real estate or stocks as an investment??

Closed Thread
Page 3 of 6 FirstFirst 1 2 3 4 5 6 LastLast
  1. #21

    I don't think the market always recovers. I have invested through the 90s and until early 2009. I lost more money than what I made after 18 years of investing. I am not talking about a small sum of money here. I think investments all sounds good in paper. However, they are the same thing as gambling. If you are lucky, you make good returns. Many professional investors who went to the best theoretical schools have failed over the years to generate decent positive returns. I have come to terms with the fact that I will not be rich. So I live my merry way everyday.

    Last edited by MingleinHK; 14-09-2009 at 09:00 PM.

  2. #22

    Join Date
    Oct 2006
    Posts
    4,905

    My point exactly, bad things are guaranteed to happen at some point and markets will fall... The crash last year wasn't the last one to happen for sure.

    As to markets always recovering, well I guess that in theory, you could say what if there's a nuclear war and HK gets flattened. It might not recover from that although Hiroshima and Nagasaki managed to do just that.

    Some areas in the US(such as Michigan)may never regain the economic prosperity they enjoyed previously.

    Take pretty well any 25 year period in the last century and you will find growth in the stock market and in real estate.

    But history says that in the end, if you diversify your investment and you are patient, it doesn't matter too much when or where you buy, eventually you will make money. There's always a risk, even if you keep money in the bank and sleep on it. Your currency might devaluate, inflation goes up and all of a sudden you've lost most of your purchasing power even if you don't travel. That's just life and one always has to be prepared for rainy days because it's certain that they will come at some point and the sun will also reappear later on and life will go on and then you die


  3. #23

    Join Date
    Oct 2006
    Posts
    4,905
    Quote Originally Posted by MingleinHK:
    I don't think the market always recover. I have invested through the 90s and until 2008.
    You may have made bad investments but the markets themselves do and have recovered. I don't know anyone that followed a sound investment strategy with good diversification that lost money in the long term.

    It may be gambling but unlike at the casino, the odds are not set so that the average person will lose. Quite the opposite in fact... If you bought a property even at the height of the bubble in the 90's, you would be relatively close to even today, if you bought in the early 90's then you are rolling on the floor laughing.

    As for stocks, once again, if you had stuck with top companies and diversified your holdings from the 90's to today, you would be well ahead in just about any market on the planet.

  4. #24

    Join Date
    Aug 2006
    Posts
    7,517

    top companies such as Lehman?


  5. #25

    Join Date
    Jun 2005
    Location
    Hong Kong
    Posts
    23,205

    Yes, but for every Lehman there are plenty of successes - that's the point of diversification. You might have lost a few percent of your portfolio with Lehman, but if you'd invested as much in HSBC at $30 you'd have got a lot more than that back already.


  6. #26

    Join Date
    Aug 2006
    Posts
    7,517

    but if you had invested when HSBC was at $140...


  7. #27

    If you believe the assumption that most of the people in this world would like to invest and make positive returns, you should realize that it is not a likely proposition. In the last 5 years, what we have witnessed is a massive financing engineering which led people to believe that they invested in assets that only went up. This financing engineering is facilitated by the government's loose credit control and massive borrowing worldwide. How can you be sure that you will always make positive returns if everyone else is trying to generate similar returns? It has to be a zero sum game where some lucky ones make money while most average people like me lose money. Similarly, the mainland Chinese are inflating the bubble in Hong Kong real estate market. People tell me these days: the housing price keeps going up and won't come down again. Therefore I should buy now. I don't believe it any more. Nothing goes up forever. You watch and see. There is a bubble here whether you want to believe it or not. I mean, people in Hong Kong are obsessed with money. Hence I would venture to guess that majority of people here believe that their investments will go up in value. That's why they buy real estate. If you look at the rental price vs. housing purchase price, you can see that the economics don't justify such a big purchase price premium.

    I am not going to buy a house just because the interest rate is low. It makes zero sense to me. Borrowing is borrowing. Cheaper cost of borrowing is still borrowing.


  8. #28

    Join Date
    Oct 2006
    Posts
    4,905
    Quote Originally Posted by drumbrake:
    but if you had invested when HSBC was at $140...
    Ifs again... I bought HSBC when it was over 100, lots of it...Yet I've made a more than 25% return this year. Why? Because I always hold back cash, sell some stocks when they are high and buy others when they are low. I maxed out on HSBC rights, bought and sold when it was lower. So I haven't lost anything overall on my HSBC even though I bought lots of it over 100. I bought Citic when it was 15 didn't panic when it was suspended and went down to 3, bought a little in between sold it all at 17. Same with Lenovo...

    In the meantime, I bought things like SHK at 60 and it's well over 100 now, my Wharf also has doubled. I sold things like Jianxi Copper after a minor gain, if I had held it, i would have doubled again. Thats the way it goes, you can't always maximize and it's safer to be careful, take some profits and have cash on hand in case something happens or there's an opportunity.

    The key is to take some profits along the way, not be greedy, buy when it's low and sell when it's high. Sometimes you get burnt but if you are diversified(multiple sectors/multiple stocks) . If one is stupid enough to put more than 10% of your assets in one stock then you deserve to lose. If you don't have cash on hand to take advantage of dips/crashes and buy when it's low then you don't deserve to make good returns.

    As for property prices, I would hardly call it a bubble, the current prices are not outrageously high by HK standard and the reality is that HK has limited space to grow, that means limited supply and if you keep having growth which is somewhat likely with a neighbour that has over a billion people, you have to put people somewhere.

    If you can put enough money down so that the rental of the property easily covers the mortgage then it's unlikely there will be problem unless interest rates really jack up and rents go seriously down. So it becomes a nice little saving plan where every month, your tenant pays off the flat little by little and 10-25 years down the road, the flat is paid off or you've sold it at a time when the market was high(my preferred choice), keep the cash and wait for another dip to buy the next property.

    There are more people that becomes wealthy than people that become poor when they invest carefully. And what is the alternative? Put the money under your mattress or in the bank and earn nothing on it?

    Here's a perfect example of how to get in trouble whether it's a corporation or an individual: Lehman was heavily over-leveraged at the top of the market in 2007 -- its net tangible equity was 17 billion dollars but its total investment was 750 billion dollars -- a good chunk of it in mortgage-backed securities that turned "toxic."
    Last edited by gilleshk; 14-09-2009 at 11:21 PM.

  9. #29

    Join Date
    Jun 2005
    Location
    Hong Kong
    Posts
    23,205

    As gilles says, I also bought some HSBC at well over 100, but also maxed out on the rights. My average buy price is about $82, and it's just above that now, plus it's still been paying dividends, albeit at a slightly reduced level. CITIC I got at just over 6. Sold about a third of it at 20 to recover all of my investment, and what's left is just pure profit. Been in and out of Commodity and Russia ETFs over the past few months, making a few percent on each. But I'm also quite heavily into India, and that's the one that's yet to get back into the black. Having said that, overall, on stocks I'm 10-15% up on where I was a couple of years ago, and on my property about 25%. so I'm reasonably happy.

    Last edited by PDLM; 14-09-2009 at 11:25 PM.

  10. #30

    I would make my point one more time: by buying stocks at low and selling them at high, you are creating wealth through financial engineering. Someone else must have lost some money for you to gain some profit. Hey, I can't stomach the risk and that's why I am a poor soul roaming the fancy streets of Hong Kong. Happy to drink beer and enjoy life without thinking about stocks or real estate.