Doomsday Daydreaming & Opportunity Costs
- Thread starter Agnostic
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AngloSaxon
Active Member
Precious metals are 9.5% of the present value our SMSF and will not deliberately go above 15% (market crashes affecting share values aside). Private PM holdings are a fraction of our PPOR deposit. Can't go all in to PM as a young family or even a young single man - there are too many opportunity costs.
AngloSaxon said:
I agree however keep in mind that learning one's personality is an important part of investing.
It's all good investing in stocks if you know you will have a steady hand when the crash comes, but if you're going to sell every time there's a downturn it's best to limit your exposure so such a volatile investment.
While theoretically what works for one should work for another (from a mathematical point of view), from an emotional point of view not everyone is as determined/stubborn/etc as the next person.
AngloSaxon said:
There is an opportunity cost to all investments, PM is no exception. Wait until stocks tank an then we will see opportunity costs.
This % investing is BS - if you pick undervalued items to buy (now PM) and sell overvalued items (now stocks) you cannot lose. If greed overtakes you and you buy overvalued items like stocks hoping to squeeze out the last few drops of gains you will be taking far larger losses into the future.
you need to have skin in the game.
diversification is for those who haven't done their homework.
Put in the hours of research (1000's), and sleep well at night knowing you'll be richer in the future.
diversification is for those who haven't done their homework.
Put in the hours of research (1000's), and sleep well at night knowing you'll be richer in the future.
I think plenty of people here, maybe most, have skin in the game.
Saying diversification is for those who haven't done their homework is a vast generalisation and not true in many cases.
There is value in focus of course, great gains can be achieved by it; but it is not the only game in town.
Diversification provides protection against loss, and also exposure to outperformance in a variety of asset classes.
No asset class is continuously the top performer, they each have their day in the sun.
No one is perfect at predicting which asset class will be the next big thing.
All asset classes (including precious metals) are fallible.
Furthermore, in general asset classes with no income (such as precious metals) are inherently higher risk than assets that earn an income; as the no income assets are relying totally on (uncertain) capital gain.
There is a diversity of opinions on this topic and I prefer hearing out the contrary opinions rather than listening to the mindless echo of groupthink.
Saying diversification is for those who haven't done their homework is a vast generalisation and not true in many cases.
There is value in focus of course, great gains can be achieved by it; but it is not the only game in town.
Diversification provides protection against loss, and also exposure to outperformance in a variety of asset classes.
No asset class is continuously the top performer, they each have their day in the sun.
No one is perfect at predicting which asset class will be the next big thing.
All asset classes (including precious metals) are fallible.
Furthermore, in general asset classes with no income (such as precious metals) are inherently higher risk than assets that earn an income; as the no income assets are relying totally on (uncertain) capital gain.
There is a diversity of opinions on this topic and I prefer hearing out the contrary opinions rather than listening to the mindless echo of groupthink.
from my point of view most people here have no skin in the game at all. I reached that conclusion by asking stackers directly.
I'm 95% in. I have skin in the game.
I suspect the difference between investor is as much one of time horizon than a choice of asset class.
when i hear people complaining about the price action in the last 4 years, it really cracks me up. They're the same kind of people that go get 20+ year mortgages. go figure.
It's not the income that makes other asset class attractive, since it's so little or even cash flow negative after inflation. It's the LEVERAGE.
And leverage is the reason why all investors not in hard assets will be taken to the cleaners.
I'm 95% in. I have skin in the game.
I suspect the difference between investor is as much one of time horizon than a choice of asset class.
when i hear people complaining about the price action in the last 4 years, it really cracks me up. They're the same kind of people that go get 20+ year mortgages. go figure.
It's not the income that makes other asset class attractive, since it's so little or even cash flow negative after inflation. It's the LEVERAGE.
And leverage is the reason why all investors not in hard assets will be taken to the cleaners.
Hmm, I'm not sure what kind of people get 20 year plus mortgages. Normally they are referred to as home owners, and their asset class has done very well over the last 70 years or so. Nevertheless, past performance is never a guarantee of the future.
It is possible to clear a home mortgage much faster than 20 years. Once someone's mortgage is clear, they have a stable residence (admittedly a feudal title in Australia, but one of the best feudal titles in the world). For most people the alternative is renting, which means they can be turfed out of home upon lease expiry. Not something I would enjoy.
Leverage is not the only reason people invest in an asset class. Many people own real estate or stocks without any leverage. Positive cash flow real estate is a popular segment of the market at the moment. Every weekly rent payment received lowers the risk profile of that asset.
Business is a great asset class, if you know what you are doing. 100% control, direct reward for effort.
Self-investment is also good. Study for a trade or degree, develop a profession, increase your income and future employability.
Regarding leverage, in certain scenarios investors with high leverage have done / may do extremely well. Moderate to high inflation is one of those scenarios and quite possible to occur again given all the QE around the place.
It is possible to clear a home mortgage much faster than 20 years. Once someone's mortgage is clear, they have a stable residence (admittedly a feudal title in Australia, but one of the best feudal titles in the world). For most people the alternative is renting, which means they can be turfed out of home upon lease expiry. Not something I would enjoy.
Leverage is not the only reason people invest in an asset class. Many people own real estate or stocks without any leverage. Positive cash flow real estate is a popular segment of the market at the moment. Every weekly rent payment received lowers the risk profile of that asset.
Business is a great asset class, if you know what you are doing. 100% control, direct reward for effort.
Self-investment is also good. Study for a trade or degree, develop a profession, increase your income and future employability.
Regarding leverage, in certain scenarios investors with high leverage have done / may do extremely well. Moderate to high inflation is one of those scenarios and quite possible to occur again given all the QE around the place.
TingTing said:
I wouldn't have got my foot in the door without the piece of paper that showed my first and second year marks, or the pieces of paper that showed I've been a hard working asset to previous employers. The piece of paper showing I'd worked on web based application design for spare cash since leaving high school didn't hurt either, despite having no formal IT qualifications. If you can prove your skills by showing what you've created using them, who cares how you gained the knowledge. Over 75% of my skills are self-taught, and I much prefer that over a generic mass production education.
The "degree" piece of paper is valuable, but also expensive in time/money/loss of potential income. Treat it like any other investment, if it's time to cash in and invest in something else, do it. It took me 3 months of contemplation to come to that conclusion, as it was hard to break the "must have degree" mindset I'd been conditioned into.
As for leverage -
I'd like property, but not keen on the way most people acquire it. When you start at literally zero, and your inheritance is dependents instead of assets, you need to think outside the box.
