Thursday, June 23, 2011

The Zillion Dollar Question

Hey there

First of all, sorry for missing Tuesday’s post. I was too stressed out with exams. Well its all over now, so back to normal!

A friend asked if she should invest in properties because there is a high chance of the prices going up and when should she wait for prices to fall a little or just get into it before prices go ridiculously high. Well thats the zillion dollar question in investing and trading I guess. My answer was if I knew that, I would not be studying anymore and I probably would be a lot richer than I am now. Does anybody know the answer to that question? When to invest in a certain investing vehicle? I don’t think so.

To me, this uncertainty that the markets provide is what makes trading and investing so enjoyable. Getting it right is like getting a pat on your back and getting it wrong can be very disappointing. Prices of houses can go up by 20% in one year but at the same time it can go down by 20% as well. The prices of a share in a company can go up by 30% in 2 days but drop 40% in 3. A lot of indicators or analysis can be done but at the end of the day it is still chaotic, it is still unpredictable, if not companies like Lehman Brothers or Bear Stearns will not ever go bankrupt. Just imagine, a company that massive with an army of analyst going bankrupt, what about solo investors like us?

Property prices has been booming in Australia however, it has slowed down significantly of late. There are a lot of negative news and sentiment going around about the property market. On top of that high interest rates makes money more expensive and hence harder to buy properties. So is this the time to get into properties or is it time to stay out? Once again, the zillion dollar question

I think what she can do is to invest in an area that is familiar to her, an area that she is aware of the surroundings and developments going on. Things like a new shopping centre, a new university, a new hospital are all easily identified factors that can affect property prices. How the neighbourhood is like. How many banks are in the area. Roughly how many houses are for sale in the area, what are their prices and how long they’ve been in the market for. What is the median house price instead of looking at the mean.

Because she is from Malaysia, another very important thing to think about is the exchange rate. Lets say if they price of the house goes up by 20%, and if MYR weakens by 20%, the profit is still 0.

I don’t know, I’m still an amateur afterall. Any of you have any advice for this young lady? What to look out for when investing in properties? Do you have an answer to the zillion dollar question? If you do please share it with me, I promise I’ll share 50% of all profit with you. Lol do drop me a comment or send me an email. Its always a pleasure to read them.

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Thanks for reading! Next post Sunday

You guys are awesome.

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2 comments:

  1. actually there is a way (but it is quiet difficult) You can collect all the housing data you can get, do regression analysis and see if prices have been increasing without a cause. If so, then it is a bad sign. The people that predicted the collapse of the housing market used this technique.

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  2. thanks dude. It makes sense. If only we have easy access to housing data lol.

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