real estate or stocks as an investment??

[Boris]

The mainland cash buyers (in both real estate and stock market) worry me somewhat. If the tap is turned off in the Mainland, and these Mainlanders need their money fast, what happens to the HK market?

As they are paying in cash, what effect could it have? They would have to sell the asset to recover the investment. Unlike stocks there is no mechanism for a broker to HAVE to buy that asset and it would have to be sold in the open market. Due to it being such a small %, then it would have little effect, even at a discount.

If the Hand Send drops 2k points .......... now THAT would effect the house market but, in the case of the mainland markets, Beijing has before and will again, intervene to support or put a " new guidance " in place to do the same thing.

[PDLM]

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.

No, that's simply not true. I accept that many types of derivatives are zero-sum games, but I don't dabble in them, not least for that reason.

In principle the price of stocks reflects the value of the underlying company (yes we could debate the extent to which they have become disconnected in practice), so if, say, IBM grows its business through being successful at what it does then it has created value and its share price goes up. The total amount of "money" in the world is generally increasing more or less in line with the total increases in value added by all the businesses around the world (net of the ones that fail of course). "Wealth" is not a zero sum game - it can genuinely be created.

[gilleshk]

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.

This extremely simplistic theory implies that there's a finite amount of money which is simply redistributed. That's simply not true...
Easy example of that is the amount of new money that has been printed in the last year.

One can argue that this printing will devalue the currency and therefore there isn't a change in wealth but a balance is created and growth continues.

You almost try to make it sound like clever investors are the evil ones robbing the poor of their money. Communism is pretty well dead, it doesn't work and never will. There will always be winners and losers to a certain extent so the key is to try to stay on the winning side because it's not much fun to lose.

[Andyhk888]

I can't say I totally agree with you about stocks. Let's say you bought a diversified basket of Nikkei 225 stocks or a Japan index fund between the late 80's and early 90's. There's a possibility you would still be behind if you held onto your portfolio for the last 19 or so years. You're right that just about any stock market on the planet has made money in the long-term. Japan might be an exception, but there's always the possibility of a repeat.

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.

[PDLM]

Well yes, but "diversified" means across countries, asset classes and risk levels. Simply putting all your money into Japanese equities doesn't count as "diversifying".

Have a look back to my post here: http://www.geoexpat.com/forum/post418193-9.html

[gilleshk]

And diversification also means having other assets besides stocks like bonds, real estate, gold and preferably some in different currencies...

Being in HK, I would say it would be ill advised to deal only in HKD/USD. Much wiser to take some kind of investment vehicle in either Yuan, Pounds, Euro, AUD or CAD depending on your home country and the market situation.

[MingleinHK]

This extremely simplistic theory implies that there's a finite amount of money which is simply redistributed. That's simply not true...
Easy example of that is the amount of new money that has been printed in the last year.

One can argue that this printing will devalue the currency and therefore there isn't a change in wealth but a balance is created and growth continues.

You almost try to make it sound like clever investors are the evil ones robbing the poor of their money. Communism is pretty well dead, it doesn't work and never will. There will always be winners and losers to a certain extent so the key is to try to stay on the winning side because it's not much fun to lose.

You know what a trader does? Buy low and sell high. I can hardly imagine that he/she is creating real value. Do you know why there was a housing bubble in the UK and US? Because there were more people buying than there were people selling, regardless of asset fundamentals. I am not the one who likes to engage in trading paper, so I stay out of stocks. If you call that wealth creation so be it. And communism? Haha, I would rather drink beer and stay on the beach than thinking about that kind of radical label.

[Andyhk888]

I agree with your post and equities should only represent a fraction of your investments. I was replying to gilleshk comment about stock markets. I guess if you were an expat who immigrated to Japan in the 80's you would have invested primarily in Japanese equities. So that fraction of your investments might be lagging in performance. I guess most investors have a heavy slant toward investing in the countries they are domiciled. There's always a chance, though remote, that another major market could stagnate for a while.

PDLM, that's incredible that you are actively invested (not just country funds) in more than one country and you even own a business outside HK. Is it hard to manage the restaurant while away?

Well yes, but "diversified" means across countries, asset classes and risk levels. Simply putting all your money into Japanese equities doesn't count as "diversifying".

Have a look back to my post here: http://www.geoexpat.com/forum/post418193-9.html

[PDLM]

PDLM, that's incredible that you are actively invested (not just country funds) in more than one country and you even own a business outside HK. Is it hard to manage the restaurant while away?

My wife manages the Philippines businesses (restaurant and financing) far better than I could. Nearly all of my non-HK equity is through ETFs or funds, although I do have some Thai corporate bonds.

[Andyhk888]

My wife manages the Philippines businesses (restaurant and financing) far better than I could. Nearly all of my non-HK equity is through ETFs or funds, although I do have some Thai corporate bonds.

I thought Thailand was a closed market for pretty much everything (property, equity, bonds). I know someone who setup a trust with a local Thai national to buy a property.

Is it that you opened a local HK account and hold your Thai corporate bond/receive coupon payments here?

Your diversification is really impressive.