Which Investments Gain If House Prices Drop?

[daveboden]

Is there an investment vehicle that moves in an opposite direction to house prices?

I'm sure that a few of us have a few thousand saved up for a deposit. I'd like to punt on the fact that house prices are going to come down. That way, if house prices do come down, I've got a bigger deposit! (obviously I understand that like all investments, it could go pear shaped).

If enough of us put money in such investments, we might well create a self-fulfilling prophecy... I'm fed up of playing the waiting game and I want to put my money where my mouth is.

[Smurf1976]

The other option is to short (sell what you don't own in order to buy it back when it is cheaper and make a profit on the difference) something that will go down in value along with housing. This is not as complex as it sounds.

Through IG Markets (or similar) you could short individual sectors of the stock market. All it takes is a few mouse clicks and your money is on the line. Likewise a few clicks to close the deal. Retailers would be a logical choice in my opinion as would Construction. Real Estate might be a bit iffy since it is transaction VOLUME not price which determines profits there.

What goes up? Well the Tobacco sector of the share market is doing very nicely. I guess a recession doesn't cure an addiction so in that sense it's pretty safe.

If you think the whole world economy is going to slow then shorting commodities would make sense. Alternatively you could short the Australian Dollar since it ought to go the same way due to Australia's reliance on commodity exports.

And of course if there is a bear market in tangible things like housing and commodities then by definition there is a BULL market in cash. And the world's dominant cash is still the US Dollar despite what may someday happen to it. Right now it is still on top.

[daveboden]

cash is king...

and maybe gold and gold shares are in the kingdom

<{POST_SNAPBACK}>

I'm after a geared investment. Interest on a savings account is definitely better than nothing... but not much at the moment! After all, mortgages are probably the highest geared investments that the average person will consider owning. Putting £10k down on a £200k property is enormous gearing. We've seen how much people in the BTL market can gain (on paper) by exploiting massive gearing and owning 10 properties with a tiny deposit.

Spread betting is always an option:

http://www.financial-spread-betting.com/Ho...ad-betting.html

Spread betting, however, isn't really doing the cause any favours. I'd rather bet directly against BTLers rather than a spread betting company.

[Guest muttley]

If it's a "punt" you want then try shorting on spread betting.As long as you remember that this is gambling rather than investing you can have fun and make money too!

Van and Big Bad Bear are the resident experts on shorting.There's a thread on one of the other forums.

[JBFTB]

cash is king...

and maybe gold and gold shares are in the kingdom

<{POST_SNAPBACK}>

I've been reading a lot of blurb about investment recently. In particular the Motley Fool recommend Index Tracker stuff. If I read this correctly, the gist of it when prices fall is that you can buy more for your money, which is a good thing when it goes up again. Is this right though? Or does this only apply if the stock marker jitters a bit, and not if it falls for ages and ages? What are the risks involved here?

[spoon]

to the original poster. what do you think will be the differential between base rates in Dec 05 and Dec 06?

the money market currently predicts rates to be approx 0.05% lower in Dec 06 versus Dec 05. ie almost unchanged.

you might consider betting on that spread widening.

[Control Freak]

cash is king...

and maybe gold and gold shares are in the kingdom

<{POST_SNAPBACK}>

Dr. B,

I am in the USA at the moment, and am due back in the UK later next month.

Is it worth me buying some gold coins over here and bringing them back to the UK? I am thinking of getting between 5 and 15K's worth, depending on the upsides/downsides.

Is buying Gold in the US and bringing it back cheaper than buying in the UK?

What are the pitfalls in this?

Is gold sold in Dollars or Euros (i.e. will buying gold hedge me against a drop in sterling?)

Any other info greatly appreciated.

CF.

[slater14]

JBFT,

Index trackers are a "proper" savings tool. You usually get a portion of the market gains (if it does gain) usually 70 - 95%. But, and heres the big "BUT" if markets drop, you're original investment is safe.

So worst case scenario - in 5 years you could walk away with exactly what you put in (less inflation, you've actually lost a little). On the plus side, you get benfits of any rises in the market (but again only percentage as you arent risking you investment)....they are generall nice, safe trusty little vehicles to make better gains than say, leaving your money in a building society. But you're not going to be driving a Bentley at the end.

Dont forget to include you "the fees" when doing your calculations!

[slater14]

Dr. B,

I am in the USA at the moment, and am due back in the UK later next month.

Is it worth me buying some gold coins over here and bringing them back to the UK? I am thinking of getting between 5 and 15K's worth, depending on the upsides/downsides.

Is buying Gold in the US and bringing it back cheaper than buying in the UK?

What are the pitfalls in this?

Is gold sold in Dollars or Euros (i.e. will buying gold hedge me against a drop in sterling?)

Any other info greatly appreciated.

CF.

<{POST_SNAPBACK}>

Hmmm....I think this is called smuggling!

You need to pay tax on gold brought into the UK from abroad.

[Control Freak]

Hmmm....I think this is called smuggling!

You need to pay tax on gold brought into the UK from abroad.

<{POST_SNAPBACK}>

[Sledgehead]

JBFT,

Index trackers are a "proper" savings tool. You usually get a portion of the market gains (if it does gain) usually 70 - 95%. But, and heres the big "BUT" if markets drop, you're original investment is safe.

So worst case scenario - in 5 years you could walk away with exactly what you put in (less inflation, you've actually lost a little).

<{POST_SNAPBACK}>

This is not the definition of an index tracker. An index tracker tracks the index for gawd sakes. There were capital protected funds that guaranteed return of initial investment plusa a proportion of stock market returns (some were even offering > 100%) about 24 months ago (similar to terms you described above) but I wouldn't describe them simply as pure trackers.

Edited May 15, 2005 by Sledgehead

[slater14]

This is not the definition of an index tracker. An index tracker tracks the index for gawd sakes. There were capital protected funds that guaranteed return of initial investment plusa a proportion of stock market returns (some were even offering > 100%) about 24 months ago (similar to terms you described above) but I wouldn't describe them simply as pure trackers.

<{POST_SNAPBACK}>

OOPS!

I had these things descibed to me as trackers?

[JBFTB]

This is not the definition of an index tracker. An index tracker tracks the index for gawd sakes. There were capital protected funds that guaranteed return of initial investment plusa a proportion of stock market returns (some were even offering > 100%) about 24 months ago (similar to terms you described above) but I wouldn't describe them simply as pure trackers.

<{POST_SNAPBACK}>

Yeah, I think that's a Guaranteed Equity Bond, isn't it? Saw it mentioned on the Fool:

http://www.nationalsavings.co.uk/products/geb/index.jsp

I don't recall reading anything in the index trackers I've been researching about any guaranteed return. That's why I'm curious to know how risky they are in bad times.

[mbga9pgf]

I reckon any stable, slow growth US/Far eastern equity. If things do go pete tong with the economy and house prices, the dollar aint going to be trading 1.89.... you possibly will make a considerable gain from the exchange rate change alone I would suggest.