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Why are people obsessed with getting a pension

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    #842
    metricspaces
    Registered Users Posts: 793 ✭✭✭metricspaces


    AndrewJRenko wrote: »
    . You could end up with no appreciation in value of assets

    Once again perceived risk Vs actual risk. What's the probability of that happening in say a 20 year period based on historical data from Irish property market?


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    #843
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,045 Mod ✭✭✭✭Jim2007


    metricspaces wrote: »
    What % of people who borrow for buy- to-let does it go horribly wrong for? Risk and perceived risk are two completely different things.

    And to my original question to you. Name another way your average Joe can get €100,000's from a bank to invest?
    metricspaces wrote: »
    Equally lots of people managed to hold on to their buy-to-lets during the downturn.
    metricspaces wrote: »
    Once again perceived risk Vs actual risk. What's the probability of that happening in say a 20 year period based on historical data from Irish property market?

    At the end of the day it is your money and your consequences, if you have researched your decision and come to the conclusions that conventional wisdom is wrong, feel free to share your research with us...


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    #844
    metricspaces
    Registered Users Posts: 793 ✭✭✭metricspaces


    Jim2007 wrote: »
    At the end of the day it is your money and your consequences, if you have researched your decision and come to the conclusions that conventional wisdom is wrong, feel free to share your research with us...

    To which we can conclude you have no suggestion as to how your average Joe can get 100,000s of someone else money to invest. Because no bank is going to give average Joe 100,000s to invest in the stock market.

    It's all fine saying lots of people get burnt with buy-to-lets, but the statement is meaningless without quantifying it. Same is true for stating the asset may not appreciate. You may get knocked over walking across the road tomorrow, why bother with a pension?

    Equally if you could share references to this analysis which shows property investment has a lower return (in comparison to what? to everything?)? Otherwise it is just opinion, which may or may not be correct. You made the assertion, I've made no assertion to provide you references for. Simply questioning yours, which you deflected.

    In particular I am talking about the scenario where someone invests 30% of property value over 25 year period say. Mortgage paid by tenant. Then reviewing scenario where asset is sold and scenario where asset is held for rental income over say another 20-30 year period and then sold, both in comparison with the 30% of property value invested in diverse fund of shares over same period.


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    #845
    AndrewJRenko
    Registered Users Posts: 28,532 ✭✭✭✭AndrewJRenko


    metricspaces wrote: »
    To which we can conclude you have no suggestion as to how your average Joe can get 100,000s of someone else money to invest. Because no bank is going to give average Joe 100,000s to invest in the stock market.
    You say this like it's a bad thing.

    There's a good reason why banks don't give out hundreds of thousands to invest. See if you can work it out.


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    #846
    metricspaces
    Registered Users Posts: 793 ✭✭✭metricspaces


    AndrewJRenko wrote: »
    You say this like it's a bad thing.

    There's a good reason why banks don't give out hundreds of thousands to invest. See if you can work it out.

    Possibly you can quantify your earlier statements around lots of people and asset appreciation rather than diverting with another statement?

    Maybe if you re-read my posts you'll work out that you've misinterpreted. Rightly so no bank will give your average Joe hundreds of thousands to invest in shares or pension. But they will give Joe that money to invest in a buy-to-let.


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    #847
    kippy
    Registered Users Posts: 18,443 ✭✭✭✭kippy


    metricspaces wrote: »
    Possibly you can quantify your earlier statements around lots of people and asset appreciation rather than diverting with another statement?

    Maybe if you re-read my posts you'll work out that you've misinterpreted. Rightly so no bank will give your average Joe hundreds of thousands to invest in shares or pension. But they will give Joe that money to invest in a buy-to-let.


    The buy to let is a physical asset that the bank essentially retains ownership of, knows exists, knows the condition of and can ensure against the death of the mortgage/loan holder. Indeed they can sell on the mortgage itself if needed and, while difficult, can obtain the assest if the mortgagee fails to pay.


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    #848
    AndrewJRenko
    Registered Users Posts: 28,532 ✭✭✭✭AndrewJRenko


    metricspaces wrote: »
    Possibly you can quantify your earlier statements around lots of people and asset appreciation rather than diverting with another statement?

    Maybe if you re-read my posts you'll work out that you've misinterpreted. Rightly so no bank will give your average Joe hundreds of thousands to invest in shares or pension. But they will give Joe that money to invest in a buy-to-let.


    No, I won't be quantifying anything. If anyone is seriously interested, let them do their own research.


    And no, I haven't misinterpreted anything. I got exactly what you say. You might want to think about why banks will lend money for property investments?


    Here's a hint: because they can take the property back when things go bad, and the investor bears the lion's share of the risk.


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    #849
    metricspaces
    Registered Users Posts: 793 ✭✭✭metricspaces


    AndrewJRenko wrote: »
    No, I won't be quantifying anything. If anyone is seriously interested, let them do their own research.

    Of course you won't, as to do so would reveal how irrelevant your statements were. Attempting to first deflect when called out on it and then wash it away thinking you can jump on the moral high ground is only fooling yourself. It's quite obvious you've written cheques you can't cash.
    AndrewJRenko wrote: »
    And no, I haven't misinterpreted anything. I got exactly what you say. You might want to think about why banks will lend money for property investments?

    So you still haven't worked it out yet. I suggest you take a look at who said it was a bad thing that banks don't lend hundreds of thousands for Joe soap to invest in shares\pension. No one, merely a misinterpretation in your mind. But you won't see this as your pride is now blinding you.


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    #850
    Bass Reeves
    Registered Users Posts: 18,214 ✭✭✭✭Bass Reeves


    Jim2007 wrote: »
    I'm basing it on 30+ years spent providing performance and attribution analysis on investment portfolios in mainland Europe. In an average year I used to review between 800 and 1000 investment decisions. And on top of that there is plenty of research papers on portfolio construction out there that confirms this.

    If you borrow money and sink into property, do not be surprised if it goes horribly wrong.

    Most comparisons of property v bonds assume that in both cases the it all pension money is put into property and that the property is it owner managed.

    No investment is risk free. Yes people have lost there shirt on property asuch as shares. Most serious losses in property was on over leveraged finds done at the wrong part of the property cycle. At present we may be nearing the end of the present cycle. However it is unlikely we will see another noughties shock. Banks now insist on a minimum of 30% equity by investors.

    However pension funds can suffer the same fate. However most ordinary workers investment in pensions are through employer schemes where there is a contribution by the employer. These are the best pension investments and any pension funds should first be directed there.

    If no employer finding property at the right part of the cycle can be considered. However you need to factor in certain risks. You need to be able to sustain the payments. Gross returns should be above 7-8% . Would I invest in property at the moment yes but the return would want to be near 10% and I want to be in control of the property. It unlikely at present you will find such properties do I would not be investkng

    Slava Ukrainii



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    #851
    Nermal
    Registered Users Posts: 2,617 ✭✭✭Nermal


    metricspaces wrote: »
    Once again perceived risk Vs actual risk. What's the probability of that happening in say a 20 year period based on historical data from Irish property market?

    Your point about leverage is well made.

    But you've spent your life in a country that moved from poverty to be one of the richest in the world, at a time when interest rates have fallen through the floor and a secular change has occured where two salaries usually buy property, not one.

    You don't have perspective.

    Here's where to start: a study of real estate values in Amsterdam from 1628 through 1973.

    https://papers.ssrn.com/sol3/papers.cfm?abstract_id=598


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    #852
    [Deleted User]
    Posts: 17,728 ✭✭✭✭ [Deleted User]


    metricspaces wrote: »
    .............

    In particular I am talking about the scenario where someone invests 30% of property value over 25 year period say. Mortgage paid by tenant. Then reviewing scenario where asset is sold and scenario where asset is held for rental income over say another 20-30 year period and then sold, both in comparison with the 30% of property value invested in diverse fund of shares over same period.

    In a pension product?
    So the €90k is grossed up to include the tax that won't be paid on it?


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    #853
    AndrewJRenko
    Registered Users Posts: 28,532 ✭✭✭✭AndrewJRenko


    metricspaces wrote: »
    Of course you won't, as to do so would reveal how irrelevant your statements were. Attempting to first deflect when called out on it and then wash it away thinking you can jump on the moral high ground is only fooling yourself. It's quite obvious you've written cheques you can't cash.



    So you still haven't worked it out yet. I suggest you take a look at who said it was a bad thing that banks don't lend hundreds of thousands for Joe soap to invest in shares\pension. No one, merely a misinterpretation in your mind. But you won't see this as your pride is now blinding you.

    Oooh, somebody's just a little touchy on this issue. Do you have some particular problem with pointing out the risks involved in a particular form of investment?

    Just for the record, I didn't say anything about property being a good or a bad investment, or high or low risk or anything like that. I just pointed out some of the risks of leveraged investments that you had glossed over.

    Surely you would be in favour of any potential investor going in with their eyes fully open?

    One thing is for sure, any cheques I need to cash will be my own money, not leveraged money.


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    #854
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,045 Mod ✭✭✭✭Jim2007


    Bass Reeves wrote: »
    Most comparisons of property v bonds assume that in both cases the it all pension money is put into property and that the property is it owner managed.


    They certainly are not, most studies relate to portfolio construction and not asset class versus asset class, but if you want to believe that it is your money....


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    #855
    The J Stands for Jay
    Registered Users Posts: 5,669 ✭✭✭The J Stands for Jay


    metricspaces wrote: »
    but dividends would be nowhere near rental income.

    There's plenty of shares out there with a dividend yield that match or beat your rental yield.


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    #856
    metricspaces
    Registered Users Posts: 793 ✭✭✭metricspaces


    McGaggs wrote: »
    There's plenty of shares out there with a dividend yield that match or beat your rental yield.

    This is true, as it is true that there are risks with property investment. However, there are pro's also - the one that I was highlighting being that you can get 70% cost of investment from someone else and the tenant is paying off this loan for you. Along with the profit from rental income along the way, when mortgage is paid off you own 100% of asset and a large proportion of rental income will be profit.

    The consensus here seems to be you'd get better returns from your 30% initial investment in property via other means like stocks, and this is guaranteed under all circumstances regardless of scenario you apply to property investment.


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    #857
    Bass Reeves
    Registered Users Posts: 18,214 ✭✭✭✭Bass Reeves


    Jim2007 wrote: »
    They certainly are not, most studies relate to portfolio construction and not asset class versus asset class, but if you want to believe that it is your money....

    I have two property investments, one that at present yields a 15% gross return on rental yield. I have it 5 years. The other is returning over 10%. The first has at capital appreciation of about 40% The second has a capital value appreciation of over 20%. Both would be valued at below build cost so there is still room for capital appreciation.

    Like I posted it investment depends on when in the cycle it occours. As I posted best pension investments are where an employer is co funding but after that property is a consideration

    Slava Ukrainii



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    #858
    Saudades
    Registered Users Posts: 378 ✭✭Saudades


    I read in the news about the Coronavirus causing world Stocks to plummet, so I checked my DC pension account online, and my pension value has dropped almost 10% this week.

    I'm invested mostly in equities.

    Is there anything to be worried about here?


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    #859
    anewme
    Registered Users Posts: 11,885 ✭✭✭✭anewme


    Mine has dropped 6% as of yesterday.


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    #860
    AlmightyCushion
    Moderators, Education Moderators, Technology & Internet Moderators Posts: 35,056 Mod ✭✭✭✭AlmightyCushion


    Saudades wrote: »
    I read in the news about the Coronavirus causing world Stocks to plummet, so I checked my DC pension account online, and my pension value has dropped almost 10% this week.

    I'm invested mostly in equities.

    Is there anything to be worried about here?

    It depends on when you plan to retire. If it's in the next few days or weeks, then yes you should be very worried. If it is decades away then no, you shouldn't be worried.

    It is usually recommended that as you get closer to retirement, you move more and more of your portfolio to less volatile investments such as cash or bonds.


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    #861
    razorblunt
    Registered Users Posts: 17,300 ✭✭✭✭razorblunt


    Saudades wrote: »
    I read in the news about the Coronavirus causing world Stocks to plummet, so I checked my DC pension account online, and my pension value has dropped almost 10% this week.

    I'm invested mostly in equities.

    Is there anything to be worried about here?

    Are you looking to cash out before Xmas 2021? It's a kick in the stones.
    After that? Don't worry.


    Xmas 2021 being abritrary.
    Quick check of my own and it's only (currently) down 2.8%. Those funds should pick right back up again too.


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    #862
    tillyfilly
    Closed Accounts Posts: 567 ✭✭✭tillyfilly


    anewme wrote: »
    Mine has dropped 6% as of yesterday.

    you must have stayed invested in the riskiest assets


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    #863
    cefh17
    Registered Users Posts: 990 ✭✭✭cefh17


    Mine has dropped close to 10%, I am invested in 100% equities.
    They're still close to end of 2019 price levels, so really, it's 10% sale atm... I'm only 28 so it's good for my pension in the long run. As others said, unless you're retiring in the next couple of years it won't matter, but by that stage you shouldn't be so weighted in shares


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    #864
    dotsman
    Registered Users Posts: 3,635 ✭✭✭dotsman


    Stock market has crashed, with over $2 Trillion wiped off by Wednesday, and it is still dropping significantly with my (non pension) investment portfolio down 20% in the past week while my main dc pension fund is down about 10%. However, in both cases, the figures are simply back to where they were in November. i.e. they have given up the huge gains they made in the past 3 months.

    There is absolutely nothing to worry about. For those about to retire, if they were (foolishly) still in equities, they simply are retiring on the pension they would have retired on last November. However, one would like to think that 99.99% of those approaching retirement would not be in equities (for this very reason). For those with more than a few years to go, this is normal and is just part of the highs and lows of stock market investment.

    Obviously, if the crash continues and worsens dramatically, it will typically take longer to recover, but it will (and hurt more for those about to retire). I lost 50% of my pension back in '08. A few years later, it had recovered and continued to grow thereafter.


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    #865
    Bobeagleburger
    Registered Users Posts: 45,286 ✭✭✭✭Bobeagleburger


    Just means buying units at cheaper prices :)


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    #866
    Saudades
    Registered Users Posts: 378 ✭✭Saudades


    I'm in my 30's so a long ways to go yet.

    It just crossed my mind to transfer everything out of equities and perhaps in to cash for a couple of weeks - or until the Coronavirus's affect on the world markets settles down - and then in a couple of weeks transfer everything back into equities.

    Probably a terrible idea then?!

    Then again with that being said I don't even know if an online investment change request is processed instantaneously or if it takes days/weeks to process.


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    #867
    tillyfilly
    Closed Accounts Posts: 567 ✭✭✭tillyfilly


    cefh17 wrote: »
    Mine has dropped close to 10%, I am invested in 100% equities.
    They're still close to end of 2019 price levels, so really, it's 10% sale atm... I'm only 28 so it's good for my pension in the long run. As others said, unless you're retiring in the next couple of years it won't matter, but by that stage you shouldn't be so weighted in shares

    I transferred into bonds from equities a week before the crash , I'm up 4% instead of down 10% it's worth paying attention to the news


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    #868
    cefh17
    Registered Users Posts: 990 ✭✭✭cefh17


    tillyfilly wrote: »
    I transferred into bonds from equities a week before the crash , I'm up 4% instead of down 10% it's worth paying attention to the news

    Fair play, but you're just trying to time the market really, I'll be DCA all the way


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    #869
    tillyfilly
    Closed Accounts Posts: 567 ✭✭✭tillyfilly


    :p
    cefh17 wrote: »
    Fair play, but you're just trying to time the market really, I'll be DCA all the way

    no idea what DCA is


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    #870
    cefh17
    Registered Users Posts: 990 ✭✭✭cefh17


    tillyfilly wrote: »
    :p

    no idea what DCA is

    Sorry, dollar cost averaging. Brings my average unit price down so when it does turn around the gains will be higher.

    Not saying you're wrong to have gotten out into bonds, it was good timing.. But it's harder to know where the real bottom is and you might miss out on some gains up along the way


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    #871
    tillyfilly
    Closed Accounts Posts: 567 ✭✭✭tillyfilly


    cefh17 wrote: »
    Sorry, dollar cost averaging. Brings my average unit price down so when it does turn around the gains will be higher.

    Not saying you're wrong to have gotten out into bonds, it was good timing.. But it's harder to know where the real bottom is and you might miss out on some gains up along the way

    I think I understand what you are saying now,don't pension funds work in DCA anyway?

    Dollar-cost averaging is a simple technique that entails investing a fixed amount of money in the same fund or stock at regular intervals over a long period of time. If you have a 401(k) retirement plan, you're already using this
    https://www.investopedia.com/investing/dollar-cost-averaging-pays/


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