Why people paying fee for custody or wealth management , when you can buy low fee index fund etf by yourself ?

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jangpark

New member
I do not necessarily disagree with you. I agree that hedge funds that do not hedge do not serve a purpose (at least not until we return to a true market economy where stock-picking becomes important again). I am saying that there is a place for real traditional hedge funds that actually hedge.

Much of what you say is correct in the theoretical sense, but not in actual practice. Studies show that most people buy high and later sell low during a crisis, which means that it might take them up to a decade or more to break even. For example, it took the NASDAQ 17 years to recover its losses from its 2000 high. Such people would be far better off incurring the cost of hedging, whether by doing it themselves or through a hedge fund. Moreover, studies also show that index investors almost never achieve index returns because of investor psychology reasons. So, even investors who invest in index funds rarely achieve index returns.

The retail investors who buy high and panic sell in times of crisis will be burned, true. But the ones who invest without leverage and can keep their head cold and keep buying during crisis will come out on top.

Does low interest rate inflate the price of zombie companies? Maybe. But who said anything about retail investing in those companies? The main discussion here is to compare performance of hedge funds vs index funds. The index funds I mentioned are blue chips like S&P 500. There is very few, if any, zombie companies in S&P 500 because the requirement is the companies have to make profits.
 

Golden Fleece

Entrepreneur
The retail investors who buy high and panic sell in times of crisis will be burned, true. But the ones who invest without leverage and can keep their head cold and keep buying during crisis will come out on top.

Does low interest rate inflate the price of zombie companies? Maybe. But who said anything about retail investing in those companies? The main discussion here is to compare performance of hedge funds vs index funds. The index funds I mentioned are blue chips like S&P 500. There is very few, if any, zombie companies in S&P 500 because the requirement is the companies have to make profits.
I was addressing another member who claimed that stocks were properly priced and not overvalued because of the efficient market theory. I replied that "efficient markets do not prop up zombie companies." Efficient markets also do not need government intervention and artificially low interest rates to keep them from collapsing. It is best to buy what is undervalued versus what is inflated, overvalued, and propped up by the financial repression of government. While no zombie companies roam the S&P500, they do represent a serious systemic risk.

A total of 19%, or 571 companies, in the Russell 3000 Index are considered unviable. * * * Altogether, those 571 businesses employ more than 800,000 people. (The index encompasses 98% of the total stock market.)


Regarding what is overpriced (real assets versus paper assets), a picture is worth a thousand words.
 

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azb1

Mentor Group Gold
I was addressing another member who claimed that stocks were properly priced and not overvalued because of the efficient market theory. I replied that "efficient markets do not prop up zombie companies." Efficient markets also do not need government intervention and artificially low interest rates to keep them from collapsing. It is best to buy what is undervalued versus what is inflated, overvalued, and propped up by the financial repression of government. While no zombie companies roam the S&P500, they do represent a serious systemic risk.



Regarding what is overpriced (real assets versus paper assets), a picture is worth a thousand words.
Sorry for my English In advance.
Please correct me If I understand wrong,
So It is the best time to invest in real estate ?
Am i right ?
 

Golden Fleece

Entrepreneur
Sorry for my English In advance.
Please correct me If I understand wrong,
So It is the best time to invest in real estate ?
Am i right ?
The best book that I have read on the topic is "The Secret Life of Real Estate and Banking" by Phillip Anderson, who is an Australian economist. He shows that in the United States over the past 200 years, with the exception of WWI and WWII, there is an economic cycle and crash that occurs every 18.6 years on average (no less than 17 years and no more than 21 years).

According to this time table, the next real estate peak and crash will occur between 2026 and 2028. So, this is still a good time to buy real estate. Stock market crashes are also part of this cycle, which is caused by low interest rates that inflate the price of raw land. Most other countries now partake in this cycle.

The Secret Life of Real Estate and Banking: Anderson, Phillip J.: 9780856832635: Amazon.com: Books
 

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avalanche

Entrepreneur
The best book that I have read on the topic is "The Secret Life of Real Estate and Banking" by Phillip Anderson, who is an Australian economist. He shows that in the United States over the past 200 years, with the exception of WWI and WWII, there is an economic cycle and crash that occurs every 18.6 years on average (no less than 17 years and no more than 21 years).

According to this time table, the next real estate peak and crash will occur between 2026 and 2028. So, this is still a good time to buy real estate. Stock market crashes are also part of this cycle, which is caused by low interest rates that inflate the price of raw land. Most other countries now partake in this cycle.

The Secret Life of Real Estate and Banking: Anderson, Phillip J.: 9780856832635: Amazon.com: Books
Note that US real estate has nothing to do with real estate in other countries. For example crash in US real estate does not guarantee crash in some country like Georgia
 

Pembroke

New member
Note that US real estate has nothing to do with real estate in other countries. For example crash in US real estate does not guarantee crash in some country like Georgia
Yes very true. Also as an investment real estate is very different to other asset classes: you can enjoy it (i.e. live in it) whereas bonds and equities you can just look at, add value (renovations, create extra rooms,...) as well as receive inflation-linked income (rent) from it. It's also the only asset class that you can add leverage to (borrow) in a safe enough way if done conservatively to improve your return. A big advantage compared to stocks is also that apartments or houses are not listed on the stock exchange so you will not see a daily price quoted for your house which allows you to sleep better and avoid panic sales at the wrong moment.
 

avalanche

Entrepreneur
Yes very true. Also as an investment real estate is very different to other asset classes: you can enjoy it (i.e. live in it) whereas bonds and equities you can just look at, add value (renovations, create extra rooms,...) as well as receive inflation-linked income (rent) from it. It's also the only asset class that you can add leverage to (borrow) in a safe enough way if done conservatively to improve your return. A big advantage compared to stocks is also that apartments or houses are not listed on the stock exchange so you will not see a daily price quoted for your house which allows you to sleep better and avoid panic sales at the wrong moment.
The problem with real estate is that it requires maintenance and mental resources to protect your physical assets. Also it depreciates over time in some countries like Japan. Nobody wants to buy a shithole house for the price of a new property.

If you hire a manager to sell your property for rent you will need to watch the manager carefully, he/she may be stealing from you. The time you spend managing the manager of your property may be well put into developing your own business
 

Golden Fleece

Entrepreneur
Note that US real estate has nothing to do with real estate in other countries. For example crash in US real estate does not guarantee crash in some country like Georgia
You are correct that a "crash in US real estate does not guarantee crash in some country like Georgia," but you are incorrect that "US real estate has nothing to do with real estate in other countries." That is why an Australian economist wrote a book about the U.S. banking and real estate cycle (because there is a distinct connection).

There is a great deal of overlap in the economic cycles of Western nations because of the modern mirroring of worldwide interest rates. On the other hand, the less likely that banks in certain countries offer mortgages for real estate, the less likely that that country's housing market will mirror the U.S. banking and real estate cycle.
 
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Pembroke

New member
The problem with real estate is that it requires maintenance and mental resources to protect your physical assets. Also it depreciates over time in some countries like Japan. Nobody wants to buy a shithole house for the price of a new property.

If you hire a manager to sell your property for rent you will need to watch the manager carefully, he/she may be stealing from you. The time you spend managing the manager of your property may be well put into developing your own business
It's not for everyone and you need to be willing to invest time. To be successful in real estate you need to manage it as a business. But it's by far the asset class/business that has created the most millionaires in the world (see also 90% of the World's Millionaires Do This to Create Wealth)
 

Golden Fleece

Entrepreneur
It's not for everyone and you need to be willing to invest time.

The problem with real estate is that it requires maintenance and mental resources to protect your physical assets.
That is the general rule for real estate, but other options exist if you think outside the box. You can buy raw land in the path of development, have a farm professionally managed, or buy shares in an existing agricultural enterprise or office building.

This is just one of many such investment opportunities (I am not recommending this particular investment, just using it as an example). As always, do you your own boots-on-the-ground due diligence.

 

avalanche

Entrepreneur
It's not for everyone and you need to be willing to invest time. To be successful in real estate you need to manage it as a business. But it's by far the asset class/business that has created the most millionaires in the world (see also 90% of the World's Millionaires Do This to Create Wealth)
Note that these millionaires became rich mostly at the older age. It took them generations or half lifetime to get to their level while modern internet business opportunities allow for that to happen in a lot shorter timespan.

Is your aim to get your children rich (who possibly will take their wealth as given), or your aim to get rich yourself and enjoy the world of opportunities before you got old?
 

Pembroke

New member
Note that these millionaires became rich mostly at the older age. It took them generations or half lifetime to get to their level while modern internet business opportunities allow for that to happen in a lot shorter timespan.

Is your aim to get your children rich (who possibly will take their wealth as given), or your aim to get rich yourself and enjoy the world of opportunities before you got old?
In general building wealth in a safe way with property takes time indeed (20 years of more). If you can get rich with an internet startup in a short timespan that is a great. Not that many succeed but it's great to be ambitious and reach for the stars.
 

Verbatim

Active Member
The best book that I have read on the topic is "The Secret Life of Real Estate and Banking" by Phillip Anderson, who is an Australian economist. He shows that in the United States over the past 200 years, with the exception of WWI and WWII, there is an economic cycle and crash that occurs every 18.6 years on average (no less than 17 years and no more than 21 years).

According to this time table, the next real estate peak and crash will occur between 2026 and 2028. So, this is still a good time to buy real estate. Stock market crashes are also part of this cycle, which is caused by low interest rates that inflate the price of raw land. Most other countries now partake in this cycle.

The Secret Life of Real Estate and Banking: Anderson, Phillip J.: 9780856832635: Amazon.com: Books
sorry just saw this, wow that's insane if the sample size is so big (200 years). what else did you learn from this book? and are stocks and gold correlated or uncorrelated with this cycle?
 

Jerry1911

Entrepreneur
But the advice I get on how to structure my wealth and where to book my assets etc for succession planning is invaluable.
Is there any chance you could share a practical example of advice you got? i.e. they told me to redomicile a trust from country X to country Y for reasons Z?
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
Is there any chance you could share a practical example of advice you got? i.e. they told me to redomicile a trust from country X to country Y for reasons Z?

Yes when I told them I wanted to sell my business and money be held for my next of kin they actually worked with me to restructure the ownership before the sale ensuring everything was handled via my trust. They actually refinanced some of the loans I had outstanding also. The buyer also came via their network. Once they guided me how to move everything into the trust the trustees basically handled the entire sale process. Thats all I can say.
 

denniz07

Active Member
The buyer also came via their network.
What do you think, is it possible to sell this way a crypto trading business that currently runs on a private basis?
My reasoning: would like to sell 50% to avoid CFC rules and be able to live where I want. Would create a company in a nice crypto and tax friendly place.

PS: Of course would still want to "run" the company or at least participate in major decisions..
 

Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
What do you think, is it possible to sell this way a crypto trading business that currently runs on a private basis?
My reasoning: would like to sell 50% to avoid CFC rules and be able to live where I want. Would create a company in a nice crypto and tax friendly place.

It depends on each specific countries CFC rules as to whether you can avoid them. But obtaining specialist advice if you plan on selling your business is important anyway.
 

denniz07

Active Member
How about this strategy. Let's say you have a net worth of 10MM$
1. 2MM to Swissquate
2. 2MM to SAXO
3. 2MM to INKB
4. 4MM to some private bank

By the way, if you would have to choose ONE private bank, which would it be? I mean there is UBS, Julius Baer, Pictet, BNP Paribas, and so on.

The reasoning behind it. On the private bank account, you would get some advice. But guess the advice wouldn't be any different if you had all the money in the private bank account. On the broker side, you would pay much fewer fees and if something goes wrong, you would have still access to your money. Maybe I read too much here, but it seems there are cases where bank accounts are blocked until you prove your source of wealth, and that might take a lot of time and energy.

PS: I'm not trying to optimize everything. It is ok, to pay a bit more for a good service. Actually just searching for a solution to sleep well.
 

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