Planning for Investment Success

Discussion in 'Share Investing Strategies, Theories & Education' started by Steve Navra, 29th Sep, 2005.

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  1. kennethkohsg

    kennethkohsg Well-Known Member

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    **********************************8
    Dear Dave,

    1. Well done! My congratulations, please.

    2. Knowledge and skills are effective tools to create wealth. As we grow and get richer in life, we will ultimately and interestingly learn that " TIME is MONEY" and "TIME is WEALTH" in and of itself.

    3. Despite our present chronologically speaking "adult" age, we can always choose to act and remain spiritually "pure and innocent" and "young" in our hearts and minds as we all have been, as children once before.

    4. We can simply do this by "feeling young" "pure and innocent" in our own thinking by simply adopting a constant humble and learning life attitude of "always esteeming others higher than ourselves" and "always looking forward to improving ourselves continually by seeking to learn continuously from the other people as well as from our own life experiences, as what we have previously done as a child, ourselves .

    5. For your kind update, please

    6. Thank you.

    Cheers,
    Kenneth KOH
     
  2. TryHard

    TryHard Well-Known Member

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    The meaning of investing life

    Great points Kenneth. The "attitude" to creating wealth, why you're doing it, and doing things you love, I have found really do make an immense difference. I'm not big on the "God" aspect but I'm convinced some sort of natural order starts falling into place to support your goals when you think and act along the lines you described :)

    I have also found that sourcing and relying on people who know more than you in areas where you can be mentored, really helps, since I started looking on our wealth creation, and being a family, the same way I used to look at my business. It just took a while to realise they all deserved the same respect and attention. :)

    Peace ;)
    Carl
     
  3. Steve Navra

    Steve Navra Well-Known Member

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    Chapter 2

    Chapter 2
    Assessing the efficiency of your current portfolio:


    The topic this chapter concerns the assessment of what constitutes efficiency within your portfolio.

    More commonly referred to as "LAZY $$$$$$$"
    Definition: Assets contained in the portfolio that do not fulfill the three efficiency criteria:

    1) INCOME
    2) CAPITAL GROWTH
    3) COLLATERAL VALUE

    All assets should contain ALL three of these attributes.

    Examples of assets:

    a) Motor Vehicle:

    Does your car produce income?
    Well you might say that you use a car in the production of income ... fair enough, for those who by necessity need a vehicle to do their job. Generally though a car doesn't produce income ... in fact cars cost money to maintain, run, insure, license and clean!

    Does your car increase in value? (Capital Growth)
    Hmmmmm, the average vehicle in Australia halves in value each 3 years! (Depreciates at 20.63% p.a. :eek: ) hardly a crash hot Capital Growth accruing asset! Yes, but some might say that their 'special edition Ferrari' (Driven sparingly once a month) might in fact increase in value, but hey ... how many of us have special edition cars?

    Can you use the value of your car as collateral for a further loan?

    Ahem: "Hi Mr. Lender ... I would like a loan to buy a property."

    "Oh Hello Mr. Hoon, what is your income and what security can you offer?"

    "Well, my income is a $XYZ-00 and you can use my car valued at $100,000 as security."

    "Well Mr. Hoon, the lenders answer is Mwa-hahahahahahaha ..."

    So as far as a motor vehicle is concerned as an investment asset it scores 0/3


    b) Diamond Engagement Ring:

    Does the ring produce any income?
    Aside from the poor sucker who bought the precious thing in the first place willingly offering up his hard earned wage to his beloved ... generally there is no income produced by the ring!

    Will the diamond ring appreciate in value?
    Well I am sure most jewelers / diamond dealers think it might ... sadly though this doesn't seem to be the case.

    Diamond ring as security for a loan?
    Mwa-hahahahahahaha ...

    So, like the motor vehicle ... 0/3
    (Disclaimer: I personally fully support the notion of marriage, love, rings and all the joy these bring!)


    c) Investment property:


    Income:
    Yes ... you will hopefully receive some Rental Income.

    Capital Growth:
    Yes hopefully the value of the property will increase.

    Collateral Value:
    Yes, as the property increases in value a lender will recognise the equity. (Studio apartment < 50 square meters ... maybe not :p )

    So, at last an asset scoring 3/3

    You might now try the same assessment for:
    i) Superannuation
    ii) PPOR
    iii) Shares
    iv) Cash in the bank
    v) Art
    vi) Children
    vii) Mother-in-law

    Then post your assessments ... should be eye opening :D

    A more serious personal assessment of your assets should be to list EVERY asset that you own and tick of (In 3 columns) each of the criteria.

    These that score 3/3 are true assets ... and all the others generally are inefficient as far as investment and wealth creation go … all the way through to being liabilities. (See vii above :) )

    Please post your results / observations ... and we can discuss this further.

    The next topic will be about converting INEFFICIENT assets into EFFICIENT assets.

    Also the balance between luxuries, lifestyle and investing needs to be explored. (Like we love our children ... so are they worth keeping? / how to do this ;) )

    Oh I am in a good mood and it is great to be posting again!

    Regards,
    Steve :D
     
  4. TryHard

    TryHard Well-Known Member

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    Wonderful post Steve :D You guys recommend insurance for income protection etc, I believe the Diamond Ring is insurance against bodily harm, which might occur if you don't produce one when expected. :)

    From earlier this thread:
    Don't wanna hijack, but just checking if you were gonna mention capitalising interest, and the whys and why nots ?
    Cheers
    Carl
     
  5. Steve Navra

    Steve Navra Well-Known Member

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    Yep, definitely will, but a bit later in the piece :)

    Regards,
    Steve
     
  6. Alan__

    Alan__ Well-Known Member

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    Ok......what about the family home......does it fulfill the three efficiency criteria?

    Seems some people view a home as an asset and others as a liability. :confused:

    Case 1:
    You are still paying off the family home.

    Income?
    Probably not but I guess you could rent a room out? Generally no.

    Capital Growth?
    Yes.

    Collateral Value?
    Yes

    Probably 2 out of 3. :eek:


    Case 2:
    Pay off this non-deductible debt(home) as soon as possible and draw down the equity for investments.

    Income?
    Yes

    Capital Growth?
    Yes

    Collateral Value?
    Yes

    Probably 3 out of 3.

    Much better. :D Mind you, isn't paying off a house in Sydney fun these days? :eek:



    What about Units in an Managed Income Fund?

    Hmmmm.........I think I could do with some input from the Income/Capital Growth sections here.......

    Collateral Value?
    Can use shares purchased as security against a Margin loan so Yes.

    Income?
    Yes.........trading profits(hopefully), dividends and interest from cash held.

    Capital Growth?
    Yessss.......I guess.........shares should appreciate in value, but in an Income Fund is this growth really returned as part of 'Income'? Either way, I suppose it's Capital Growth?

    Therefore 3 out of 3.

    Actually Steve, I think you may(?) have mentioned the possibility of needing to sell some Units to access Capital Growth. Wouldn't Capital Growth simply trip over into Income as you sold the stock on rising prices?


    :)
     
  7. Stevec__

    Stevec__ Member

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    Bloody studios! :mad: I wish I knew, what i know now, back when i bought my studio. Its an absolute nightmare trying to find someone who is willing to use it as security.
     
  8. Meisterin

    Meisterin Well-Known Member

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    I would like to see Chapter 3 of this.

    It was very interesting.

    CH 1. What triggers people to invest?
    - You have to pay yourself first


    CH 2. What sort of things(asset class) should people invest in?
    - Property because it scores 3/3

    If there were Ch 3 what could it be?
     
  9. pudsa

    pudsa Active Member

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    Chap 3

    We are with you hiflo, would love to read Chap 3. Does anyone know what happened as Chap 2 was quite some time back and we for one would be most interested in thoughts on capitalising interest. Have read some other thoughts on this subject in other posts. Our approach is not to capitalise interest but to be careful not to spend it and then take it from our main portfolio and reinvest it so hopefully turn it to advantage. Cheers Pudsa.
     
  10. Alan__

    Alan__ Well-Known Member

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    Hmmm........I'd forgotten about this thread.

    IMHO, it's this type of thread that probably has the widest appeal for most people. NB. Not negating other fine threads though. :)

    Love to see some 'additional Chapters' in the coming months too.