You wake up one morning and you have $1,000,000 in your account
You must invest it
You only have two options
Either a cash purchase of a $1,000,000 property no additional loans allowed… OR $1,000,000 into Etfs/shares.
What would you pick? And Why
If picking Etfs - what etfs?
@tomlikesbeetroot: Sure! It's no secret. Pick any Magnificent 7 company. They all run 20-30% pa over the last 10,15,20 years. Some even more than that.
Ok guys wait for me for tomorrow's topic : "30 mil dilemma …" 👌👌
nah, OPs in the penalty box. No more daily weird scenario.
warren buffet would say etf
1m to play with
house
5% a year capital growth = 50k
rent 5% - costs 1% = 4% = 40k
year 1 profit = 90k
40k of accessible profit needs to be reinvested manually eg shares.
you also need to liaise with property managers, buy insurance, etc. it's more work in general.
ETF
i pick the NDQ etf, which follows NASDAQ100
10% return per year after costs = 100k
year 1 profit = 100k
dividend reinvestment plan can auto invest those funds.
the ETF wins easily. less management and more profit.
as others have said, property is only good because you can leverage with the banks money. if you could use $1m as a deposit and buy the right property at $4m (cashflow neutral), it'd be a different kettle of fish. the yearly ROI would be about 20% compared to stock's 10%.
BuT ProPERTY OnLY GoeS Up
I would wake up and have BEKFAST
Is this ozb or r/AusFinance?
r/OzBFinance?
Shares ETF…. No stressing over more taxes (rates), maintenance costs tennents easy life just a price chart and let it ride.
Neither, the question is why people are still recommending ETFs when there is no additional money printing mechanism.
Nothing drastic has changed and the market looks like it is temporarily topping which makes it a very poor time to invest.
The only underpriced ETFs are the Asian based ones and they are underpriced for a good reason…
If neither is good, how would you invest if you have 500k?
'the question is why people are still recommending ETFs when there is no additional money printing mechanism.'
dunno what you mean by money printing mechanism - but e.g. if you google 'ASX IVV' it shows my ASX ETF IVV has gone down the toilet this YTD showing MINUS 3% - OMG terrible !?
but if I click on '1Y' it shows as up 15% last year, '5Y' up 105% or about 15%pa, and 'Max' up 568% over 17 years - about 12%pa cumulative since 2008 - I'm happy to stay with that, fanks anywaze … 😸
market looks like it is temporarily topping
Are you suggesting that after this temporary top, prices will be higher? Would that not make this an excellent time to invest?
ETF's and let it ride.
Wouldn't recommend an IP unless you've got the holding costs handy - and others said an IP would have no tax deductions if you can't show taxable income like rent received.
A home could be a good investment and would be tax free on sale if you'd lived there the whole time as your principal place of residence, but would require maintenance and ongoing costs - my small home unit costs $9Kpa (strata, rates, electricity, water, internet, insurance)
Add in land tax - my terrace was costing me $9Kpa in land tax before I sold it - strata units typically are below the land tax threshold.
ETFs theoretically are buy and forget and you only pay tax on any capital gains each year due to the internal buy/sell to track an index or such.
One ETF cost me the equivalent (on $1M investment) of $15K in income tax last year due to a huge capital gain.
So - buy a Home yeah - not taxable income unless rented out, but involves holding costs, land tax and maintenance hassles
ETFs may be easier to buy and forget about until you need/want to sell, then get ready to pay big lumps of CGT.
Borrow $1M to buy a house. Use the $1M to pay down debt, effectively debt recycle and use the refinanced $1M to buy ETFs, tax deduct interest against earnings.
nice - that sounds like a way to go !
House and ETFs
As per which ETFs, if you don't wish to DIY asset allocation, pick one of the diversified options ie VDHG, VDAL, DHHF or GHHF.
'Invest with Queenie' did a comparison between an ETF portfolio vs Property portfolio. check it out on Youtube.
both were relatively similar in outcomes after a period of time if you factor in all the taxes and outgoings.
the thing is, both are completely different asset classes. that offer some things you may or may not like.
nobody can really say one is better than the other, it really depends on your situation and your goals.
personally, i have both and i will never invest in property every again. but thats for me and understand many others may do better than me.
for property to be better than average you'll need to understand the market.
one basic principal i ask people:
"How often does the asset class offer discounted price"?
for property, you might get a 1 in 5 year or 1 in 10 year opportunity to buy at a great price.
with ETF's youll get a discount almost every 1-3 years with major discounts once a decade to take advantage of.
secondly, when said discount occurs, how often will you have the opportunity to invest and take advantage of the discount?
for property, its such an illiquid asset class, i've never met someone that had some spare capital or equity available to invest in another property that was at a discount. whereas with ETF's and stocks, you can invest with practically any amount you have on hand taking advantage of oversold conditions.
the other factor i consider is how much properties are being targeted in Australia for tax and compliance. its a market that's being propt up by controlling supply and demand. every scheme that allows a group of buyers to enter the market just raises the floor. and this has been hapening for 30 years now. landlords are also getting less rights and its no longer that golden-egg nest egg of an investment it once was.
Aus property remains high risk to policy changes imo.
Also, you can invest into REITS which are ETF's which give you exposure to the property sector. some REITS are also commercial.
i have my younger cousins puting some of their savings in REITS, atleast it allows them to benefit with the property market. you can even invest in the US property market with a REIT called "O"
as for ETF's, aus offers some of the highest dividends in the world. average 4-5%+
id focus on dividend ETF's tracking AS200. there are many to chose from.
US ETF's offer less dividend returns in comparison however they have stronger growth.
Care to share what your chosen strategy is for weath accumulation is?