Showing posts with label volatility. Show all posts
Showing posts with label volatility. Show all posts

Saturday, November 3, 2012

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.

Tuesday, August 14, 2012

Housing Risk

An interesting article by Chris Joye:  Housing Risk: It's greater than you think.

"Using some complex statistical methods pioneered by US academics, we estimate that the annual volatility of an individual home with no debt is about 18 per cent. That is similar to the observed risk of the Aussie sharemarket.

But this assumes you have no debt. What happens when you leverage up? The most variable dotted line in the second chart displays the monthly returns yielded by an individual home with 80 per cent gearing. This has a spectacular impact on risk and return. The annual equity volatility of a single property jumps from 18 per cent to north of 38 per cent. On the other hand, returns are also higher.

The key to mitigating risk is diversification. This ideally means a portfolio comprising multiple assets situated in unrelated regions. Hard to achieve, I know. Without diversity, your best way to reduce risk is by using less debt."

See also: 10% lose money when they sell home -- circa 15% after costs