Property as a portfolio diversifier?

Hoenir

gm0 said:

The equity markets shrugged off Ukraine. European energy markets - did not.

I

Germany in particular relied on Russian energy imports from the late 90's to become an industrial powerhouse. Now heading back towards the days of being called the sick man of Europe in the late 90's. 

dunstonh

I was interested in a comment by Dunston in another thread re using property (and money market) to bring diversification to a portfolio.

Don't read too much into that.   It was a remark to a specific question.   However, the question asked was the wrong thing for the person asking it.  I am hoping that the thread in question continues so that theme can be expanded on.

Property funds (direct property) were fantastic in the past.   Back in the day, they were long term holds and steady eddies in terms of returns.   However, with the internet and transactions getting faster, the speculators moved in with their extremely large amounts and started buying into established property funds.  They were never designed for that type of investor.    You had long term illiquid assets vs short term speculators moving money in and out.  The two don't go together and it pretty much killed off direct property as a viable option

Property shares are already going to exist in most portfolios via the inclusion of property companies in the asset make up.    Increasing your weighting into property shares would increase the investment risk.

Aged

dunstonh said:

I was interested in a comment by Dunston in another thread re using property (and money market) to bring diversification to a portfolio.

Don't read too much into that.   It was a remark to a specific question.   However, the question asked was the wrong thing for the person asking it.  I am hoping that the thread in question continues so that theme can be expanded on.

Property funds (direct property) were fantastic in the past.   Back in the day, they were long term holds and steady eddies in terms of returns.   However, with the internet and transactions getting faster, the speculators moved in with their extremely large amounts and established property funds.    You had long term illiquid assets vs short term speculators moving money in and out.  The two don't go together and it pretty much killed off direct property as a viable option

Property shares are already going to exist in most portfolios via the inclusion of property companies in the asset make up.    Increasing your weighting into property shares would increase the investment risk.

Thanks for clarifying Dunston. I just wondered if maybe things had changed since I last considered property funds. I agree with your statement - my Henderson Property fund was a mainstay of my portfolio, and it is greatly missed! I think however that I will be steering clear of property funds in the future.

Bostonerimus1

If you have a mortgage you are already investing a lot into property and hopefully you'll see some gains. But that capital and gains aren't liquid. You could look at REITs, but I would use those sparingly and really understand what you are buying as many are in commercial real estate and some have had bad experiences with retail property and of course rising interest can be trouble for REITs. There's BTL, but that comes with very particular risks and responsibilities. 

Aged

Bostonerimus1 said:

If you have a mortgage you are already investing a lot into property and hopefully you'll see some gains. But that capital and gains aren't liquid. You could look at REITs, but I would use those sparingly and really understand what you are buying as many are in commercial real estate and some have had bad experiences with retail property and of course rising interest can be trouble for REITs. There's BTL, but that comes with very particular risks and responsibilities. 

I own my home outright and as a matter of fact have recently sold it, making a reasonable profit to put towards the next house, so that's all good. Yep, REITs are not for me, nor is BTL - I'll stick with what I can vaguely understand!

Aged

gm0 said:

I'll try but my lack of sufficient confident understanding of it is the main obstacle to me using it.

Commodities markets have a different set of drivers and trading behaviours and cycles to equities (generally) and to high weight US and large cap tech equities in particular.  This is arguably a valuable feature as a diversifier.  But they also have highly volatile supply/demand/capacity variations of their own.  The equity markets shrugged off Ukraine. European energy markets - did not.

I do not understand it - or the specifics of the trading of them and how the short/medium cycles could help or hurt me sufficiently.  So point of entry to redeploy capital in deaccumulation is difficult to discern.  Saving up a little over the very long term would perhaps have been less traumatic - as it is with other speculative investments.

I also spent some time long ago in employment in an infrastructure supplier to a well known oil/gas/energy trading company when it was briefly in europe. Before imploding in a cloud of fraud and overly aggressive accounting. No prize for guessing who. Cannot unsee self-serving forward curve manipulation by a dominant tradebook in a niche market.  This came up in questions I had about how some derivatives and special purpose vehicle holdings made / lost money. Where was the magic skill.  Asymmetric information as power to push the market a little, and create the accounting story you need or prefer.  Manipulation of forward curves. 

The people holding their stock, in pensions, as a proxy for sector and because - my employer is a master of the universe - took an unholy capital loss.  No job. No 401k.  Went to zero.  When the walls came atumbling down on the cultural delusion and accountancy ponzi

Anything with a forward curve and only a few or asymmetric size players and scope for gaming - makes me distinctly nervous as the small mug punter right at the ede of the map.   The dumb money. Whose face in trader parlance is ripe for ripping off. Not that they notice you. As a unitised small scale holder of proxy mining/extractive/processing stocks, or directly as commodities and futures in a "commodities" themed fund - you are but a cork on large waves. Who needs to consider both weather and the possibility of wave machines.

See also cornering the Silver market in London and other historical examples of malpractice. 

Mining and Metals and Oil/Gas is a fairly rough place.  Hasn't always kept up with modern times on behavioural norms.  And regards laws as more "guidelines".   Arrr.

Thanks gm0. I think I'll give all that a miss too!

Neversurrender

dunstonh said:

I was interested in a comment by Dunston in another thread re using property (and money market) to bring diversification to a portfolio.

Don't read too much into that.   It was a remark to a specific question.   However, the question asked was the wrong thing for the person asking it.  I am hoping that the thread in question continues so that theme can be expanded on.

It was a simple enough question I asked

I feel you didn't actually read it properly!

dunstonh

Neversurrender said:

dunstonh said:

I was interested in a comment by Dunston in another thread re using property (and money market) to bring diversification to a portfolio.

Don't read too much into that.   It was a remark to a specific question.   However, the question asked was the wrong thing for the person asking it.  I am hoping that the thread in question continues so that theme can be expanded on.

It was a simple enough question I asked

I feel you didn't actually read it properly!

I understood the question but I felt the underlying problem needed sorting first.    i.e. lack of structure and making things a bit more difficult than needed.      I think you are likely to be better suited with a non-home bias multi-asset fund (although it will mean around 19 funds but that is a few less than you currently have  ).   As I said, I hoped your thread would develop more and lead into that.