What's A Good Alternative Investment Vehicle To Buying A House?

[cybernoid]

But I find it interesting how many entrepreneurs end up going back to running/setting up businesses after a few years off. Filling the void post-work seems to be awfully hard for some.

I believe that getting to that point will change you. You have to adapt and take on a persona that will allow you to get that success. Once you have the success, you also have that new persona, and that persona wants more of the same.

Balance is hard, because you had to be unbalanced for so long to get there.

[aa3]

You would definately need to find an alternative investment like antiques or something to get serious real return. As the market has arbitrauged out any real return in the mainstream markets.

[Ah-so]

It all depends on your circumstances (kids?) and where you choose to live in the UK but i could easily retire on 300k as long as you're smart enough with your money

Many on here will be stuck in the London rat race so will disagree & forever chase that rainbow , but you could buy a nice enough house for 100k & invest the rest .

Why exactly do you need a few millon ?

200k is plenty to keep the bills & a few luxuries rolling...

100k for a nice enough house? Where? Perhaps there are somewhere, but I bet the area would be pretty grim.

200k would not last you very long. Even if you could survive off the income, inflation would eat it up in no time - in twenty years time it would lose about half its value. Even today, the lifestyle would be barely minimum wage.

Better to spend all the money and live on the dole for the rest of your life - the lifestyle would be much the same.

[Secret Squirrel]

Not Grim Ah-so ... but probably more Remote .. damn you could move to Wales if you wanted too .. it depends how serious you are about making the change imo.

Interesting your comments on inflation i partly agree , but rents will always rise with inflation if you took that route ?

though i don't intend to die in a solid gold coffin either

so your dole idea isn't as daft as it sounds either as you get a fair bit older .. a few antiques hidden away for a rainy day

[StainlessSteelCat]

Not Grim Ah-so ... but probably more Remote .. damn you could move to Wales if you wanted too .. it depends how serious you are about making the change imo.

Interesting your comments on inflation i partly agree , but rents will always rise with inflation if you took that route ?

though i don't intend to die in a solid gold coffin either

so your dole idea isn't as daft as it sounds either as you get a fair bit older .. a few antiques hidden away for a rainy day

I guess your comments are why everyone (plus dog) has piled into BTL over the last decade - it has been (and still is?) one of the best long term investment vehicles. The one slight wrinkle - I suspect rents at the cheaper end of the market have hardly moved over the last decade in many locations outside of London.

Edited October 1, 2012 by StainlessSteelCat

[JustYield]

Shelter is the best investment you can make because it is essential and we are nearly all thrown in to the adult world short of it. It has to be supported by demographics, which are fairly predictable.

The other essential we are short of is the food and water required to sustain us over our lifetimes (and, arguably, education). Food is a perishable commodity and by nature is supplied just in time. So the only other comparable investment vehicle I can think of is arable land and/or fresh water springs. Everything else is optional and therefore highly speculative.

Risk-adjusted returns in all asset classes converge to the same prevailing yield - so your quest of perpetual 10% returns is quite naive.

[winkie]

The OP is being incredibly over optimistic.......I wouldnt even consider 300k sufficient to retire at 60, if thats all that I had, i.e. no additional pension. Wouldn't even consider giving up work (@30ish) unless I had several million, and that is to live a normal life (eqivalent lifestyle to now). You would be surprised how little return you would get and obviously tax at 40%....and then when you are a millionaire there would be temptation to start being more extravagent.....if you had two million you would be lucky to net 40k after tax etc, and thats if you dont touch the captital, and your money is being erroded by inflation too...........

£300k to retire on?......what does retirement mean?.....what other financial expenses, commitments, responsibility are there?

£300k with no rent or mortgage to pay gives some freedoms and various choices.....I would say that most healthy and still relatively young people who retire after working in a particular job or industry for a long period of time that have tried to plan their long term future would not retire from working completely, they would take on new work, possibly work that they never had the chance of doing when they had the other financial commitments and debt to pay for......no true worker will ever retire unless forced to...work can come in all shapes, sizes and prices.

[Democorruptcy]

100k for a nice enough house? Where? Perhaps there are somewhere, but I bet the area would be pretty grim.

200k would not last you very long. Even if you could survive off the income, inflation would eat it up in no time - in twenty years time it would lose about half its value. Even today, the lifestyle would be barely minimum wage.

Better to spend all the money and live on the dole for the rest of your life - the lifestyle would be much the same.

+1

Ignoring things like job satisfaction etc etc purely from a financial point of view in terms of valuing your labour you may as well do that.

High house prices and low interest rates have devalued that £300k. It's no longer enough to buy a decent house and have some income from the remainder. People would have got that £300k from working and saving - so work and saving are also being devalued. In 1997 it took 6,000 to buy a house at average wage now it takes over 12,000. When you look at earnings plus house it buys, minus benefits plus house they let you live in - where is the value in working now? Unless you have a very good job most people are probably working for a few extra pennies a week and benefits would probably provide a house they couldn't afford to buy. It's why we need more immigrants to work and pay tax to support our government induced benefit culture.

[mk1mini]

This thread has many LOL's. Yes you can retire on £300k at 35, but would anyone want to? I'd honestly think I'd need at least 10x that to enjoy myself (I mean how much is a small boat in Croatia to own and moor?!). What is the point in sitting idle in your 2up 2down in some shitty part of ex-industrial England when you can be chasing the rainbow as someone eloquently put.

I have my eyes open, the housing market is massively over valued and it isn't a good 'investment vehicle'. If you are hell bent on making a lot of money, head over to Vegas and use the Martingale system. If you have the balls you should be able to make 10% on your £300k easy.

[winkie]

This thread has many LOL's. Yes you can retire on £300k at 35, but would anyone want to? I'd honestly think I'd need at least 10x that to enjoy myself (I mean how much is a small boat in Croatia to own and moor?!). What is the point in sitting idle in your 2up 2down in some shitty part of ex-industrial England when you can be chasing the rainbow as someone eloquently put.

I have my eyes open, the housing market is massively over valued and it isn't a good 'investment vehicle'. If you are hell bent on making a lot of money, head over to Vegas and use the Martingale system. If you have the balls you should be able to make 10% on your £300k easy.

Ah but the clever ones would be seeing to it that they were being paid to navigate that boat sailing the Med.

[Democorruptcy]

But I'm interested to know how many options are out there that could earn at least 10% per year return. It's an interesting milestone because you could make a pretty good living off the interest alone with an investment like 300k. But your 300k capital would be losing value every year if you took all the appreciation/ interest out of it, due to inflation.

Norway's wealth fund aims for 4% a year

Norway’s $650 billion sovereign wealth fund is closing in on its first U.S. real estate investment as the market struggles with stagnant prices.

The fund will invest in the U.S. “by the end of next year at the latest,” Trond Grande, deputy chief executive officer at Norges Bank Investment Management, said in a Sept. 27 interview in Molde, Norway. “The U.S. is the largest real estate market so if you want to have a global portfolio you must have exposure to the U.S.”

Built from Norway’s oil and gas wealth, the fund in 2010 got approval to invest as much as 5 percent of its capital in real estate as it seeks to meet a 4 percent return target. It has since bought properties in Paris and London for about $2 billion and real estate accounted for 0.3 percent of its holdings at the end of June.

Europe’s largest equity investor gets its investment guidelines from the Norwegian Finance Ministry and is mandated to hold about 60 percent in stocks, 35 percent in bonds and about 5 percent in real estate. The fund got its first capital infusion in 1996 and has been taking on more risk as it expands globally, raising its stock portfolio from 40 percent in 2007. It first added stocks in 1998, emerging markets in 2000 and real estate in 2011 to boost returns and safeguard wealth.

The fund has a strategy of buying assets as prices are declining to take advantage of the fact that it has no immediate obligations to pay out.

The fund had a loss of 2.2 percent in the second quarter as stock markets fell. Its real estate investments returned 0.3 percent in the second quarter, helped by rental income and an increase in the estimated value of the property investments.

The fund has bought 25 percent of a portfolio of properties on Regent Street in London and 50 percent of 10 properties in and around Paris. In July, the fund agreed to buy stakes in five properties in the French capital from Italy’s Generali Group.

http://www.bloomberg.com/news/2012-09-30/norway-s-wealth-fund-targets-u-s-real-estate-by-end-2013.html

[ThePiltdownMan]

It seems to me that if you can find a partner in your 20's and save money together, it would be possible to jointly have 300k by age 35 and essentially retire from the rat race. I see some members on here mention they have saved with a partner and almost paid off the mortgage mid 30's etc.

Yet many more people don't find a partner till their 30's and I get the feeling men tend to save less and spend more to keep their ego up while they are still in the dating phase meaning many reach their 30's without any savings and end up just starting their mortgage or house deposit savings with 5,000 pounds or so.

I think its highly unlikely to find a woman who doesn't want children at all and will be content to live a frugal life and forgo the modern western lifestyle (cars, holidays abroad, etc) and doesn't give in to the types of social pressure that involve spending money. Men of generation X and after have it easier in that they can occupy themselves with exercise/sports, video games, internet porn, downloaded torrents for music, films etc. all of which can be acquired for next to nothing. A man can dress cheaply at sports direct and not be a complete social pariah. I think the chances of success in your quest will be higher if you go it alone or are into same sex partnerships.

[200p]

It is doubly hardg to look for a good return in monetary terms in a low yield world.

One is going to have to think out of the box. How can you get 200% yield, 500% yield? A seed or a plant can yield many more seeds, and cuttings for example. Growing your own food reduces your reliance in chasing those pound sterling units and then buying food. Saving energy, reducing fuel bills, etc.

What about an infinite yield? If it cost nothing, then you have infinite yield - write an E-book for example.

The simple ideas add up, and you won't need £300K...

[bmf]

It is doubly hardg to look for a good return in monetary terms in a low yield world.

One is going to have to think out of the box. How can you get 200% yield, 500% yield? A seed or a plant can yield many more seeds, and cuttings for example. Growing your own food reduces your reliance in chasing those pound sterling units and then buying food. Saving energy, reducing fuel bills, etc.

What about an infinite yield? If it cost nothing, then you have infinite yield - write an E-book for example.

The simple ideas add up, and you won't need £300K...

Books and vegetables take *time*. That is the cost. All things cost time and effort, plus perhaps materials.

If you aren't a genius then you have to leverage the labour of others to get above the maximum one person can achieve. Hopefully in doing this you also lift their productivity so you are not exploiting them.

[Georgia O'Keeffe]

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Edited October 2, 2012 by Georgia O'Keeffe

[IntoTheStorm]

I think its highly unlikely to find a woman who doesn't want children at all and will be content to live a frugal life and forgo the modern western lifestyle (cars, holidays abroad, etc) and doesn't give in to the types of social pressure that involve spending money. Men of generation X and after have it easier in that they can occupy themselves with exercise/sports, video games, internet porn, downloaded torrents for music, films etc. all of which can be acquired for next to nothing. A man can dress cheaply at sports direct and not be a complete social pariah. I think the chances of success in your quest will be higher if you go it alone or are into same sex partnerships.

Ha, I actually identify quite well with this point about the needs of the Gen X single male - and the concepts being brought up by the original poster have been in my mind also recently. - I just about exactly fit his profile described in original post.

36yo, currently circa £300k investments as per example (£100k shares - Mostly good dividend yielders, fair chunk in ISA, £200k equity in my 2 rental gaffs in NZ, minimal mortgage).

No house in UK at present.

Still working flat tack in good paying london job - although may get option of redundancy next year with a decent lump payout to add to the above.

The 'present' tax guidance on UK dividends is that if you don't exceed the 40% tax threshold, then you don't have to pay any extra tax on what is recieved net (usually 10% taken off at source. So a lump sum of £300-400k shares throwing off £20-£25k would have minimal tax if that was your only income.

So in theory could stop work, lump the whole lot into decent dividend paying shares (I work on being able to average 6% portfolio yield as maintainable) and live off most of the income, just re-investing a little . Again in theory, a good pool of companies should grow their share price and dividend payout with inflation over time, so effectively that capital portion is somewhat inflation proofed. Although a bit risky to bet another 50+ years on it!

So I could consider to try next year as the OP describes and 'retire' or semi retire or at least take a mid career extended break.

Its certainly enough income to get by on for quite some time and travel on a upper end backpacker basis (say £2k/mth is plenty for a single guy to get about cheaper parts of the world on if not paying rent in the UK) or just hang round in UK going Gen X male things, like exercise/train for club sports events, enjoy the outdoors/beach and learn some new personal hobbies etc, without really eating the capital in short term..

As Pitdown man says, a Gen X single male could entertain themselves ok for quite a while like this but a women partner might not be impressed!!

Also its important to maintain and build your social networks and relationships with people, which are a big part of what make people happy. If many of these come through work then need to be able to somehow maintain these and/or replace them.

Alternatively take middle ground - get out of career role and then blend the above with contract/shorter term jobs. Make less money - but get a lot more time each year while semi young to experience other things, rather than 60hrs a week tied to an office chair,.

Or last option in my case behave myself, plonk the lot into an overpriced London flat, and get back to working for the man.....:-)

Its important to keep in mind there is no rule saying you must work for 40 years straight until you are 60 then you retire for 20 years after. I find the thought to use some of those years while younger if you can afford to, to be very appealing.

Everyone has their £ 'number' that would work for them depending on their lifestyle tastes and commitments.

A lot of good and thought provoking postings on this string.

[Saberu]

Yap, but that is with 84 hours week (12x7) except Chinese New Year. Fine if you are made for it.

Or you just employ a Chinese person for 200 pounds/ month, a lot of local shops I see can afford to employ at least two people working in the shop at any one time with maybe four in total.

[Saberu]

You can still buy a reasonable sized apartment for 30k in places like China, Taiwan etc if you don't want to live in a big city.

But after reading through the thread I have to agree on one thing, investing 200-300k for a 10% return is throwing your money away because a good business idea could get a much bigger return. And a lot of low investment businesses only require a 30k investment so you could in theory have 5-6 such businesses running in parallel each all capable of giving a living wage.

It really puts things into perspective, if you spend the majority of your savings and earnings on either buying a house or for a 10% yield then it seems like a waste.

I think another issue is people will not feel financially secure if their earnings are subject to a percentage return which over time has more chance to fall than rise.

I think a good solution would be to invest half your savings in a business and half as investments so you have a steady income from the investments but a potentially higher income from the business but with investments to keep you going if the business goes through bad times.

The main benefit of having capital behind you is you can earn your investments/ setup your business in a country with a lower cost of living and in that scenario even 200-300k is more than enough. But I agree it's not enough in Britain.

One of the reasons this topic interests me so much is I see a lot of colleagues and friends in their late 20's/ going on 30 who spend most of their income every month on things like renting a luxury apartment and going out to bars. These are the same people that despite all their effort usually don't find a long term girlfriend or wife until they reach mid 30's. I see a lot of people wasting their 20's when it's probably the most important time in your life to get your sh!t together.

The average HPC poster probably does way better than the average young person financially, I dread to think how bad most mid 20's men are preparing for their future. The people I see wasting money here are earning enough that they could easily save at least 1000 pounds/ month but they choose to spend most of their income instead. A guy on 1500 pounds/ month (after tax) here might spend 700/ month on a luxury apartment then 100 pounds every weekend on partying in bars. Then spend the rest on food, going out to restaurants etc.

A lot of young peoples attitude is 'I worked hard to earn my salary this month so I deserve to spend it'. I know how it feels because I was like that for my first couple of years of full-time employment. I learn to get satisfaction out of smaller things these days, like a takeaway pizza or just watching movies indoors with the girlfriend, going out to a mid-range restaurant etc. Hell I can live pretty comfortably on 300 pounds/ month here in China as I don't need to pay rent or bills, yet colleagues seem to spend 3-4x as much as me because 'they are worth it'.

Edited October 2, 2012 by Saberu

[200p]

I dread to think how bad most mid 20's men are preparing for their future.

Don't worry, they'll always be uknown, unknowns.

The people born in the 50s and 60s didn't expect a secular boom in property and other benefits, but neither did people born in the 20s have to go off and fight a war. Ignorance is bliss, probably.

[winkie]

It is doubly hardg to look for a good return in monetary terms in a low yield world.

One is going to have to think out of the box. How can you get 200% yield, 500% yield? A seed or a plant can yield many more seeds, and cuttings for example. Growing your own food reduces your reliance in chasing those pound sterling units and then buying food. Saving energy, reducing fuel bills, etc.

What about an infinite yield? If it cost nothing, then you have infinite yield - write an E-book for example.

The simple ideas add up, and you won't need £300K...

They are giving away free muck down on the farm....as much as you can carry.

A lot of young peoples attitude is 'I worked hard to earn my salary this month so I deserve to spend it'. I know how it feels because I was like that for my first couple of years of full-time employment. I learn to get satisfaction out of smaller things these days, like a takeaway pizza or just watching movies indoors with the girlfriend, going out to a mid-range restaurant etc. Hell I can live pretty comfortably on 300 pounds/ month here in China as I don't need to pay rent or bills, yet colleagues seem to spend 3-4x as much as me because 'they are worth it'.

... spending money does not make all people feel better about themselves, some prefer to find ways of spending less but still enjoying life the same if not better.....spending money does not have to be a competition, living up to your peers or proof of how much you are valued or worth to others or yourself.....spending money is easy (others tend to think and do it all for you), saving money requires more thought, creativity, practical ability and sometimes risk......

[StainlessSteelCat]

The average HPC poster probably does way better than the average young person financially, I dread to think how bad most mid 20's men are preparing for their future. The people I see wasting money here are earning enough that they could easily save at least 1000 pounds/ month but they choose to spend most of their income instead. A guy on 1500 pounds/ month (after tax) here might spend 700/ month on a luxury apartment then 100 pounds every weekend on partying in bars. Then spend the rest on food, going out to restaurants etc.

A lot of young peoples attitude is 'I worked hard to earn my salary this month so I deserve to spend it'. I know how it feels because I was like that for my first couple of years of full-time employment. I learn to get satisfaction out of smaller things these days, like a takeaway pizza or just watching movies indoors with the girlfriend, going out to a mid-range restaurant etc. Hell I can live pretty comfortably on 300 pounds/ month here in China as I don't need to pay rent or bills, yet colleagues seem to spend 3-4x as much as me because 'they are worth it'.

Fair play to you. The prep work you do now could well pay off big time by your mid thirties or earlier. But don't forget to have some fun along the way.

In your 20s, your life seems endless and the possibilities great. No one likes an old fool - so if you going to be foolish, better to do it when you are young.

Who knows what the next decade or two will bring? I think young people have a far greater chance of being called up to fight some daft war in the next couple of decades than in the previous couple. Perhaps those having fun don't have it all wrong. Similarly, history is replete with examples of people who've had to leave adopted countries in a a hurry leaving all of their wealth behind because the situation has turned nasty for non-locals. Who'd be an Albanian in Greece at the moment, for example?

[Saberu]

Similarly, history is replete with examples of people who've had to leave adopted countries in a a hurry leaving all of their wealth behind because the situation has turned nasty for non-locals. Who'd be an Albanian in Greece at the moment, for example?

I agree with you there, which is why I don't want to buy any property in China and any business I invest in will not be reliant on living here. Taiwan is probably a safe place to buy though. Even in war times I think some people will still be able to get visas and work in China depending on the country of the passport you are traveling in, Australians might for example still be ok due to their resource selling to China.

But it might not be a good idea to travel to China on a US or British passport in 10-20 years depending how bad relations get. But it would take a pretty significant 'event' to cause a war between China and the US because as it stands right now they have a symbiotic relationship business wise until it gets to the point where Chinese workers can all just be replaced with machines in Western factories. Some Chinese factories have already started replacing workers with machines.

[Bradbury Robinson]

Do people actually believe that the majority of 20 year old people will have the foresight, desire and ability to save £20,000/year for 15 years? I doubt anybody I know was or is doing jobs that would allow you to pay living expenses and have some form of social life WHILST saving that amount of money.

I guarantee that nobody I know has £300,000 tucked away in some investment pot. I'd guess this is the same across great swathes of the UK as well.

At times on here the posts seem to imply that everybody is working away in £150,000/year jobs and we all have the luxury of being able to save these amounts, the reality is that for most people £25,000 is probably a decent wage, get into the higher rate tax band and you rolling in it.

[winkie]

Do people actually believe that the majority of 20 year old people will have the foresight, desire and ability to save £20,000/year for 15 years? I doubt anybody I know was or is doing jobs that would allow you to pay living expenses and have some form of social life WHILST saving that amount of money.

I guarantee that nobody I know has £300,000 tucked away in some investment pot. I'd guess this is the same across great swathes of the UK as well.

At times on here the posts seem to imply that everybody is working away in £150,000/year jobs and we all have the luxury of being able to save these amounts, the reality is that for most people £25,000 is probably a decent wage, get into the higher rate tax band and you rolling in it.

I agree with you, that is why because times have changed and money now has little value and can be won or lost in an instant it is not worth doing something that you are unhappy doing for the sake of accumulating so called 'wealth'......fine if what you do brings enjoyment to yourself and others at the same time as making a profit, otherwise pay-as-you-go...enjoy life because it is short and you can't take it with you......there is nobody that anyone needs to impress with paper.

[Nomadd]

Well, maybe 35 is cutting it a little fine - even for a single person - but I find it strange that a few people are throwing around 50 and even 60 as being a problem. I mean, how long are you expecting to live for? And at that later kind of age, you've probably enough N.I. contributions over the years to pay for a full state pension.

So, £100k on a house.

And £200k, all spent over 25 years with a post tax return of 4% gives £1k per month.

If you were 60, that would get you to 85 - and you wouldn't have touched a penny of your state pension, so that could have been re-invested over the 20 years you were receiving it, hence keeping you going until you were 95. And even then you'd then still own a house and have the state pension coming in...

And the same figures for a 50 year old don't look too bad either.