where can i get 7% return on investment
Discussion
I'm shifting funds around at the moment and will be putting a significant proportion into commercial property to get 6 - 8% (or more hopefully!) in the new year.
Other than that, the "right" cautious equity fund should see similar returns, but easy to get the "wrong" one.
I would also be interested in any "off the wall" or "out of the box" speculative investments (not for huge sums / returns) that anyone could suggest...
Other than that, the "right" cautious equity fund should see similar returns, but easy to get the "wrong" one.
I would also be interested in any "off the wall" or "out of the box" speculative investments (not for huge sums / returns) that anyone could suggest...
srebbe64 said:
I get 7%-8% return by renting out commercial property. Plus, it's a (hopefully) growing asset.
>> Edited by srebbe64 on Tuesday 20th December 21:55
interesting. is that 7-8% of todays value, or 7-8% of the price paid at time of purchase.
i'm getting 9% return on the purchase price of property i bought a few years back, but seeing as that has now more than doubled in value, the return i am getting is less than 4% now. hence if i could sell up and move into something with a higher rate of return, i stand to be a few shillings better off.
Rob_T said:
I get 7%-8% return by renting out commercial property. Plus, it's a (hopefully) growing asset.
>> Edited by srebbe64 on Tuesday 20th December 21:55
interesting. is that 7-8% of todays value, or 7-8% of the price paid at time of purchase.
i'm getting 9% return on the purchase price of property i bought a few years back, but seeing as that has now more than doubled in value, the return i am getting is less than 4% now. hence if i could sell up and move into something with a higher rate of return, i stand to be a few shillings better off.
I've bought a few properties for £200k a pop and I'm getting £18k rent back from each. Obviously I'll need to factor in some money for maitenance etc, but it's not too bad. I'm hoping the property will go up in value, but the main income stream is the rent rather than the capital gain.
mutt k said:
...I did a deal the other day for a portfolio with a net yield in the region of 39%!
But I bet the managing agents don't go in without full body armour and alsatians
check out the prices for flats and terraces houses in greenock and port glasgow, my grandmother lives there so I know where is good and where is bad, so I advised my client accordingly...for example try a sandstone built apartment in the town centre for 39grand renting for £375 PCM...even with the minimum 15% deposit it's still a massive return - especially on the 4.55% 3 year BTL fix from mortgage trust...cue: one extremely impressed investor and one big banking for yours truly :smug:
>> Edited by minimax on Wednesday 21st December 13:43
Rob_T said:
I get 7%-8% return by renting out commercial property. Plus, it's a (hopefully) growing asset.
>> Edited by srebbe64 on Tuesday 20th December 21:55
interesting. is that 7-8% of todays value, or 7-8% of the price paid at time of purchase.
i'm getting 9% return on the purchase price of property i bought a few years back, but seeing as that has now more than doubled in value, the return i am getting is less than 4% now. hence if i could sell up and move into something with a higher rate of return, i stand to be a few shillings better off.
Arguably you are still getting a high return based on the original investment.....Any gain in value is only a paper one, until you sell and reinvest elsewhere, of course there will be costs associated with doing this, reducing the return.
B
My IFA emailed me this today, it makes interesting reading, if you've got 10 minutes:
“My message throughout 2005 has been to expect only modest returns from all investment asset classes - single-digit returns being the order of the day - or year, rather. This is what has happened:
UK Equities - the FTSE 100 had a little midsummer madness, leaping over the 5500 hurdle, and thus achieving a 14% rise since January on top of an average dividend yield of 3%. After a 6% fall, the market has climbed somewhat more steadily back above 5500 – so, better than expected performance, and with the price/earnings ratio at its lowest in the 14 years I have been monitoring it, still very good value.
Overseas Equities – the markets on all continents have been rising this year. With most mature markets showing moderate p/e ratios, it is the emerging markets which continued to top the growth league for the third year running. Japan has also rocketed, far in advance of the rest of the Far East; quite on what grounds is not clear to me. Apologies to my clients, whom I have resolutely kept out of Japan – a policy which has actually served them well most years. For the fourth year running, it is the US which has been the laggard. As my clients have been largely kept out of the US for some years, no apologies needed here.
Commercial property – with confidence slow to return to the equity market, commercial property funds have continued to attract vast sums of money. This has driven up prices and returns, but left the funds awash with cash, in some cases well over 20% - which will dilute future returns. Returns over the past year have been c.18%, and are expected to fall back to 8-9% next year.
Fixed Income - bond funds have put on 7-10% over the year, fuelled by a dwindling supply and considerable demand, which has raised prices and (hence) reduced yields to a level not seen since the 1950s. At the time of writing, the 20-year gilt yield is only just over 4%. The total return on riskier ‘high yield’ bonds has been close to zero – a reflection of the inherent greater volatility.
And the long-term yield ratio remains obstinately below the long-term average – often a good indicator of cheap equities and/or expensive fixed income. But which?
What to do, then? Where to generate a reasonable return? I continue to expect only moderate overall returns across the board. Lower your expectations unless you are prepared to increase your exposure to risk.
Commercial Property remains a reasonable long-term prospect, as rental yields are fixed and reliable in the longer run. However, I always get worried that a market has peaked when there is a rush of new funds being marketed. And a lot of new commercial property funds have just appeared on the market. Still a reasonable component of a well-diversified portfolio, though.
Fixed interest funds now seem very expensive to me, and returns barely above cash do not justify the additional risk. A cautious managed fund – investing within a defined range of bond and blue-chip equities – seems a better option. However I would not recommend a wholesale flight from bonds; we have to stick with a low-risk element in our portfolios, unless your fear of loss is lower than your appetite for the riskier prospect of gain.
Cash - the market is not expecting cash interest rates to move for the next year, so expect only a continuing return of 2% above inflation.
Equities - as I have pointed out many times over several years now, globalisation has led to uniformity of market movements pretty much across the world; only the velocity differs. There is not a strong correlation between economic performance and market returns. However, there is some link. Western economies have become service-based, whilst manufacturing has shifted to the developing Far East. Western debt is owned by the Far East – excluding Japan, which has become a ‘Western’ service economy to a large extent. The depreciating yen has become the engine of equity appreciation – I remain unconvinced of the inherent value in this market, so long as the p/e ratio remains more than twice that of the ‘old Western’ markets. The US economy remains an accident waiting to happen; when it runs out of debt-fuelled steam (which rising US interest rates only may lead to a soft landing), the repercussions will echo across the huge emerging economies, which do not have sufficient internal demand resources to sustain their almost double-digit growth.
For that reason, I am more interested in the UK market – and Old Europe, to a certain extent. With sterling at a more reasonable rate against the dollar and the euro, and fairly sound economic management, I would rather stick here than venture abroad. History suggests that Far Eastern and South American gains cannot continue indefinitely. For medium risk and above, I still see no reason to change my advice that good stock-pickers could continue to produce above-average returns. On the growth front, Anthony Bolton's Fidelity UK Special Situations fund continues to out-perform - but how long will this last? Well, possibly not that long, as he has recently announced his retirement plans, which will see him gradually phase himself out over the next two years. I don't expect the world to fall apart, but for those who are concerned by this, for the past year I have been putting my money into the Rensburg UK Select Growth fund, managed by Mark Hall. He seems to be matching Bolton blow for blow, and (kiss of death) I am now ready to recommend this as a suitable replacement for current and future holdings in FSS. With AAA rating, lower volatility, similar alpha and lower beta, this is thoroughly recommendable. On the equity income front, I remain satisfied with Neil Woodford's Invesco/Perpetual Higher Income fund - but Tineke Frikkee's tenure of the Newton Higher Income fund has also been successful - in a very different fund portfolio.”
“My message throughout 2005 has been to expect only modest returns from all investment asset classes - single-digit returns being the order of the day - or year, rather. This is what has happened:
UK Equities - the FTSE 100 had a little midsummer madness, leaping over the 5500 hurdle, and thus achieving a 14% rise since January on top of an average dividend yield of 3%. After a 6% fall, the market has climbed somewhat more steadily back above 5500 – so, better than expected performance, and with the price/earnings ratio at its lowest in the 14 years I have been monitoring it, still very good value.
Overseas Equities – the markets on all continents have been rising this year. With most mature markets showing moderate p/e ratios, it is the emerging markets which continued to top the growth league for the third year running. Japan has also rocketed, far in advance of the rest of the Far East; quite on what grounds is not clear to me. Apologies to my clients, whom I have resolutely kept out of Japan – a policy which has actually served them well most years. For the fourth year running, it is the US which has been the laggard. As my clients have been largely kept out of the US for some years, no apologies needed here.
Commercial property – with confidence slow to return to the equity market, commercial property funds have continued to attract vast sums of money. This has driven up prices and returns, but left the funds awash with cash, in some cases well over 20% - which will dilute future returns. Returns over the past year have been c.18%, and are expected to fall back to 8-9% next year.
Fixed Income - bond funds have put on 7-10% over the year, fuelled by a dwindling supply and considerable demand, which has raised prices and (hence) reduced yields to a level not seen since the 1950s. At the time of writing, the 20-year gilt yield is only just over 4%. The total return on riskier ‘high yield’ bonds has been close to zero – a reflection of the inherent greater volatility.
And the long-term yield ratio remains obstinately below the long-term average – often a good indicator of cheap equities and/or expensive fixed income. But which?
What to do, then? Where to generate a reasonable return? I continue to expect only moderate overall returns across the board. Lower your expectations unless you are prepared to increase your exposure to risk.
Commercial Property remains a reasonable long-term prospect, as rental yields are fixed and reliable in the longer run. However, I always get worried that a market has peaked when there is a rush of new funds being marketed. And a lot of new commercial property funds have just appeared on the market. Still a reasonable component of a well-diversified portfolio, though.
Fixed interest funds now seem very expensive to me, and returns barely above cash do not justify the additional risk. A cautious managed fund – investing within a defined range of bond and blue-chip equities – seems a better option. However I would not recommend a wholesale flight from bonds; we have to stick with a low-risk element in our portfolios, unless your fear of loss is lower than your appetite for the riskier prospect of gain.
Cash - the market is not expecting cash interest rates to move for the next year, so expect only a continuing return of 2% above inflation.
Equities - as I have pointed out many times over several years now, globalisation has led to uniformity of market movements pretty much across the world; only the velocity differs. There is not a strong correlation between economic performance and market returns. However, there is some link. Western economies have become service-based, whilst manufacturing has shifted to the developing Far East. Western debt is owned by the Far East – excluding Japan, which has become a ‘Western’ service economy to a large extent. The depreciating yen has become the engine of equity appreciation – I remain unconvinced of the inherent value in this market, so long as the p/e ratio remains more than twice that of the ‘old Western’ markets. The US economy remains an accident waiting to happen; when it runs out of debt-fuelled steam (which rising US interest rates only may lead to a soft landing), the repercussions will echo across the huge emerging economies, which do not have sufficient internal demand resources to sustain their almost double-digit growth.
For that reason, I am more interested in the UK market – and Old Europe, to a certain extent. With sterling at a more reasonable rate against the dollar and the euro, and fairly sound economic management, I would rather stick here than venture abroad. History suggests that Far Eastern and South American gains cannot continue indefinitely. For medium risk and above, I still see no reason to change my advice that good stock-pickers could continue to produce above-average returns. On the growth front, Anthony Bolton's Fidelity UK Special Situations fund continues to out-perform - but how long will this last? Well, possibly not that long, as he has recently announced his retirement plans, which will see him gradually phase himself out over the next two years. I don't expect the world to fall apart, but for those who are concerned by this, for the past year I have been putting my money into the Rensburg UK Select Growth fund, managed by Mark Hall. He seems to be matching Bolton blow for blow, and (kiss of death) I am now ready to recommend this as a suitable replacement for current and future holdings in FSS. With AAA rating, lower volatility, similar alpha and lower beta, this is thoroughly recommendable. On the equity income front, I remain satisfied with Neil Woodford's Invesco/Perpetual Higher Income fund - but Tineke Frikkee's tenure of the Newton Higher Income fund has also been successful - in a very different fund portfolio.”
I'm currently getting an annualised return of 25% on my eight company equities portfolio, and 66% in 2½ years. I can't see why anybody would want the hassles of BTL.
In funds Fidelity Special Situations has worked very well for my ISAs but in particular my Max ISA in the Credit Suisse European Frontiers Fund has almost doubled in value in 18 months.
Funds and equities is where the money is made.
In funds Fidelity Special Situations has worked very well for my ISAs but in particular my Max ISA in the Credit Suisse European Frontiers Fund has almost doubled in value in 18 months.
Funds and equities is where the money is made.
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