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First time property investment - $4m - Advice needed

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  1. #31
    Mat
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    Quote Originally Posted by TheBrit
    No, you lose even if you don't sell. It is a complete fallacy to suggest otherwise.
    Again depends. You keep it two years more, the prices go higher than you have bought 5 years before and you still win.
    Example, you bought in 2007, in 2008 you were "loosing", you sold in 2010 - you won.

    you have to stop being so categorical.

  2. #32

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    Quote Originally Posted by Mat
    Again depends. You keep it two years more, the prices go higher than you have bought 5 years before and you still win.
    Example, you bought in 2007, in 2008 you were "loosing", you sold in 2010 - you won.

    you have to stop being so categorical.
    Eurgh - if you buy a car for $50,000 and drive it for two years it's value may drop to $25,000.

    Do you still value the car at 50k or accept it's new value is 25k? Or does it only become worth 25k when you actually sell it? Until then it's value is still this mythical $50k purchase price even though that bears no relation to what you can buy or sell it for in the real world?

    Of course, the value may go up in the future but that doesn't mean that when valued at current prices you are sitting on a big loss.

    Do you really work in finance and don't understand the concept of mark to market?!

  3. #33

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    mark to market is an accounting concept. And a car is a terrible example because cars depreciate and typically fall in value, while property fluctuates up and down so Mat's example is perfectly feasible.

    Until you sell an asset, any losses or gains are only paper losses and gains. If the asset has a clear lifetime and depreciates, then yes, I agree with you, the value falls over time even if you do not sell it.

    But investments - like property or shares, which fluctuate only turn into real money when you sell them - anything else is just an accounting treatment or for "information purposes". It's not real until you sell.

    Mat likes this.

  4. #34
    Mat
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    Quote Originally Posted by TheBrit
    Eurgh - if you buy a car for $50,000 and drive it for two years it's value may drop to $25,000.

    Do you still value the car at 50k or accept it's new value is 25k? Or does it only become worth 25k when you actually sell it? Until then it's value is still this mythical $50k purchase price even though that bears no relation to what you can buy or sell it for in the real world?

    Of course, the value may go up in the future but that doesn't mean that when valued at current prices you are sitting on a big loss.

    Do you really work in finance and don't understand the concept of mark to market?!
    Very bad example - do you really work in Finance?

    MtoM is an accounting principle.

    I buy my house in 2005 for 3 Mio, in 2006 it is "worth" 2.8 Mio but I sell it in 2007 for 5Mio, sorry but I made 2 Mio (without deducting interests, rates...of course)

    Car depreciate (aside for a few exceptionnal cars)
    Last edited by Mat; 07-03-2011 at 10:19 AM.

  5. #35
    Mat
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    Quote Originally Posted by TheBrit
    Of course, the value may go up in the future but that doesn't mean that when valued at current prices you are sitting on a big loss.

    !
    As you say, you are "sitting on a loss" but not a REALISED loss. the KEY is the REALISED Loss.

    You maybe sittling on a loss but if your stock or property goes up again an you sell higher than you have bought, you are REALISING A GAIN, not matter if 2 months before you were SITTING ON A LOSS.

  6. #36

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    Quote Originally Posted by Mat
    Very bad example - do you really work in Finance?

    MtoM is an accounting principle.

    I buy my house in 2005 for 3 Mio, in 2006 it is "worth" 2.8 Mio but I sell it in 2007 for 5Mio, sorry but I made 2 Mio (without deducting interests, rates...of course)

    Car depreciate (aside for a few exceptionnal cars)
    In 2006 you have made a 200k loss
    In 2007 you have made a 2m gain

    You can't pretend your position is not loss making in 2006 just because you don't sell it then!

    Losses are reversible, just like gains but you can't claim "you don't make a loss unless you sell it" because that is patently absurd.

  7. #37
    Mat
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    Quote Originally Posted by TheBrit
    In 2006 you have made a 200k loss
    In 2007 you have made a 2m gain

    You can't pretend your position is not loss making in 2006 just because you don't sell it then!

    Losses are reversible, just like gains but you can't claim "you don't make a loss unless you sell it" because that is patently absurd.
    You are stating the obvious, but admit that what counts is that I sold in 2007 and I made an actual GAIN of 2 Mio overall in my investment.

  8. #38

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    Quote Originally Posted by TheBrit

    Losses are reversible, just like gains but you can't claim "you don't make a loss unless you sell it" because that is patently absurd.
    Why? Money is only real if you try and use it. Paper gains and losses are just that - paper - they only mean something if you have a desperate need for cash and have to sell an investment suddenly for the accounting value. To human beings (rather than accountants) it's cash that counts.

  9. #39

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    Quote Originally Posted by Mat
    You are stating the obvious, but admit that what counts is that I sold in 2007 and I made an actual GAIN of 2 Mio overall in my investment.
    I never denied that - so you are happy to admit that you are making a loss in 2006. Good to see you coming round to the correct way of thinking, and that valuing something on a figure in your head to avoid accepting you have made a loss (even if this is subsequently reversed) is a pretty wrongheaded way of thinking.

  10. #40
    Mat
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    Quote Originally Posted by TheBrit
    I never denied that - so you are happy to admit that you are making a loss in 2006. Good to see you coming round to the correct way of thinking, and that valuing something on a figure in your head to avoid accepting you have made a loss (even if this is subsequently reversed) is a pretty wrongheaded way of thinking.
    No - I am making an UNREALISED loss (look at unrealised in a dictionnary if you have problem in English)

    What counts is that I made a REALISED gain at the end.

    I have never changed my way of thinking, the main difference between you and me, is that you are always categorical in your posts.

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