Why do people in developed countries still fall into the "debt trap" ?

Dan Howard

Ad Honorem
Aug 2014
5,033
Australia
That is the first of a four-part series that aired last week. My father owns a lot of property but stopped buying a decade ago. Property in Australia is way too expensive and the returns are not there any more. The only place to get returns these days is the stock market, which is why it is also at ridiculously high levels - there is nowhere else for the smart money to go. There are two main types buying houses now - first home buyers who are desperate to get into the market, and speculators who are gambling on prices continuing to rise. I bought my house before this latest bubble and took advantage of low interest rates to pay off the mortgage so we are sitting back now laughing at all the idiots continuing to fuel the property bubble. A reckoning isn't far away. We won't be buying any more until after the next crash when there will be plenty of foreclosed houses going cheap. When your bartender and hairdresser think they have canny investment advice, it is time to sell out of whatever they are buying because the bubble is about to burst. It has ever been thus since the tulip mania of the 17th century.
 
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tomar

Ad Honoris
Jan 2011
14,101
When your bartender and hairdresser think they have canny investment advice, it is time to sell out of whatever they are buying because the bubble is about to burst.
+1 :)

And worldwide it is not clear that there are any good and relatively safe investments currently.... Best bet is probably carefully choosing companies and investing in their stock, but that requires a lot of analysis work....
 
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fascinating

Ad Honorem
Dec 2011
2,421
+1 :)

And worldwide it is not clear that there are any good and relatively safe investments currently.... Best bet is probably carefully choosing companies and investing in their stock, but that requires a lot of analysis work....
How about getting someone else, with a long proven investment track record, to do the analysis work for you? Anybody can invest in Berkshire Hathaway, which is run by Warren Buffet. Mind you, each share costs $3000.
 

tomar

Ad Honoris
Jan 2011
14,101
How about getting someone else, with a long proven investment track record, to do the analysis work for you? Anybody can invest in Berkshire Hathaway, which is run by Warren Buffet. Mind you, each share costs $3000.
Well, you pay fees which quite often kill your income.... (I have tried investing in funds, never worked out for me)

BH share price 1 year ago was 330 921, today it is 330 495.... so in 1 year you'd have lost 0.06% (that is before any fees and commissions) .... Note that its lowest point was 279 410 ( a loss of some 20%) and highest 335 041 .... So you'd need to know when to buy it and when to sell it (again requires a lot of analysis work)
 

Dan Howard

Ad Honorem
Aug 2014
5,033
Australia
My father uses an agent to manage his share portfolio. He made $80,000 last year. The agent took $25,000. The Tax Office took another $20,000.
 
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fascinating

Ad Honorem
Dec 2011
2,421
Well, you pay fees which quite often kill your income.... (I have tried investing in funds, never worked out for me)

BH share price 1 year ago was 330 921, today it is 330 495.... so in 1 year you'd have lost 0.06% (that is before any fees and commissions) .... Note that its lowest point was 279 410 ( a loss of some 20%) and highest 335 041 .... So you'd need to know when to buy it and when to sell it (again requires a lot of analysis work)
Investments must be made in the long term. You don't invest your capital and expect a big return every single year, and should not be surprised if some years produce a loss. Maybe share price drops can be regarded as chances to top up, while times of strong growth may be a time to cash in your profit before the inevitable drop.
 
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Jul 2019
850
New Jersey
I think I'm going to wait for the market to drop and then buy lots of cheap index funds - but I'm a lot more fiscally conservative than many. Some people prefer a more active investment strategy.