On May 24, 10:21 am, bowgus <bow...[at]rogers.com> wrote:
- quote -

What about start up cost, e.g. downpayment. You can't buy a house
with a 10K downpayment anymore.


- quote -


Well that's nice. I can cite stocks that I have owned that has
appreciated over 1,000% (you read that right). But that's an
extremely rare example (too bad for me). You are looking at a real
estate bull market the last 5 or 6 years. Compare that with the 5
years before 2000 stocks beat real estate hands down.

In other words, can't selectively pick the time period that give you
the max gains.


- quote -

How come you are using an 8% average return for stocks, and not the
20% average for the period from 1996 to 2000?


- quote -

You mean boarders? That's pretty high risk. They can sue you, they
could be serial killers. But again it's apples and oranges. You have
expenses associated with your real estate investment and taking in
boarders. There is very little active management involved in stocks.

"Daniel T." <daniel_t[at]earthlink.net> wrote in message
news:1180043439.695084.241640[at]q75g2000hsh.googlegroups.com...

- quote -

builder's costs about 1980/81 at which time the home price escalates. It's
easy to see that builder's costs decline in tandem with interest rates. The
only aspect not in Joe's analysis is the population increase. (But I suspect
a discussion of immigration policy my be disallowed by the moderators, even
though it does appear to be having an impact on individual
financial-planning.)

Elizabeth Richardson

Elle wrote:

- quote -

I'm unable to recover the original data I used when I wrote that page,
but keep in mind, CPI grew by a factor of 2.281 over this period, so the
$7.43 would inflate to $16.94. During this period, wages didn't even
keep up with inflation, yet the 'hours per months' needed to pay for the
house still declined. I believe my original data was factory wages, I
tried to eliminate the objection you now raise, but again, my original
data set is not at my fingertips. (If you can provide a link to compare
1981 income to 2005 income, I'd be much obliged, and I'd update the page
to reflect annual income or median, however it's presented.)
JOE

On May 24, 2:43 pm, joetaxpayer <joetaxpa...[at]nospam.com> wrote:
- quote -

How does this reconcile with the link below?
<http://www.answers.com/topic/barrons...06-20-2005-gif

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote
- quote -

Can you outline how you computed the hourly wages used?

Seems like your figures of $7.43/hour for 1981 and
$16.11/hour for 2005 are averages that do not take into
account an occasionally dangerously large gap in wages
between blue collar and white collar. E.g. over some time
periods white collar wages might shoot up by a factor of
five, while blue collar wages go up by a factor of two. Yet
most folks are blue collar, right? (Roughly speaking for
purposes of posting, and since only about 21% of the age
eligible population have a bachelor's degree.) So housing
affordability measures must weight the high presence of blue
collar wages accordingly.

BreadWithSpam[at]fractious.net wrote:

- quote -

I put together an analysis on this topic at
http://www.joetaxpayer.com/housemort.html
I show that all appreciation from 1981 to 2005 can be accounted for in
the drop in rates from 14%/yr to 6%/yr and inflation. The 'hours worked
per month' to buy the median home dropped slightly over that period. I
don't suspect anyone is anticipating that rates drop 8% from current levels.

JOE

bowgus <bowgus[at]rogers.com> writes:

- quote -

During the biggest bull run for residential real estate in
history.

During your holding period, the return has been approx 11%/yr
annualized, during a period when inflation averaged 2.5%
annualized.

Historically, real estate has appreciated at between 1% and 2%
per year above inflation. Had your 10 year period been
more like the norm, your $200,000 house would now be worth
something between $282,000 and $310,000.

Good luck believing that real estate is going to keep
going up at 11%/yr. You're going to need it.

- quote -

None of which is to say that investing in the business of
running small scale real estate is necessarily a bad idea,
though it is very risky, somewhat capital- and moreso labor-
intensive.

But do be realistic.

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- quote -

You mean in "the example" ... I wasn't the OP.

But let's see ... my home currently costs $1200/month operational ...
including HDTV and high speed internet :-). Over ten years the resale
value has increased from $200K (my cost) to $600K. Now, the way I look
at it, we have to live somewhere ... e.g., $1200/month would currently
get me a "nice" 2 bedroom apartment here (hardly big enough for me and
my blended family). Ok, so, if I sell right now, I pocket the $600K
(less legal fees ... 2%? ... I'm a DIY seller, done it before, no
problem) ... let's say $590K ... since it's my prime residence, no
tax!!! ... or, net return of $590K - $200K ... about $390K.

Using that 8% average on the $200K over the same 10 years if invested
is $432K - $200K = $232K and if equities, take half the return ($116K)
and tax that at my current 24%. So net return on $200K invested would
be ... about $230K.

So, I live in my home for 10 years and then sell with net return of
$390K ... or ... I invest at 8% (average) over 10 years with net
return of $230K ... but geez, I gotta live somwhere. Assuming an
average of $8K over those 10 years, that's $80K. Leaving about $150K.

My opinion ... the home is low risk, the market is high risk. And did
I mention I take in borders (=$$s)?

On May 19, 4:04 pm, bowgus <bow...[at]rogers.com> wrote:
- quote -



The two biggest difference between stocks and real estates is the
start up cost and the carrying cost, both more expensive for real
estates. In you example, I don't know where a person can put 10K down
for a house. But everyone can start with 5K on a MF.

bowgus <bowgus[at]rogers.com> writes:
[BWS said:]

- quote -

Then stop with the apples-to-oranges comparisons and talk
about your net return.

- quote -

MER (Canadian for "Expense Ratio") of 2.4% is criminally absurd.
Find another fund. Or buy ETFs. In about 10 sec. of looking, I
found Barclay's iShares ETFs with MERs of 35bp or less.


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- quote -

Sure, funds are "for profit" ... we are in complete agreement ...
except ... as an investor I'm not interested in apples, or
oranges, ... I am interested one thing only, and that is net return. I
understand that funds are less expensive in the US than up here but
here is a typical balanced fund I looked up that the average person
might select up here. Return over 3 years was 7.8% and the MER is
2.4%.

Using $1000 and 7.8% over 1 year.
Return is $78, fund net return is $25.87, holders net return is $52.13

Now consider this. ($52/$1000)*100 is ... 5.2%. There are GICs to be
had that return better than that, and with much less risk.

On May 21, 12:12 pm, bowgus <bow...[at]rogers.com> wrote:

- quote -

Its a valueless measure. If that exact same mutual fund had a 100%
return both years, the MF company would only get 1% ($30 on $3000
"profit"), not 12.5%.

In the above scenario the Fund Co. would PREFER to have the 1% profit
than the 12.5% profit.

bowgus <bowgus[at]rogers.com> writes:

- quote -

They get 1% of assets under management. Regardless
of "profit" (where by "profit" you seem to mean
"investment appreciation"). Comparing it the way
you did makes no sense - it's, again, apples-and-oranges.
Suppose it's an equity fund and it loses 5% on year.
Guess what - the management company still gets their
1% because you are not paying them a percentage of
the "profits". You are paying them a percentage of
the assets. If you want to make your questionable
calculation now, well, the percentage of "profits"
looks pretty silly.

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- quote -

So in year 2 the fund takes 12.5% of the profit
(20.80/20.80+166.40) ... not bad.

- quote -

No they don't ... I'm saying that tax is part of the debt associated
with equity (Investopedia). In order to put any proceeds from the
market (excluding my tax sheltered profits which stay I leave in the
tax shelter) in my pocket over a given year, at years end I am obliged
to add 50% of those profits (equities taxed at 50%, dividends
differently, and so on) to my day job income, and pay the tax man.

Once that is done, that equity (my original investment plus profit
after tax) is all mine ... all debts have been paid..

BreadWithSpam[at]fractious.net wrote:

- quote -

You're absolutely right. But I think the reader's point was that you
can invest sweat into real estate, but not in a mutual fund. Or
whatever. You're right that this could make it equivalent to a job, a
point also made in the original Money article.

-Will

http://apps.nasd.com/investor_Inform...asd/mfetf.aspx

will tell you exactly how much you are going to give the MF company.
You can choose the fund (loaded or not), the return, the initial
investment amount, and the investment time horizon (up to 20 years)
and it will output the expenses paid to the MF company.

Overall a good tool to have in general.

bowgus <bowgus[at]rogers.com> writes:

- quote -

Give an example (without resorting to the ridiculous
or to comparing apples-to-oranges) of coming up with
numbers like those.

Suppose, say, an average long-term equity return of,
say, 8%, after paying 1% management fees to the fund
company. (not sure why you'd lump "taxes" in with "them" -
the fund companies don't earn anything on your taxes).

For each $1000 you invest, the fund company collects
$10 and your investment goes up by $80 in the first year
(on average). The fund company collects $10.80 and
your investment goes up by 86.40 in that second year.
After two years, that's $20.80 for them and 166.40
for you.

There's a quote from Bogle which gets passed around
(and was misused, unsurprisingly, by Kiyosaki)
wherein there's a bogus calculation which claims
that mutual funds complexes keep 80% of the profit
generated by an investor's capital. We've shot holes
in that very quote (and in K's columns) here before.
Perhaps that's the piece you're thinking of?


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On May 19, 7:04 pm, bowgus <bow...[at]rogers.com> wrote:
- quote -

Investopedia: "In general, you can think of equity as ownership in any
asset after all debts associated with that asset are paid off."

So assuming management fees, tax, etc., as debts, the mutual fund
after all those years might get you 30% in your pocket (E.g. $1M ...
$700K for them, $300K for you) OT: and that imo is the main reason
advisors want us to invest long term ... so we don't experience any
thought provoking costs along the way. I'd say worth looking into if
you hold mutual funds.

E.g. ... "Over the past twenty years, the cumulative profit of each $1
initially invested in the managed fund came to just $1.55 in real
terms, after taxes and costs, ... " from ... Remarks by John C. Bogle
Founder and Former Chairman, The Vanguard Group
American Association of Individual Investors Philadelphia Chapter
May 24, 2005, Valley Forge, PA.

Will Trice <wwtrice[at]paragondynamics.com> writes:

- quote -

What's the difference between Investor A who buys a house
and spends weekends and evenings doing renovations and
landscaping and Investor B who buys stocks and spends
weekends and evenings working a second job?

Unless Investor A's time has no value, the reader writing
in above is comparing apples and oranges.

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