAA-rated Australian government bonds have delivered almost the same returns as Australian shares (plus dividends) with vastly lower risk.

On the question of risk, the table below shows us that there have been five months over the last 11 years where Aussie shares have fallen in value by more than 5% (the worst being a stunning 14% loss). None of the other asset classes have had a single monthly loss of five per cent plus.

This just hammers home the point that if you get your market-timing wrong with shares, you could be underwater on your investment for many years. Think, for example, of all the poor folks who piled into Aussie shares around the market apogee in 2007 (see the peak of the red line in the chart above)."

See Property Observer

Finding a Roommate - take care!

If you are using a room-mate service, such as EasyRoomMate and StudentFlatmates.com.au, take care. There are a few issues.

First, there are a number of scam listings, by people who pretend to have a room available, to scam the deposit or bond from you. For example, a "person" called Heather Buffington Nicole pretends to have a room for rent in Cathedral Place: 41 gotha street, brisbane. This is just a scam. See, for example, this blog.

Second, there can be disputes between flatmates regarding rent and bonds, and they get very messy. Often, one flatmate is held responsible for the conduct of another flatmate.