Passive Investment Income

What are some ways a person can generate passive investment income? There are a number of ideas about it. Everyone has his own ideas about which one can be a passive investment income. We should have our own choice of investment. The wealthy, the marginalized, and the middle class people differ in their own preferences about investing their money. Now, let’s compare ways and opportunities according to some considerations such as safety, profitability, and also liquidity.

Safety means that your investment and the income are stable. The money that you invest could be prone to the changing market condition, economic slowdown, and social unrest. The point is that your passive investment income should always be there. In that case, it is safe to invest.

On the other hand, profitability is what we usually consider when we invest. We are supposed to believe that what is profitable is ideal. That’s right. But is it risky? Is my money stuck? Obviously, everyone would go for whatever gives them profit. Whenever we consider gains, the highest amount is always the best passive investment income. What we should consider here should not have been about the top gainers only. It’s should also be the safer ones.

Another significant factor that must be considered is liquidity. Let us suppose that we earn very attractively from our safe investment. What does that mean to us anyway? When you are ready to use your fund because you really need it and that’s the reason why you invested, is it possible to convert it to cash now? If there is no liquidity, our passive investment income is only an imagination. You would become wealthy only in your dreams. Liquidity is not only about the comfort of making a withdrawal. It is also about how smooth it is to invest.

Now, here are three kinds of investment we may consider whether which passive investment income is better for us. So, let’s talk about three kinds of portfolios such as business, stocks, and real estate.

Business is a personal activity that deals with economic factors that determines future gains. It is the chemistry of work and investment. This means that a businessman does not only wait for passive income, he should also work for it. Therefore, it is an active income and at the same time passive.

In the aspect of safety, business is not that safe. It is exposed to economic cycle. Businesses are under the supply and demand law. If the demand for their goods has been increasing, the price will also increase, and so will the supply. As time goes by, the demand will influence the supply to increase more. So if the supply is much greater, it will then influence the price to decrease. Consequently, businesses are getting more unstable and their future is turning gray. But, businesses may also get more resilient. As this type of investment is a little active, the active control of a businessman can manage a worse situation. Therefore, these two characters of investment regulate the cycle. Because of this, business becomes good. It is definitely a good example of passive investment income when it comes to safety.

In stock market, it’s the other way around. Safety is a very controversial issue here. Obviously, the risk involved here is very high. But the potential return is high, too. Passive investment income is more common in stock trading. Therefore, your income here is not the product of your active participation in the company. It is the product of your decision.

In the area of real estate, the lesser amount you invest, the safer it is. The bigger the investment you have, the riskier it becomes. But land alone is considerably not risky. The reason why real estate becomes a little risky is because the cost of structural materials is getting higher. Structural materials are also subject to the law of supply and demand. So, if we only rely on land for passive investment income by renting it out, our passive income will not be affected by any price fluctuation. Aside from that, structures depreciate over a period of time. Therefore, investing in real estate can be risky or safe depending on the kind.

In terms of profit, it is more attractive in business. In some businesses, you have to spend time before you earn regularly. Usually, the profit is negative especially if they are just beginning to operate. They should promote their brands and strengthen themselves in the market. When the consumers buy their goods, passive investment income begins. On the other hand, other businesses are doing well in the beginning of the operation. During the first stage, their sales shoot up. Subsequently, they grow very early. As time goes by, consumers get sick and tired of their goods. Consequently, these businesses reduce their passive income. Nevertheless, what is nice about business is the resilience to catch up with the competition. In business, the consistency of income is stable. One more advantage in business regarding this is the petty cash. Passive investment income in business need not come after a fixed cycle like that in stocks. There is always readily available petty cash.

On one hand, profit potential in stock investing is definitely high. As the character of stocks is risky, risk appetite causes the value of stocks to go up quickly. On the other hand, risk aversion and profit taking in the intraday trading can cause the value of stocks to go down quickly, too. Risk management in the stock market depends on the traders. Speculators enjoy their passive investment income from the price volatility while non-aggressive traders and investors get their passive investment income from dividends. Therefore, we can’t rule out the risk nature of stocks. When we gauge the balance between the energy we exert and the profit we earn, investing in stocks could be the most attractive one. We must not forget that passive investment income is an income that we could get without extra effort. If stock market really offers this potential, it must be a better option for passive investment income.

In real estate, how can we have a passive investment income? There is no doubt that one may enjoy his passive investment income in real estate without extra effort. The point is whether or not the ratio of profit is balanced with the investment. Surely, we can gain in real estate primarily because the usual investment is big as well. But always remember that you should pay the capital gains tax annually. This might explain why landlords do not solely rely on renting out their lots. Hence, land is usually developed to optimize the gains. Regarding the actual amount of gains, real estate could guarantee a better passive investment income. Therefore, we should really consider the ROI.

In terms of liquidity, it is somewhat less in business. Of course, liquidity still exists. However, much time is spent to put up a business, to start gaining, and even the time it takes to stop operating. Although the period of time executing all these can be determined according to a business plan, the process is still slower depending on the kind of business. Retail businesses are quite liquid whereas manufacturing industries are not.

Among the common types of investments known to many, investment in stocks is the most liquid one. You can open and close an investment account at your convenience. Moreover, you may select any available stock you wish to invest in. If you wish to have exposure in stock market, to take profit, or to pull out your investment, it won’t take that long. You may do so at any given time wherever you may be.

On the contrary, liquidity is a big problem in real estate. In business, there are still ways to determine it, but hardly in real estate. Usually, it is like a game of chance to sell even a small house and lot. Thus, investing in real estate, earning passive income, and even pulling out your investment will never occur overnight. It won’t matter if it doesn’t affect productivity. For instance, you have found a better opportunity that needs quick decision. Then, you think it best to change your existing investment into such a new one. Perhaps, before you are able to pull out your investment from real estate, your commitment to others will have already been canceled. In similar case, you might get stuck.

These are some ways a person can generate passive investment income. Whether you wish to invest in stocks, real estate, or business, you can always find an opportunity to generate passive investment income.

Best Investment Ideas and Best Safe Investments for 2012

Here we list some of the best investment ideas and tackle the challenge of finding the best safe investments for 2012. What might appear to be one of the best investment ideas to the uninformed could turn out to be one of the worst.

Looking at the big picture for investment ideas in 2012, moderation in asset allocation and a balanced investment portfolio will be the most basic key to success. There are 4 asset classes, and average investors need to spread their money across at least the first three to keep their overall portfolio risk moderate. The 4 categories in asset allocation are: safe investments, bonds, stocks and alternative investments like gold and real estate (optional). Asset allocation can be simplified, because there are mutual funds available to average investors that represent each of the 4 asset classes. Now let’s get more specific about the best investment ideas for 2012 starting with safe investments.

Safe investments earn interest and do not fluctuate in price. You will need to look outside of mutual funds in 2012 to find the best safe investments because record low interest rates have taken yields on money market securities (and hence money market funds) down to just about zero. One of the best investment ideas if you have an account with a discount broker or major mutual fund company is to shop for one-year CDs paying higher rates if you can’t get competitive rates from your local bank. Do not tie your money up for longer periods just to earn a little more interest. One of these days interest rates will go back up and you will be locked in at a lower rate and face penalty charges if you cash in early.

Finding the best safe investments will be truly challenging in 2012, but here are some more investment ideas. If you are in a retirement plan like a 401k that has a fixed or stable account option do not overlook it. You can often get a much higher interest rate there (maybe 4% to 5%) than anywhere else outside of your retirement plan. If you own an older retirement annuity or universal life insurance policy, it might have a fixed account you can add money to that is guaranteed to never pay less than 3% or 4%. Remember, truly safe investments like U.S. Treasury bills and bank money market and savings accounts are paying WAY LESS than 1%!

Over the past 30 years bonds and bond funds have become a favorite with investors because they have been consistent performers and returned on average about 10% per year… basically about equal to what stocks have returned, but with considerably less risk. Many investors have fallen in love with their bonds funds and consider them to be among the world’s best safe investments. Bond funds are NOT safe investments. They have performed well since 1981 (when interest rates and inflation were at record highs) for one primary reason. Both inflation and interest rates have been falling for 30 years, which has sent bond prices higher. Loading up on bond funds now is NOT one of the best investment ideas for 2012. In fact, it is one of the worst investment ideas.

When interest rates and/or inflation turn around and head upward bond funds, especially those that hold long-term bond issues, will be losers. That’s how bonds work. One of the very best investment ideas for 2012 is to sell your long-term bond funds if you own any, and switch to funds holding bonds with average maturities of about five years. These are called intermediate-term bond funds; and average investors should have some money invested here as part of their asset allocation strategy to add balance to their investment portfolio. These are not truly safe investments, but they are much safer than long-term funds.

My best investment ideas in the stock department focus on stock funds. Do not go heavily into the more aggressive funds that invest primarily in growth and/or small company stocks. These pay little if anything in dividend income and tend to be more risky and volatile than the average stock fund. Go with funds that invest in high quality large-company stocks with excellent dividend paying histories. Look for funds that are paying 2% or more in dividends. One of the best investment ideas for 2012 and beyond: invest in no-load funds with low yearly expenses. No-load means no sales charges, and low expenses mean higher net returns to the investor.

Alternative investments include the likes of real estate, gold and other precious metals, natural resources, commodities, foreign investments and so on. One of the best investment ideas for managing a truly balanced investment portfolio is to include this fourth asset class as well. The simplest way for the average investor to add these alternatives to their portfolio is with mutual funds that specialize in these areas or sectors. My best investment ideas here: don’t go heavily into any one area, and don’t chase after a sector (like gold) just because it’s hot. Real estate and natural resources funds would be my picks as two of the best investment ideas in the alternative investments asset class.

Moderation and diversification across the asset classes will be the key to asset allocation in 2012. I have also listed some specific best investment ideas for keeping the average investor in the game and out of serious trouble should the investment scene turn ugly. Above all else memorize this: long-term bond funds are not among the best safe investments for 2012. They are not safe investments, period.

Investing – How To Choose The Best Option

Investors are increasingly forced to choose from a proliferation of investment options. They also have to deal with contradictory advice on how to achieve their financial goals and how to invest the savings they have accumulated during their lifetime. If you consider that there are more than 7000 mutual funds available in the United States alone, and thousands of insurance products worldwide, making the choice that will satisfy them ever after is daunting, to say the least.

No wonder people so often ask the rather general question: Which investment is best? The first part of the answer is easy: No single investment is ‘the best’ under all circumstances for all investors. Personal circumstances, goals and different people’s needs differ, as do the characteristics of different investments. Secondly, one asset class’s strength in certain circumstances could be another’s weakness. It is therefore important to compare investments according to relevant criteria. The art is to find the appropriate investment for each objective and need.

The following are the most important criteria:

  • the goal of the investment
  • the risk the investor can handle
  • liquidity required
  • taxability of the investment
  • the period until the financial goal is reached
  • last but not least, the cost of the investment.

THE GOAL

Goals determine the characteristics sought in an investment. You will be in a position to choose the most appropriate investment only when you have decided on your short-, medium- and long-term goals. The following generic goals are normally involved:

Emergency fund

Emergency fund money should be readily available when needed, and the value of the fund should be equal to about six months’ income. Money market funds are excellent for this purpose. While these funds do not perform much higher than inflation, their benefit is that capital is saved and is easily accessible.

If you already have a ready emergency fund covering more than six months’ income, you could consider a more aggressive mutual fund

Capital protection

If your primary aim is capital protection, you will have to be satisfied with a lower growth rate on the investment. Those above 50 are normally advised to be conservative in their investment approach. While this may for the most part be sound advice, you should also keep an eye on the risk of inflation, so that the purchasing power of your money does not depreciate. It is not the nominal value of the capital that should be protected, but the inflation-adjusted one. At an annual inflation rate of 6%, $1 million today will buy the same as $174 110 in 30 years’ time. A 50 year-old with $1 million would therefore have to lower his living standard substantially if he only retains the $1 million until he was 80.

Conservative investments like those listed above should form the normal basis for providing an income. Because of inflation risk, investments should be structured so that they can at least keep up with inflation. This means that at least a percentage of the investment source providing the income should be made up of other asset classes like property and equity mutual funds. The percentage would differ according to individual and economic circumstances.

Investors fortunate enough to have their basic budget provided for by a conservative fund could consider increasing their income with commercial property funds and tax-free income from dividends paid out by listed shares.

Capital growth

If an investor’s primary goal is to achieve capital growth, the real rate of return should be higher than inflation. This implies greater risk to capital in the short term. Investors aiming at capital growth should not be apprehensive, as they will reap the rewards in the long term.

The history of equity prices over the past 100 years proves equity investments to be the best performer, followed by property. This does not mean you should buy either of these investments blindfolded. Wait until the quality shares in which you are interested are trading at inexpensive price levels.

RISK

The investment with a history of the highest growth is not necessarily the one to choose. The Standard Bank’s Gold Fund increased by 178% during the period 13 August 2001 – 24 May 2002 (284 days). Judging only on the growth of the fund during this period, it performed exceptionally well. But would it be the right investment for a retiree? During the 805 days following this, the same fund experienced a negative growth rate of 44%! The problem with an investment that decreases by this percentage is that it will not reach its previous peak by increasing again by 44%. This is because the growth this time will take place from a lower base, so in fact the investment would have to increase by approximately 80%.

LIQUIDITY

Hard assets like Persian carpets, works of art and antique furniture may be good investments in the long term, but unfortunately they are not very liquid. The same is true of certain shares in smaller companies. Money market funds, on the other hand, are very liquid, but the returns may not always be as good as those from other investments. The need to liquidise the investment quickly is therefore also a criterion to consider when evaluating investments.

TAXABILITY

The taxability of an investment has a considerable impact on its value to the investor. When comparing the returns on different investments, the return after tax has been deducted should be used. The investor should always ask what will be left in his pocket after tax deduction.

PERIOD

Conservative investments with no potential for high returns are suitable for shorter periods, while investment-objectives with longer time horizons aspire to achieving higher returns. Money market funds are suitable for periods of one or two years. Income and conservative asset allocation funds for three or four years and flexible asset allocation funds, commercial property funds and value equity funds may be chosen for longer periods, dependent on the economic and interest cycle and the propensity of the investor to accept risk.

COSTS

The costs involved in an investment are normally things like administrative cost and commission. The percentage of the costs to the investment amount directly affects the value of the investment. Many of the currently available investment products are structured in such a way that investors can negotiate commission.

CONCLUSION

No investment strategy blueprint is going to be perfect for everyone’s circumstances. Investment opportunities should therefore be examined critically before any decision is made. It should also be kept in mind that there are different companies managing specific funds under the investment categories referred to above. Some are more effectively managed than others. Investors should therefore research investments as well as the managers thoroughly before investing. Otherwise, they could appoint professional asset managers to do so on their behalf. Time spent determining the type of investment you really need is time invested in your future financial well-being.

A New Way to Invest in Property

The two most frequently asked questions by investors are:

  1. What investment should I buy?
  2. Is now the right time to buy it?

Most people want to know how to spot the right investment at the right time, because they believe that is the key to successful investing. Let me tell you that is far from the truth: even if you could get the answers to those questions right, you would only have a 50% chance to make your investment successful. Let me explain.

There are two key influencers that can lead to the success or failure of any investment:

  1. External factors: these are the markets and investment performance in general. For example:
    • The likely performance of that particular investment over time;
    • Whether that market will go up or down, and when it will change from one direction to another.
  2. Internal factors: these are the investor’s own preference, experience and capacity. For example:
    • Which investment you have more affinity with and have a track record of making good money in;
    • What capacity you have to hold on to an investment during bad times;
    • What tax advantages do you have which can help manage cash flow;
    • What level of risk you can tolerate without tending to make panic decisions.

When we are looking at any particular investment, we can’t simply look at the charts or research reports to decide what to invest and when to invest, we need to look at ourselves and find out what works for us as an individual.

Let’s look at a few examples to demonstrate my viewpoint here. These can show you why investment theories often don’t work in real life because they are an analysis of the external factors, and investors can usually make or break these theories themselves due to their individual differences (i.e. internal factors).

Example 1: Pick the best investment at the time.

Most investment advisors I have seen make an assumption that if the investment performs well, then any investor can definitely make good money out of it. In other words, the external factors alone determine the return.

I beg to differ. Consider these for example:

  • Have you ever heard of an instance where two property investors bought identical properties side by side in the same street at the same time? One makes good money in rent with a good tenant and sells it at a good profit later; the other has much lower rent with a bad tenant and sells it at a loss later. They can be both using the same property management agent, the same selling agent, the same bank for finance, and getting the same advice from the same investment advisor.
  • You may have also seen share investors who bought the same shares at the same time, one is forced to sell theirs at a loss due to personal circumstances and the other sells them for a profit at a better time.
  • I have even seen the same builder building 5 identical houses side by side for 5 investors. One took 6 months longer to build than the other 4, and he ended up having to sell it at the wrong time due to personal cash flow pressures whereas others are doing much better financially.

What is the sole difference in the above cases? The investors themselves (i.e. the internal factors).

Over the years I have reviewed the financial positions of a few thousand investors personally. When people ask me what investment they should get into at any particular moment, they expect me to compare shares, properties, and other asset classes to advise them how to allocate their money.

My answer to them is to always ask them to go back over their track record first. I would ask them to list down all the investments they have ever made: cash, shares, options, futures, properties, property development, property renovation, etc. and ask them to tell me which one made them the most money and which one didn’t. Then I suggest to them to stick to the winners and cut the losers. In other words, I tell them to invest more in what has made them good money in the past and stop investing in what has not made them any money in the past (assuming their money will get a 5% return per year sitting in the bank, they need to at least beat that when doing the comparison).

If you take time to do that exercise for yourself, you will very quickly discover your favourite investment to invest in, so that you can concentrate your resources on getting the best return rather than allocating any of them to the losers.

You may ask for my rationale in choosing investments this way rather than looking at the theories of diversification or portfolio management, like most others do. I simply believe the law of nature governs many things beyond our scientific understanding; and it is not smart to go against the law of nature.

For example, have you ever noticed that sardines swim together in the ocean? And similarly so do the sharks. In a natural forest, similar trees grow together too. This is the idea that similar things attract each other as they have affinity with each other.

You can look around at the people you know. The people you like to spend more time with are probably people who are in some ways similar to you.

It seems that there is a law of affinity at work that says that similar things beget similar things; whether they are animals, trees, rocks or humans. Why do you think there would be any difference between an investor and their investments?

So in my opinion, the question is not necessarily about which investment works. Rather it is about which investment works for you.

If you have affinity with properties, properties are likely to be attracted to you. If you have affinity with shares, shares are likely to be attracted to you. If you have affinity with good cash flow, good cash flow is likely to be attracted to you. If you have affinity with good capital gain, good capital growth is likely to be attracted to you (but not necessary good cash flow ).

You can improve your affinity with anything to a degree by spending more time and effort on it, but there are things that you naturally have affinity with. These are the things you should go with as they are effortless for you. Can you imagine the effort required for a shark to work on himself to become sardine-like or vice versa?

One of the reasons why our company has spent a lot of time lately to work on our client’s cash flow management, is because if our clients have low affinity with their own family cash flow, they are unlikely to have good cash flow with their investment properties. Remember, it is a natural law that similar things beget similar things. Investors who have poor cash flow management at home, usually end up with investments (or businesses) with poor cash flow.

Have you ever wondered why the world’s greatest investors, such as Warren Buffet, tend only to invest in a few very concentrated areas they have great affinity with? While he has more money than most of us and could afford to diversify into many different things, he sticks to only the few things that he has successfully made his money from in the past and cut off the ones which didn’t (such as the airline business).

What if you haven’t done any investing and you have no track record to go by? In this case I would suggest you first look at your parents’ track record in investing. The chances are you are somehow similar to your parents (even when you don’t like to admit it ). If you think your parents never invested in anything successfully, then look at whether they have done well with their family home. Alternatively you will need to do your own testing to find out what works for you.

Obviously there will be exceptions to this rule. Ultimately your results will be the only judge for what investment works for you.

Example 2: Picking the bottom of the market to invest.

When the news in any market is not positive, many investors automatically go into a “waiting mode”. What are they waiting for? The market to bottom out! This is because they believe investing is about buying low and selling high – pretty simple right? But why do most people fail to do even that?

Here are a few reasons:

  • When investors have the money to invest safely in a market, that market may not be at its bottom yet, so they choose to wait. By the time the market hits the bottom; their money has already been taken up by other things, as money rarely sits still. If it is not going to some sort of investment, it will tend to go to expenses or other silly things such as get-rich-quick scheme, repairs and other “life dramas”.
  • Investors who are used to waiting for when the market is not very positive before they act are usually driven either by a fear of losing money or the greed of gaining more. Let’s look at the impact of each of them:
  • If their behaviour was due to the fear of losing money, they are less likely to get into the market when it hits rock bottom as you can imagine how bad the news would be then. If they couldn’t act when the news was less negative, how do you expect them to have the courage to act when it is really negative? So usually they miss out on the bottom anyway.
  • If their behaviour was driven by the greed of hoping to make more money on the way up when it reaches the bottom, they are more likely to find other “get-rich-quick schemes” to put their money in before the market hits the bottom, by the time the market hits the bottom, their money won’t be around to invest. Hence you would notice that the get-rich-quick schemes are usually heavily promoted during a time of negative market sentiment as they can easily capture money from this type of investor.
  • Very often, something negative begets something else negative. People who are fearful to get into the market when their capacity allows them to do so, will spend most of their time looking at all the bad news to confirm their decision. Not only they will miss the bottom, but they are likely to also miss the opportunities on the way up as well, because they see any market upward movement as a preparation for a further and bigger dive the next day.

Hence it is my observation that most people who are too fearful or too greedy to get into the market during a slow market have rarely been able to benefit financially from waiting. They usually end up getting into the market after it has had its bull run for far too long when there is very little negative news left. But that is actually often the time when things are over-valued, so they get into the market then, and get slaughtered on the way down.

So my advice to our clients is to first start from your internal factors, check your own track records and financial viability to invest. Decide whether you are in a position to invest safely, regardless of the external factors (i.e. the market):

  • If the answer is yes, then go to the market and find the best value you can find at that time;
  • If the answer is no, then wait.

Unfortunately, most investors do it the other way around. They tend to let the market (an external factor) decide what they should do, regardless of their own situation, and they end up wasting time and resources within their capacity.

I hope, from the above 2 examples, that you can see that investing is not necessarily about picking the right investment and the right market timing, but it is more about picking the investment that works for you and sticking to your own investment timetable, within your own capacity.

A new way to invest in properties

During a consultation last month with a client who has been with us for 6 years, I suddenly realised they didn’t know anything about our Property Advisory Service which has been around since April 2010. I thought I’d better fix this oversight and explain what it is and why it is unique and unprecedented in Australia.

But before I do, I would like to give you some data you simply don’t get from investment books and seminars, so you can see where I am coming from.

Over the last 10 years of running a mortgage business for property investors:

  • We have executed more than 7,000 individual investment mortgages with around 60 different lenders;
  • Myself and our mortgage team have reviewed the financial positions of approximately 6,000 individual property investors and developers;
  • I have enjoyed privileged access to vital data including the original purchase price, value of property improvements and the current valuation of close to 30,000 individual investment properties all around Australia from our considerable client base.

When you have such a large sample size to do your research on and make observations, you are bound to discover something unknown to most people.

I have discovered many things that may surprise you as much as they surprised me, some of which are against conventional wisdom:

Paying more tax can be financially good for you.

This one took me years to swallow, but I can’t deny the facts. The clients who have managed to get into a positive cashflow position have paid a lot of tax and will continue to pay a lot of tax, whether it is capital gains, income tax or stamp duty. They don’t have an issue with the tax man making some money as long as they continue to make more themselves! They regularly cash in the profits from their properties and reduce their debt, but always continue to invest and park their money where the return is best. In fact, I can almost say that the only people who enjoy positive cashflow from their investment properties are the people who have little concern about paying taxes as they treat them as the cost of doing business.

Just about every property strategy works. It just depends on who does it, how it is done, when it is done and where it is done.

When I first started investing, I went and read many property investment books and attended many investment educational seminars. Just about every one of them was convincing and this confused the hell out of me. Just when I was about to form an opinion against a particular property strategy, someone would show up in one of my client consultations and prove that it worked for them!

After testing many of these strategies myself, I came to realise that it is not about the strategy,(which is only a tool) but rather it is about whether the person is using the tool appropriately at the right time, in the right place and in the right way.

There is no such thing as the best suburb to invest in, forever.

If you randomly pick a particular property in what you think is the best suburb over a 30 year window, you will find that there are periods during which this property will outperform the market average, and there are periods when this property will underperform the market average.

Many property investors find themselves jumping into historically high growth suburbs at the end of the period when it is outperforming the average, and then stay there for 5-7 years during the underperforming period. (Naturally this can taint their view of property investing as a whole!)

There is no such thing as the worst suburb to invest in, forever.

If you pick a property in the worst suburb you can think of from 40 years ago, and pitch that against the best suburb you can think of over the same period of time, you will find they both grew at about 7-9% a year on average over the long-term.

Hence in the 1960s, a median house in Melbourne and Sydney was valued at $10k. The worst property around that time may have been 30% of the median price for then, which was say about $3k. Today, the median house price in these cities is about $600k. The worst suburb you can find is still around 30% of that price which is say $200k a house. If you believe a bad suburb will never grow, then show me where you can find a house today in these cities, that is still worth around $3k.

Median Price growth is very misleading.

Many beginner property investors look at median price growth as the guidance for suburb selection. A few points worth mentioning on median price are:

We understand the way median price is calculated as the middle price point based on the number of sales during a period. We can talk about the median price for a particular suburb on a particular day, week, month, year, or even longer. So an influx of new stocks or low sales volume can severely distort the median price.

In an older suburb, median price growth tends to be higher than it really is. This is because it does not reflect the large sum of money people put into renovating their properties nor does it reflect the subdivision of large blocks of land into multiple dwellings which can be a substantial percentage of the entire suburb.

In a newer suburb, median price growth tend to be lower than it really is. This is because it does not reflect the fact that the land and buildings are both getting smaller. For example, you could buy a block of land of 650 square metres for $120k in 2006 in a newer suburb of Melbourne, but 5 years later, half the size block (i.e.325 square metres) will cost you $260k. That’s a whopping 34% annual growth rate per year for 5 years, but median price growth will never reflect that, as median prices today are calculated on much smaller properties.

Median price growth takes away people’s focus from looking at the cost of carrying the property. When you have a net 2-3% rental yield against interest rates of 7-8%, you are out-of-pocket by 5% a year. This is not including the money you have to put in to fix and maintain your property from time to time.

Buying and holding the same property forever doesn’t give you the best returns on your money.

The longer you hold a property, the more likely you will achieve an average growth of 7-9%. But you will be bound to hit periods where your property outperforms the 7-9% growth and periods where it under performs the 7-9% growth.

The longer you hold a property, if its growth is at or above average, the lower its rental yields will become.

The longer you hold a property, the higher the capital gains tax you will need to pay when you sell, and the less likely you will be able to sell it.

The longer you hold a property, the more likely there will be a need for an expensive upgrade of the property.

The longer you hold a property, the more likely you will forget which part of the equity actually belongs to the tax man, AND the more likely you will be to try to leverage the equity that doesn’t belong to you. This can get you into a negative equity position with a negative cashflow forever, unless you have proper financial guidance.

Key Facts About Bird Flu

Bird flu was first identified in the early 1900’s and has since spread worldwide. Also known as avian influenza, this virus has caused considerable concern due to the mutation of a particular strain of the disease. Although this virus previously only infected birds and other types of animals, namely pigs, since 1997, it has also been known to infect humans.

The strain of the disease to cause so much concern is H5N1. These are simply numbers and letters that represent the subtype of this particular strain, 1 of 144 influenza subtypes. Not only has the virus caused an epidemic in poultry, but it has recently been feared to be leading to a pandemic, or worldwide epidemic, in humans.

While the virus was first identified in humans in 1997, it was not until 2004 that the spread became of great concern. At that time, a major outbreak occurred in Vietnam and Thailand, which spread to ten countries and regions of Asia within weeks and caused the death of 23 people. Within three months the outbreak was contained after the slaughter of tens of millions of potentially infected birds. However, the damage was already done and the virus had spread across Asia to lead to additional outbreaks. Since that time, H5N1 has spread throughout Asia, Europe, and the Middle East, and a low pathogenic form of the virus was identified in Canada on November 19, 2005. Currently, 131 humans have been infected with the virus, resulting in 68 deaths. However, it is feared this number will only increase with the ongoing spread of the disease.

The primary concern surrounding H5N1 is its mutation and ability to infect humans. As of yet, the virus has been spread from poultry to humans, and human to human transmission has only been suspected but not confirmed. Once the virus mutates further, it will easily be passed through humans, causing the disease to spread rapidly. Influenza pandemics, or worldwide epidemics, have caused a great number of deaths in the past, including the Spanish Flu which killed 50 million people in 1918. This is the ultimate concern with the mutation and spread of H5N1.

At this time, the primary cause of infection has been due to the consumption or handling of diseased poultry. Unfortunately, there have been a very few cases that were not easily explained, and therefore, human to human transmission was suspected. However, this has not been confirmed in any of the cases of H5N1 infection.

Marine VHF Radio

Types of VHF sets:

Non-DSC sets

Non-DSC VHF sets on yachts and motorboats will still continue to work, will still be legal to use and certificate holders do not need to do a conversion course until they choose to upgrade. After 2005 Coastguards will cease to monitor Channel 16 in the way that they do now, that is with a dedicated officer on headset watch 24 hours a day, but they will continue to have a loudspeaker watch on channel 16 in the operations room. Increasingly the boat without VHF DSC radio will be at a disadvantage.

A transportable set is an invaluable second radio for use in an emergency when it can be taken into a life raft or used on deck to communicate in a rescue situation. It is useful for safety reasons in a tender when going ashore or in a safety boat when organising dinghy sailing events. A portable set is a good buy for non-boat owners who charter or who go afloat occasionally. They have a limited range but do require licensing and certification. Portable sets with a very limited DSC facility are available. They are intended as an addition to a full VHF DSC set, not as a substitute. Note that the portable set covered by a ship’s radio licence can only be used on the vessel covered by the licence or by its tender(s). It is illegal to use the portable ashore.

VHF DSC radio sets

From 2001 all new non-portable radios sold must be VHF-DSC or be capable of being converted to DSC by the addition of an extra ‘black box’. These are called DSC Controllers. It will provide the digital selective calling (DSC) facility which is the special feature of the new type of set. What this does is to send, on channel 70, a burst of digital signals in a code to ‘call up’ another DSC set. This call can be directed at an individual, using their MMSI, a group of boats or ‘all stations’ in an emergency. Once the link has been established by the digital ‘call’, normal voice   transmission  will be used. The DSC is essentially a new method of establishing communications, more reliably than was possible before. The digital signals are of high radio quality and rapid, the alert taking just 0.5 seconds. It can be used in both routine and distress situations.

There are different classes of controller with varying levels of capability for use in different types of vessel.

The Class D controller is the one designed for use with VHF on yachts and motorboats who make passages within VHF range of the coast. Fitting one of these is not compulsory on private boats. On small boats used at sea commercially, sea school boats for example, it may become a requirement. This will be to the great advantage of their students who will be able to see the sets in use and appreciate their advantages.

Other controllers for VHF DSC are available to meet the requirements of ships. These include Class A and B Controllers, which have enhanced capabilities.

What is the range of the set?

Those sailing across an ocean, or even the Bay of Biscay, need radios that transmit over vast distances. Licensing arrangements are different too.

The range of  transmission  of VHF radio telephones is limited by a number of factors. The height of the aerial is very significant as the propagation of the radio waves is only slightly more than ‘line of sight’. This includes the aerial height of both the transmitting and the receiving station.

When talking from yacht to yacht expect a range of 10 to l5 miles with aerials fitted at the tops of the masts. Those commonly fitted to yachts are known as ‘unity gain’ aerials. They are made of thin wire and often have wind instruments attached. They are recommended because, although the range is not as good as the taller rigid aerials used on motorboats, they cope better with the heeling effect often experienced on yachts! The better range of a ‘high gain’ motor cruiser aerial is only achieved if it is mounted vertically.

It should be possible to talk to a Coastguard station from 30 to 40 miles offshore because of the height of their aerial.

Transmitting range is also affected by the transmitting power of the set. The maximum power allowed is 25 watts. There is also a low power setting, which reduces the transmitting power to 1 watt. This should be used for all short range routine communications. You might think that it is always a good idea to broadcast your signal as far as possible. This it not so. Remember that each channel can only be used for one  transmission  at a time. Powerful signals cause more inference to other radio users. If you are calling another craft nearby or a marina, use low power. Try to use low power for all routine communications. The use of low power does not change the receiving range of the set.

A portable VHF set has yet another type of aerial. This is flexible and will operate at a wider range of angles. The low aerial height and a maximum power output of 5 watts reduces the range of  transmission  of these sets. Between portable radios the range can be up to 5 miles, increasing to 10 miles to a Coastguard station, if there is no land in the way! Remember, with portable radios there is always the risk that the battery will go flat.

The information about ranges of  transmissions  is for average conditions and good circumstances. Ranges can be influenced by:

o Atmospheric conditions, especially high pressure, can increase the range and cause interference from distant stations.

o Land. Boats operating near land may have poor reception with signals being blocked by hills or buildings.

o Incorrect installation of the aerial, or damage to the coaxial cable connecting the aerial to the set, can give poor reception.

o The proximity of other electronic equipment can cause interference.

For these reasons it is best to have the fitting done, or at least checked, by a professional electronics engineer.

A portable radio has a range of 5 miles to another portable, 10 miles to a Coastguard Station.

All distress calls should be transmitted on high power.

Many yachts carry emergency VHF aerials in case of dismasting, which is a very good idea, but failure of the electrical supply is a more frequent problem! The emergency aerial has a plug attached to connect it to the back of the set. For maximum range, situate the aerial as high as possible, but realistically expect a greatly reduced range. When the mast is lost, many people are surprised to hear the radio apparently still working. This is because the co-axial cable is acting as an aerial over a short range, but transmitting without an aerial will damage the set permanently.

A portable radio could be useful under these circumstances!

AIDS – What Really is AIDS and How Can it Be Prevented?

AIDS is a disease of the immune system which is caused by HIV which is otherwise known as “human immunodeficiency virus” a diagnosis of HIV can be devastating news for anyone. The condition is prolonged and takes time to weaken the immune system leaving sufferers of the illness susceptible to other illnesses such as the common cold, which due to the weakened immune system of AIDS sufferers can be deadly. An individual suffering from AIDS or HIV is also more susceptible to tumors meaning routine checkups are needed after a diagnosis, leading to a life of hospital appointments.

HIV can be transmitted through full on contact of the mucus membrane, such as mouths, lips and genitals and can also be transmitted through full on contact with an infected bodily fluid. These fluids can be blood, semen, vaginal fluid and breast milk meaning that HIV and AIDS can be passed through to a child throughout pregnancy and throughout breast feeding. The contact of these fluids can happen throughout different activities including anal, vaginal or oral sex, a blood transfusion or the exchange of infected needles, which would commonly be more associated with drug use.

AIDS symptoms often lie dormant until the disease is in its more advanced stages meaning that a diagnosis of AIDS can be even more devastating when the time left is short. Sufferers from AIDS have an increased risk of developing cervical cancer in female sufferers and cancers of the immune system such as Lymphoma. AIDS in its more advanced stage with come with symptoms such as fevers, sweats, swollen glands and weakness. Weight loss is also a common symptom of an AIDS sufferer. AIDS sufferers are also more susceptible to pneumonia as well due to the weakened immune system. AIDS is truly a life wrecking illness for everybody involved.

Since there is no cure for AIDS, the best way to decrease the spread of it and stop others contracting it is with prevention methods. Some of these methods include safe sex, being responsible and using a condom. Sexual relations are one of the main causes of AIDS transmission and a condom could save lives. It is proven that unprotected sex is responsible for the AIDS pandemic all over the world. A male or female condom would suffice.

People working in the health care industry also can do their bit in stopping the transmission of AIDS and HIV by following precautions and using the appropriate safety equipment to keep the illness from spreading. Also, it has now been said that mothers who are suffering from HIV or AIDS should avoid breast feeding their child as to prevent the child from contracting the illness as well. This is what any reasonable parent would do for their child if they knew it could save their life.

Overall, AIDS is a life wrecking disease and it is nothing to be ashamed of. Yet the prevention of it is so simple that people don’t need to be dying every day from this disease. AIDS doesn’t only affect one person; it spreads like a fire and can affect thousands. So think, and use precautions so you don’t become a sufferer too.

How to Have Clutch Power

The key to your motocross bike’s performance lies in the clutch. You may be an ace as a motocross player but if your clutch is not doing its part, you may find your engine difficult to control. The following are some tips for an excellent clutch.

First of all, take out those Factory Clutch Springs and substitute them with stiffer ones. Bike factories never use maximum performance parts when assembling the clutch. High performance parts usually cost more money than those being used by factories. But keep in mind that you don’t have to change every spring. Usually two or three will do but you can experiment on what works for you.

Do not neglect your   transmission  oil. It’s not the same as cars and trucks wherein you can change the oil once a year only. Ideally, your oil must be replaced every two or three races. It may sound too much for you, but changing the oil is cheaper than a  transmission  overhaul. Remember that the crud that you pick up on the track accumulates and will put early stress on your clutch plates.

Always carry extra shims for emergencies. You’ll never know when you’re going to need these things. It might happen in the middle of a race and you won’t be able to remedy the situation. You can simply insert the right washer under the bolt. The added thickness will preload your springs and take away that spongy feeling in your clutch.

You can top off your  transmission  to the proper level with Automatic  Transmission  Fluid, that is, if it is GM compatible. But don’t use a Ford type fluid. The difference between the two is GM fluid grips better than a Ford fluid which is slick as molasses.

Never use factory-installed aluminum clutch plates. These plates are suitable only for regular use but not tough enough for extended motocross use. They don’t hold up as well as steel plates which are heavier but more durable. There are two drawbacks for aluminum plates. One, they wear more quickly than steel leaving metallic deposits in the oil, thus, hastening mechanical wear. Two, aluminum warps easily when subjected to extreme heat generated in motocross.

Aging plates build up a glaze layer on the surface which makes them slip more noticeably. When this slippage is noticed, take out your fiber clutch plates and sand the surface to remove the slippery glaze. Reinstall after cleaning.

Make sure your clutch lever isn’t set too tight. Set it so that a quarter can slide between the lever perch and the lever without catching the clutch cable.

Online Dating Should Be an Olympic Sport

The Olympic Games program consists of 26 sports, 30 disciplines and nearly 300 events. It is a global event with monumental interest and cultural significance in our world. As such, I would like to formally submit Online Dating/Dating to the International Olympic Committee for consideration of inclusion as an Olympic sport for the 2012 or 2016 games.

Think this is just another boneheaded idea from your friends in the online dating world? Consider this:

Olympic sports are governed by International Sports Federations (IFs) who are in turn recognised by the International Olympic Committee (IOC) as the global supervisors of their respective sports. In layman terms, that means the big dog IOC lets the little dog IFs manage everything on a local level. Well, such a little dog already exists in the online dating world in the form of reputable online dating websites. That is right, there are some reputable dating websites that are good enough to be called established “Federations.” These websites can be the global governing body of online dating! That was the first step. Now to convince the IOC that online dating is a sport.

In terms of Olympic competition, think about it we could classify the online dating world into men, and women, then break it down further into specific weight classes, or even personality types within those weight classes. These men and women would then compete with one another physically (through flirting), intellectually (through questioning) and visually (physical appearance). It is the perfect blend of a sport. The winning Gold medalist will have to spend years in the gym training to be physically sound, spend years in school or the library “learning” to become smart, and behind all the muscles and misogynistic intellect, still be graceful in delivery and presence. The winner of the online dating would be perfect athlete, the Opus Olympian.

Not convinced it would work? Maybe your mind will change after reading this:

In October 2004, the IOC established an Olympic Programme Commission who’s job was to review all existing sports, and other non-recognised Olympic sports. In this review the goal was to apply a systematic and category approach to each sport and evaluate whether or not it met the criteria for inclusion in the Olympic games as a recognised Olympic sport. This Commission came up with seven criteria to judge whether a sport should be included or not.

1) History and tradition of the Sport

2) Universality

3) Popularity of the sport

4) Image

5) Athletes’ health

6) Development of the International Federation that governs the sport

7) Costs associated of hosting/playing the sport

The above seven criteria my friends is what a sport or discipline has to meet in order to be considered for inclusion at the Olympic Games. Period.

Does Online dating meet these 7 criteria? Lets find out:

1) History and Tradition – Check! Dating is the oldest tradition on the planet that was around before any of today’s current Olympic sports.

2) Universality – Check! I’m pretty sure dating and the sport of interpersonal communication and sparing has universal appeal. I mean, we do it every day!

3) Popularity of the sport – Check! I’d say Dating was pretty popular. Wouldn’t you? Everybody does it. Even animals. I don’t see penguins playing Soccer or Baseball, but I do see them date.

4) Image – Check! Dating is all about attraction and reflecting a positive and beautiful self image. Those who partake in the sport of dating exude the highest standard of image compared to any sport image or sport athlete! Who likes to date an unbathed, rude, and dirty human being? Puhleeze.

5) Athletes Health – Check! Dating athletes date, and date often. As such, they take their own personal health very seriously. Education about Sexually Transmitted Disease start at a young age, and practicing safe sex to maintain good sexual health is part of the every day routine for those who date.

6) Development for International Federation that governs the sport: Check! The International Federation for Online Dating, a reputable dating website, would very much benefit from online dating being included in the Olympic games.

7) Low cost of holding the sport: Check! How much does it cost to look at the person next to you and start a conversation?

In conclusion, Online Dating meets all the criteria for inclusion as an Olympic sport, in many ways better than existing Olympic sports. Consider Curling – Who is that helping? How about Fencing? Serious people… how on earth is swatting somebody with a piece of wire going to benefit people or project a good self image? Give me a break.

So without further adieu, I would like to formally submit online dating to the International Olympic Committee for consideration and recognition as a recognised Olympic Sport in the year 2012 or 2016…or even 2020. I’m not picky.

Thank you very much.

Victory Motorcycle Shift Ratchet Replacement

The Victory Motorcycle is a very well built piece of machinery. I have owned a Victory Kingpin since 2004. I have had no problems with the motorcycles and am very pleased with my motorcycle. This article will address the one issue I did have that is related to a failed shifter part. The dreaded Victory Shift ratchet.

One day while riding, I began experiencing downshifting problems my kingpin. It only happens from time to time and it feels like it is hanging up when i am trying to downshift. I have adjusted the clutch cable and changed the oil with no resolve. I am running full synthetic AMSOIL 20W50 motorcycle oil in the transmission and was thinking the oils was too thick for the clutch plates. After changing the oil to the Victory OEM multi-blend synthetic, the problem with shifting still existed.

I decided to take a few more test rides to diagnose the problem. I did notice that if i push the shift ratchet shaft in (has about 1/8 inch movement in and out) it seems to temporarily stop the problem. I went to the Victory Motorcycle Solutions community site and have read people talk about shift ratchet as being the culprit. after reading several posts on this information, I contacted my favorite Victory motorcycle dealership, Santa Rosa VeeTwin. They confirmed that I need to replace the shift ratchet. The reason being the rest spring fails over time.

The Victory dealership explained that Victory changed the ratchet somehow after 2000 due to hard shifting complaints. They also stated that they have seen more issues like this with those Victory riders with driver floorboards. The drivers with floor boards will typically do a lazy shift. Anyhow the ratchet will be worn on both ends, thus allowing the shifting to continue down and not engaging.

Being that I am handy with a wrench and always up for a challenge, I ordered the OEM replacement parts from Victory. I needed to get the shift ratchet and new transmission gaskets. I have the Victory Kingpin service manual but it did not explain exactly how to do this shift ratchet replacement. So I took my time and video taped everything.

The basics steps involved in doing this shift ratchet replacement is as follows:

1 – Drain all of the oil out of your Victory Motorcycle. Trust me, I did not do this and made a huge mess when I removed the transmission cover.

2 – Remove all of the transmission cover bolts.

3 – Now the hard part, pull of the transmission cover. Note the clutch magnet is very strong and will not want to give up the cover too easily. Pull straight out and watch your fingers.

4 – Once the cover is off and the remaining oil spills out, observer how the shift ratchet is positioned. Note this by taking a picture or video taping it. You will need to install the new shift ratchet in the same position with the star wheel engaged correctly.

5 – Do the replacement and not clean off the old transmission cover gasket and install the new one. This is a must to prevent leakage.

6 – Install the transmission cover. Again be mindful of the magnet, this will suck the cover right on and take off your finger if you are not paying attention.

7 – Install the cover bolts evenly and check torque settings.

8 – Fill the bike up with AMSOIL full synthetic 20W50 V-Twin motorcycle oil.

9 – Start the bike and check for oil leaks.

10 – If all looks good, test ride the bike and see how wonderful it is to have the shifter working again.

You are now one of the few and proud Victory motorcycle owners to go through this incredible maintenance activity.