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JollyJamma

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Hi all

So I’ve got a collection of books that talk about investments and trading and I thought it would be a good opportunity to talk about advance concepts of investments.

A lot of people are scared of shares and the stock exchange because the risks are high and investment managers want to keep you in the dark

A lot of books on how to get rich are just general rules of life like paying off debt early or talking about how someone else got rich. The only books these people make rich are the authors

I have money in tax free unit trusts because I don’t have a lot of money to start proper investing and I want to spread my risk over several eggs, including one with international exposure

Here’s a list of books I own and have been highly rated by critics, including investment managers



 
Cool thread!

Just as a disclaimer to anyone reading or contributing to the thread.

All posts here are the opinions of each poster and should NOT be interpenetrated as investment and or financial advice in any sense if the word.
No one here is claiming to be a financial advisor, stand to benefit from their opinions shared and will not take responsibility for any impact on your financial situation should you do something based off the opinions you read here.


With that out of the way, I'm almost done with The Book on Rental Property Investing and I've enjoyed it.There are no great secrets to success, but it's a great accumulation of most of what you need to know if buying-to-let is one of your interests. It's obviously more focused on the international market but that was part of the reason it caught my interest.

We actually used Intelligent Investor as extra material in my varsity days, awesome book. I'd say you'll only really value the book if you've got some financial background or investment experience. It's not the cookie cutter "Rich Dad Poor Dad" for the masses type of thing.

Security Analysis is also a great book. Again, it's old but the theory is sound and very applicable today. I'd say that the interpretation skills it'll teach you are invaluable regardless of the type of investments you are interested in.
 
And don't go to r/wallstreetbets
I am sorry, I just laugh a little every time I see your profile picture :p

With that out the way, I just want to mention this trading != investing.
Of the books the OP mentioned it looks like only one of them really covers value investing (a good strategy if you have time to burn) the other 2 look like a "How to in equity trading" I could be wrong? Please OP correct me if I am.

Picking winners and losers in the equity market might on the surface of it seem fun, but you will soon join the majority of fund managers that under perform the index, what I have found works better for me is, instead of identifying individual shares I like, I buy ETF's in sectors/regions that I suspect will outperform, and less fancy has always seemed to work better for me E.g : My TFSA only has 1 ETF in it, the Ashburton Global 1200, Why? Because I want to invest my money proportionally into the world, its a amazing rand hedge, why invest the majority of your capital into a country that is less than 1% of the worlds GDP?, and since its in my TFSA I won't pay the premium of inflation when a sell and CGT would come into play.

I think people sometimes forget, inflation is also a tax, government doesn't physically take your money, they simply take the value of it out from underneath you.

It is for that exact reason that I also have a moderate amount of debt, because I know inflation the same tool that the government uses to relieve the pressure of debt is at my disposal too, the key is to know what assets you can buy with that debt that will always beat inflation (hence giving you a real return) and that is where property fits in nicely for me.

I also like the topic! Lets talk money :)
 
Also know that investing doesn’t include Bitcoin.

Crypto currencies are not a valid form of investment, they are a gamble, at best.

I’m looking to put my money into offshore linked investments at the moment.

Edit: This is my current main tax free investment account https://www.prudential.co.za/media/29460/prudential-dividend-maximiser-fund.pdf

TOP 10 HOLDINGS* 1. Prudential Global Equity Fund 12.7% 2. Naspers Ltd 8.8% 3. M&G Global Dividend Fund 6.9% 4. Anglo American Plc 5.6% 5. British American Tobacco Plc 5.5% 6. Standard Bank Group Ltd 4.7% 7. Sasol Ltd 4.1% 8. Sanlam Global Financial Fund 3.7% 9. Vulcan Value Equity Fund 3.3% 10. Absa Group Ltd 3.2%

FUND OBJECTIVE: To provide broad-based exposure to shares that offer value and medium- to long-term growth. The portfolio managers seek to invest in companies where returns can be achieved from any or all of growth in earnings, growth in dividends and a re-rating of its share price; however, there will be a bias towards companies offering high but sustainable dividend yields.
 
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That has quite a steep cost, almost 2% TER you got there.

You get MUCH better offshore exposure with ASHGEQ
And it only has a TER of 0.45%

But this gets into the whole Passive vs Active debate I guess.
Yeah, the TER costs are a big concern of mine and I may move the investment to a new portfolio - I only noted the high costs shortly after opening the account.

Thank you for the input, it's something that has been bugging me about the portfolio for a while now.

Regards
 
It is for that exact reason that I also have a moderate amount of debt, because I know inflation the same tool that the government uses to relieve the pressure of debt is at my disposal too, the key is to know what assets you can buy with that debt that will always beat inflation (hence giving you a real return) and that is where property fits in nicely for me.
I have heard about it but this explained it better. Regarding property investment I have owned a property management company for quite some time (Also family business) and there are so many areas to watch out for when investing in property 99% of the time it is a bad investment.

As a note a majority of the 99% above is people that think it is profitable to buy property through mortgage and think that it will pay off. Something that sales agent allways promises without even knowing the whole story.
 
I think the line needs to be made very clear between trading and investment.

The OP makes it sound like it's all one and the same, but while it's using the same mechanisms/systems the approach is very very different.
 
I have heard about it but this explained it better. Regarding property investment I have owned a property management company for quite some time (Also family business) and there are so many areas to watch out for when investing in property 99% of the time it is a bad investment.

Precisely why I've moved all such notions to the property ETF's and don't have any aspirations any longer to make it my own problem.

As a note a majority of the 99% above is people that think it is profitable to buy property through mortgage and think that it will pay off. Something that sales agent allways promises without even knowing the whole story.

Yup. Golden rule for me is that if you can't pay it off in half the time (10 years) of what the home loan is for then you almost certainly won't see a profit, as compared to putting the money into something else that is.

It's still a better bet than having no investment at all, but people need to cut the delusion imposed by our parent's generation that buying property is the golden investment option that will always win out for you.

And for the love of god don't ever take a 30 year loan.
 
On the topic, I think before anyone reads any of those books they should read Warren Ingram's Become Your Own Financial Advisor first so that they can learn how to have expendable cash and only spend that on the get rich quick scheme that trading so quickly becomes for many people.


Then follow it on with "How to make your first million"


And only once you've actually done that, consider trading as an avenue to generate more money. If you managed the former you shouldn't fall too hard on your face trying the latter.

Once the first million is there it tends to keep rolling on almost by itself.
 
It's still a better bet than having no investment at all, but people need to cut the delusion imposed by our parent's generation that buying property is the golden investment option that will always win out for you.

After dealing with all of the costs associated with buying a property and then selling it, I can tell you that it's a fucking nightmare owning a place.
There are only two reasons why you should own a property:
1) When your monthly rent is the same as your mortgage amount each month
2) When the market is going to increase and so if you sell, you make a profit.

I don't see paying interest on a mortgage as a loss of profit if the total bond repayment each month is the same as your rental option. Either way, the same amount of money goes out of your account each month.

The costs that I do see as an expense are new geysers, renovations & improvements that don't increase the value of the property, etc.

My property increased by R300 000 in value over 3 years. That's pretty good but the costs destroy the value so badly that if it doesn't increase and you are forced to sell, you're screwed.
 
After dealing with all of the costs associated with buying a property and then selling it, I can tell you that it's a fucking nightmare owning a place.
There are only two reasons why you should own a property:
1) When your monthly rent is the same as your mortgage amount each month
2) When the market is going to increase and so if you sell, you make a profit.
I would add points
1) When your monthly rent is the same as your mortgage amount each month (EDIT) + Rates and taxes and insurance.
3) Fair wear and tear Repairs and maintenance that you as the owner is responsible for. On some of my courses it was suggested to get a rough estimate and use 2% of the house value on repairs per year but in practice we saw it closer to 1% (over 5 years using properties that followed suggested maintenance to keep a property evaluator happy). That still kicks you one months rental back EVERY year.
4) Over 130 rentals over 10 years, in Witbank, we had an average home stand open a month every 2 years. That also kicks you back 10 months in a 20 year investment.

Also the last 20 years of homeowners growth is not a good indicator of future growth. In Witbank property values in terms of sales has gone down in the last 2 years.
 
I would add points
1) When your monthly rent is the same as your mortgage amount each month (EDIT) + Rates and taxes and insurance.
3) Fair wear and tear Repairs and maintenance that you as the owner is responsible for. On some of my courses it was suggested to get a rough estimate and use 2% of the house value on repairs per year but in practice we saw it closer to 1% (over 5 years using properties that followed suggested maintenance to keep a property evaluator happy). That still kicks you one months rental back EVERY year.
4) Over 130 rentals over 10 years, in Witbank, we had an average home stand open a month every 2 years. That also kicks you back 10 months in a 20 year investment.

Also the last 20 years of homeowners growth is not a good indicator of future growth. In Witbank property values in terms of sales has gone down in the last 2 years.

Yeeesh. That sucks.
 
I don't see paying interest on a mortgage as a loss of profit if the total bond repayment each month is the same as your rental option. Either way, the same amount of money goes out of your account each month.

But when it is your own property you have something to show for it at the end of the day.
Rental option, once contract is up you have 0 to show for all the money your payed each month
 
But when it is your own property you have something to show for it at the end of the day.
Rental option, once contract is up you have 0 to show for all the money your payed each month
Remember even buying has fixed costs for which you get 0 :
-Costs of buying the property in the fist place
-Property tax
-Levies (If Applicable)
-Insurance
-Loan interest

Those are costs, that if you are renting for cheaper than the combined cost of those items and save the difference you will be better of than owning the property.
 
Remember even buying has fixed costs for which you get 0 :
-Costs of buying the property in the fist place
-Property tax
-Levies (If Applicable)
-Insurance
-Loan interest

Those are costs, that if you are renting for cheaper than the combined cost of those items and save the difference you will be better of than owning the property.
Yes indeed, but even with those "hidden" costs is it still not worth it to have the asset instead of basically paying for someone else to obtain their own asset?

I am in that position now looking at buying, got a nice amount together for the deposit and admin involved. Tired of renting, but as you say there are many more funds involved once buying. So I am weighing up everything before doing anything at this stage
 
Yes indeed, but even with those "hidden" costs is it still not worth it to have the asset instead of basically paying for someone else to obtain their own asset?

I am in that position now looking at buying, got a nice amount together for the deposit and admin involved. Tired of renting, but as you say there are many more funds involved once buying. So I am weighing up everything before doing anything at this stage

Once a house is paid off and you are retired, it makes a lot of sense since you can maintain the property yourself, with the odd call for an electrician and plumber.

As your primary residence, yes, it makes way more sense.

My cousin who is a property developer says that property is the worst type of investment.

I wouldn’t buy a property to rent out as an investment, even a big standard savings account from Capitec can probably match the returns you’d see on a good property but without the insane torment of upkeep.
 
But when it is your own property you have something to show for it at the end of the day.
Rental option, once contract is up you have 0 to show for all the money your payed each month
If I may give you some advise on good faith.

Cost of buying per month = Sales Price (includes agent com and transfer fees) + Interest for Mortgage + Rates + Maintenance - rent
Asset Value = Sales price + valuation growth - Agent Fees and Transfer fees
Cost of renting per month = Rental (always cheaper than buying)
Asset Value = Cumulative investment amount over 20 years of difference between Cost of buying and cost of renting.
If you look at the average difference per month and invested that amount in a fixed deposit account at 7% per year then the difference over 20 years is +- R 0.00. EDIT - This is also assuming property growth far higher than actual. I have done this calculation in much more detail a couple of times and it strangely comes out the same. I spoke to an economist about it once and he theorized that this is the equilibrium state that it naturally will drift towards. If it was cheaper to buy more people will do it which will cause rental to go down. If less people buy rental will go up so it will always balance out.

If you sold the house and bought another one just once the difference however is + R 50 000.00 less than the rental because of agent com and transfer fees. The problem is MOST people when renting instead of investing the difference they increase their lifestyle to accommodate and then Mr Flex in 20 years you indeed have nothing to show for it.


So then my advise is as follows. If you plan to buy a house and retire in that house one day or buy another house and then rent out this house when the mortgage is over. Then that is a wise investment since you can not have asset growth higher than in rentals this way. Added benefits are you can change the house in anyway you want with major upgrades available.

Negatives in rentals are indeed something to consider and include-
Rental increases dependent on an the current owner. (We have seen an owner increase with 12% once)
No real security in terms of housing. Owner can refuse to renew contract or sell house to owners who don't want to rent.
The owner can refuse to do maintenance leaving you with costs that was not in this calculation.
No securtiy for future investments.
 
After dealing with all of the costs associated with buying a property and then selling it, I can tell you that it's a fucking nightmare owning a place.
There are only two reasons why you should own a property:
1) When your monthly rent is the same as your mortgage amount each month
2) When the market is going to increase and so if you sell, you make a profit.

I don't know hey, I made almost half a bar on my old place in five years.

The above is somewhat true for any secondary property, but a primary residence has benefits that go way beyond money.

You don't buy your primary home to sell it after all, you buy it to live in it.

So things like drilling holes in my wall whenever I fancy and making it my own, painting it as and when I like to do it and modyfing stuff in general carries a lot more weight that strictly money.

The money only really comes into it when deciding not to make buy a place that will lose money over time.

I don't see paying interest on a mortgage as a loss of profit if the total bond repayment each month is the same as your rental option. Either way, the same amount of money goes out of your account each month.

Unfortunately, that will never be the case unless you've struck it really lucky with the person renting to you, or you paid a massive deposit.

Generally the question is would the difference between renting and buying saved in an investment make more sense over 20 years than buying a house would and selling it at the end of the term.

Again one doesn't want to necessarily sell it at the end of term so that value increase doesn't necessarily matter. And like I said above there are other benefits.

So yes in many if you just consider the purchase that of a rental and ignore the money making that can work. On the other hand if you use the bond as an investment vehicle and offset the interest by paying more into it then you free up that money sooner to do other things.

I, for instance, don't plan to buy another property once this one is paid for and will take that 15k a month to fund my TFSA, max my RA and then buy more property ETF's if anything is left.

The costs that I do see as an expense are new geysers, renovations & improvements that don't increase the value of the property, etc.

If they don't increase the value of the property then you are doing it wrong. Geysers are insured and not your cost. Again it's also beyond money and those renovations should offer value to you who lives there not the next oke you sell it to.

My property increased by R300 000 in value over 3 years. That's pretty good but the costs destroy the value so badly that if it doesn't increase and you are forced to sell, you're screwed.

The question is did anything else over the same period offer you the same profits even after costs? Likely not.

That being said the historic performance of the property bubble is not to be bargained on. My previous place as a percentage almost doubled in value. The current one has maybe seen a 10% move in 3 years.

*****

So in conclusion don't fall in the trap our parents painted such a blissful picture of to drop 30% of your salary on a home and ride it out through the tough times.

Only buy a house when 25% of your salary can make a 150% instalment on the house and then you will see a profit.

And stop at a primary residence, invest in something else once you've finished up with that .
 
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Yes indeed, but even with those "hidden" costs is it still not worth it to have the asset instead of basically paying for someone else to obtain their own asset?

I am in that position now looking at buying, got a nice amount together for the deposit and admin involved. Tired of renting, but as you say there are many more funds involved once buying. So I am weighing up everything before doing anything at this stage
Well the answer is as always it depends

It actually just so happened that me and my dad both bought our houses at the same time.
In my case it was way worth it, in his case, not so much.

He was renting a nice house at the time worth around R3-R3.3M
The owners of the house couldn't find reliable tenants and he ended up renting it for a steal at R13K.

Now if you go and work that out, if he had bought that house at R3M at prime (lets say 10%)
The interest on that loan alone would equal R24.6K PM and that is excl insurance, rates and taxes and levies.
He then despite my repeated warnings went and bought a expensive property anyway.
 
This is a really helpful thread because it gives so many sides to peoples financial lives that you might now know and might need to know.
 
So we've gone from book talk to purely talking about property investments...
 
So we've gone from book talk to purely talking about property investments...
It seems that way...although its like many here state...it is such a drilled in thing you can never go wrongwith property...yet it is clear that property investment is very complicated.

I for one have a 30day investment account with some money in it earning 7.5% per year. I would GLADLY take advise on where to start investing in higher risk higher payoff with ZERO experience in the matter. Are these books for beginners or not?
 
Are these books for beginners or not?

One is for experts only but is the most in depth of the lot.

I’d suggest building up a collection as one book won’t have all the answers. Trading for a living is a great starting point and is easy to get Into. The technical books can be way too much but you do need them.
 
@Nickslayer I’ll update the thread with details on the books I own.

I’ve read them all but the one I haven’t made my way all the way through, it’s just too much for my tiny brain.
 
Thanks that is very kind of you.
I would say that if you need a short, accurate and great introduction to investing, start with this book: Come Into My Trading Room: A Complete Guide to Trading (Wiley Trading)

There are better books but this one is easier to digest and understand and concepts are well linked. I know hardcore day traders that use it.
 
Yes indeed, but even with those "hidden" costs is it still not worth it to have the asset instead of basically paying for someone else to obtain their own asset?

I am in that position now looking at buying, got a nice amount together for the deposit and admin involved. Tired of renting, but as you say there are many more funds involved once buying. So I am weighing up everything before doing anything at this stage

Just to add some flesh onto the property debate regarding Renting or Owning: it really comes down to paying it off faster if you can afford it, or saving more through rent. Let's take a pretty typical scenario: 1 bar house/townhouse, 10% interest 100% loan, 20 years. A nice 2 bedroom townhouse, or 3 bedroom house. So the base bond amount would be R10 069(edit, redoing the calculation, 1 mil bond is=R9650, not 10 000, derp) bond per month(account fees add up to over 16K over 20 years--excluding the compounding interest, so that R69 counts.) --let's not forget the FUCKING TRANSFER FEES SCAM LIKE, 45K or so for a million house, bam, gone, already in negative territory.

Anyway, on top of the bond, you need bond cover and insurance per month. For a million, bond cover and insurance would likely be around R600-R700 (wild guesstimate). Then, rates and levies if it's in a complex. For ease, let's just put the rates at an even R700, no levies. Then maintenance and what not throughout the year: 1-2% a year, so 10-20K, so an extra R1600 max a month. So, for a 1 million rand house, the likely cost to own it every month is R13 069. After 20 years of diligent regular payments, you've managed to buy a house for your bank in interest costs--your total cost for owning the house is interest payments equal to R1,323,997--more than the amount loaned initially, thus you bought your bank a house . Total cost of the house is R2,346,595--remember this is just the loan amount, this does not include the insurance, rates, maintenance over the 20 years, which is likely around R250K-R300K(VERY GENEROUS CALCULATION-it's probably most likely 500-600K). In any case, let's call it an even R2.6 million total cost to owning the house. The only way you've made a return on this house, is if the million rand house value has grown by at least 5-6% a year in real terms. In the past 10 years, not a good story to tell, no matter what the ANC tells you South Africa’s house price appreciation remains below inflation Your million rand house is worth more or less exactly the price you paid for it--no real growth.

Yay?

Now, let's say that same place is up for rent, and unless you are daft af, you should not be paying more than 9K rent for a property that is worth 1 million. You'll likely pay closer to 8K and under. So, if you're smart, you'll save 5K a month if you choose not to buy that place. 5K a month, you put it away in a money market, unit trust, ETF, whatever. Something that gets you at least inflation rate or higher returns. That 5K a month is 60K a year saved, compounded at 6% including fees, equals roughly 2.3Million after 20 years Allan Gray | Money Market Fund (this excludes any tax paid, so that might definitely eat into this return)

Of course, the cost of rent wont stay the same, and all things equal, the cost of the owning the house would also marginally increase (insurance premiums, bond cover, maintenance costs etc)., but probably be less than the increases in rent per year -I know landlords can increase rent 5-10% a year, but the benefit of renting is negotiation(try negotiate with the bank lol), and the chance to shop around.

So, the person who rented has accumulated similar wealth to the person who bought the house, except theirs is liquid cash, and the other is an immovable asset. So, which one has better outcome after 20 years? To me, the liquid cash would be worth far more in that you can shop around and buy a house with no loan required- boom, house secured in 20 years, instead of buying the bank a house with interest payments.

HOWEVER, the only way the buyer might come out ahead of the 20 year renter is through saving a huge deposit, and chucking that cash into a house. Like the renter, if they choose the rent option for 10 years, saving that 5K a month into a sizeable deposit after 10 years, they can likely put down a 40-50% of a house, have a much better interest rate, overall cheaper bond, and be in a position to service the bond at 120% a month. They'll own the house after 10-12 years, reducing their interest and total cost of the house substantially.

So, in my opinion and calculations, the only way to really choose owning over renting is if you are able to slap down a huge deposit and service the bond faster, and not have their property's real growth ransacked by a rapacious bank's interest rate. Otherwise, 100% loans will never give you a real return.
 
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