Posted by Cary on November 03, 1999 at 17:42:17:
In Reply to: Real Estate or Commodities? posted by Shelva In Canada on November 02, 1999 at 21:31:38:
Shelva,
It's a very difficult question. For you see, I have invested "lots" of money in Stocks, Commodities, and RE. But, I agree with most of what Mr. Behle has to say, one has to remember that Mr. Behle is an EXPERT in the field of RE Paper. I am no expert at stocks, Futures, or RE investing. I am just a regular Joe trying to make "a little money on the side."
To be brutally honest with you. I have LOST "lots" and MADE "lots" of money in both RE and Commodities.
I have also made pretty good money in Stocks, BUT with the monster bull market we have going on right now in the stock market, it makes one think "how can I lose?"
But, I can definately see where when the Bull slows down, money will be very difficult to have in the Stock market. So, if you decide to invest in stocks, remember that --- you are not the one in control.
As far as commodities go, I love 'em. I get the rush. I love it when things are going my way. I learned early on though, losses are inevitable. But, to be successful at commodities, you MUST stay "on top" of what you are doing. These 'gurus' that say, with 20 year history's buy this on this day and sell on this day, or this is a simple elliot wave 3 extension, or this Gann angle shows, or any other "system", BE CAREFUL. Have you heard that 95% of people in the futures market lose money. Those 95% aren't 'stupid' as the gurus make it sound. Some of these people are 'brilliant' and still can't find that "hidden order" that lies w/in the futures markets. While it's true that I have lost plenty of money in commodities, I have made plenty of money as well. But, it's not as easy as these late night gurus make it sound, trust me. I guess I average about 35% return on my commodities, when looked at yearly. But, month to month the swings get WILD. If you can't handle a wild ride, then commodities ARE NOT FOR YOU.
RE is a different story. I'm sure there is some statistic out there that shows that 90% of people MAKE money in real estate. Well, one has to remember that this statistic has owner-occupied homeowners in it. You have to devote plenty of time, and research everything, in order to make "good" money in real estate as an investor. My last RE deal, I thought that I'd done "due diligence', and I still got burned. So, even RE isn't without it's risks. All in all, my RE side of things, I average about 20%.
So now you ask how would I rate these investments, on a scale of 1-10, I'll give you my take on your questions.
1-Risk Management - RE(3), S(8), C(4)
--------RE (3) because SO MUCH can go wrong, and big money losses is the result if it does "hit the fan."
--------S (8) because you only invest the amount you are willing to lose.
--------C (4) true you only invest what you are willing to lose, but you better plan on losing much more often that you win.2) Initial Capital- RE(4), S(8), C(4)
-------RE(4) because you are kidding yourself and others if you think that you can realistically start with much less than $25K. I know some do it, but these are the EXPERTS that I was talking about before.
-------S(8) because right now in the bull market if you have $2K-$3K, you can open a brokerage account and still have enough in there to cover your losses.
-------C(4) because as a beginner you'd better have AT LEAST $15K-$25K and trade the small stuff (corn,oats) if you ever plan on making it last. If you start w/ anything less, you are planning on too much luck.3) Mental Stress- RE(2), S(8), C(1)
------RE(2) because what if your rehab contractor bails on you, tenant won't pay, major employer in town downsizes and lays off a bunch of workers and property prices go very soft, and you can't sell/lease/flip/rent, etc. your properties.
------S(8) because you know what you wanted to risk before you entered the transaction. But the fear of loss is still there, but you factored that into you decision before you bought.
------C(1) because you can lose more than you intitally invested w/ limit moves against you, and you are so highly leveraged.4) Physical energy req'd- RE(5), S(5), C(5)
They all require a LOT of work/research to be consistently profitable.5) Time required- RE(2), S(7), C(4)
-------RE(2) in order to be successful at RE you must devote the time to do it right. Most of these people do this FULL TIME.
-------S(7) researching companies has become a lot easier with the advent of the internet. You just have to "know what to look for." Plus, a bull market doesn't hurt.
-------C(4) to do adequate research in commodities is much more difficult. Hard to differentiate between rumors and facts, especially when YOUR money is at stake. Real time data helps. Adequate research library helps. But, you don't have to do it full time, or any 'day trading' or anything like that. Once your research is done, just ride the trend. Hope it stays your way.6) Skill/Learning Curve- RE(8), S(6), C(2)
------RE(8) the hardest part about RE is 'finding the right deal/motivated seller, etc.' Once that is completed THEN the skill comes in to make it happen.
------S(6) once you learn what to look for, and the types of companies that you like to research, it's just a matter of watching the price dip, and purchase on the dip.
------C(2) you'll lose a lot at first. There is a VERY STEEP learning curve associated w/ futures. But, once you get the hang of it, and get used to the volatility, it's OK.All in all, pretty muttled. No 'perfect' investment out there, as far as I can see. Some are better in some areas than others, but they all require motivation and persistance.
Just my experiences, and my $0.02.