Book of Wise Investors

Housing loan is one of the loans many people will come to have, one of the mantra in personal finance is to be as debt free as possible but this does not really apply in primary residence housing loan and when you have interest free study loan. While the saying that being debt free is good, it does not really apply to housing loan even though the interest rate on mortgage is definitely higher than the risk free return from savings, fixed deposits and government bonds. We shall see why in this post on the reasons it is…

The price of General Electric was trading at $10 per share 2 days ago, if an owner of the stock offered you 1000 shares at so called below market price of $8 per share, will you buy? Just like with stocks, even if a company still exists 10 years later, a below market price does not really tells you everything about its intrinsic value. In other words, simply buying a house below current market price does not mean that one can surely profit from great price appreciation in the near future of within 5 years.

The problems inherent in market…

The New York Times best selling personal finance book, Rich Dad Poor Dad, once make a bold claim that your house is a liability, not an asset because he redefines an asset as something that put money in your pocket while a liability is something that takes money out of your pocket. As you shall see below, even based on this definition, your house is still an asset, not a liability. There is actually a reasoning fallacy in Robert Kiyosaki reasoning in his famous Rich Dad Poor Dad book.

Your house is a great asset because not in…

REIT stands for real estate investment trust and it is definitely one of the essential investment vehicles for the masses and high net worth individuals as well. Key reasons being that it allows small flies to participate in the ownership of many and diverse portfolios of physical properties with a relatively small amount of money and of course, REIT being an easy to understand business. In fact, they are the only cost-effective way for a low net worth individual to gain exposure to real estate investment without directly owning physical properties.

While REIT is not a totally risk…

We buy physical properties, as well as other investment vehicles like stocks, for the purpose of earning a return much higher than inflation 5 years or more down the road. As we defer consumption for the purpose of having something to live on when the day comes that we cannot physically work, or simply don’t want to spend our life working for money, there is a need to do more due diligence when it comes to substantial financial investments like in the case of real estate.

Economics 101 tells you that when there are too much money running after too…

There is no doubt that when it comes to long term investing, of at least 5 years or more, value investing is the best investment strategy when it comes to stocks. What most people don’t know is that when it comes to physical properties, value investing, invented by Benjamin Graham, perfected by Warren Buffett, is also the best strategy, at least in my opinion.

The distinctive key of value investing lies in it using multiple benchmarks when deciding on the value of an asset, instead of subscribing to modern finance theory of prices of asset already reflect the value of…

Benjamin Graham value investing principles pay handsome dividends to those who follow it, the most famous example of which is Warren Buffet. Given the large similarities between businesses and physical properties, it is clear that some principles can be ported when one is going to buy properties.

No one places 100% cash down when buying properties for investments, other than primary residence. Although the price of a physical property seldom drop to zero, unlike that of stocks where even for a well know blue chip like Enron and Lehman Brothers can fall, its price can still dropped in the short…