If you were investing in the Zimbabwe Stock Exchange (ZSE) before hyperinflation, chances are—you lost money. In 1999, the ZSE's market capitalisation was $2.4 billion. After hyperinflation, it reopened at just $1.4 billion in 2009.Through it all, one asset class performed well: property.The big question is: Has property only outperformed stocks during periods of high inflation, or has it also performed well in a more stable environment?
Was in the middle of posting a comment but seem to have lost what I was working on when went back to check on something you had said.
Not to worry will try to recap -
* no need to apologize for for being incorrect - you are asking questions, provoking thoughts and opinions. Think like an economist who spendsr time today explaining how they will be able to tell you tomorrow why what they told you yesterday did not work out.
* in our view critical issues in the analysis must be : period of the investment. liquidity and interim returns.
At the risk of over-simplification (we are new-comers to your stack so have no idea of the degree of sophistication of your readers) property is usually for the long-term (as the form of financing its acquisition usually mirrors); while stocks can also have a long-term view (which is at the heart of the Warren Buffett approach you mentioned), they are frequently held for much shorter periods (especially by share-traders, which also has a taxation consequence). We'll return to Buffett later.
Liquidity rests on the side of stocks. Property purchases also tend to be for larger amounts (you can invest a few dollars at a time in stocks, but you can't buy properties cheaply!). And when it comes to listed stocks there are frequently purchasers waiting in line (depends on your price point and what other stocks within a price-range around that are also available).
Property sales tend to be more difficult to achieve.
Tastes and style change over time and generational attitudes towards property ownership may also change. So for example in South Africa there are many farms on sale at any given time and one of the reasons is that the "younger generation" have gone off to seek fame and fortune in what they have perceived as being "greener pastures".
As we frequently put it : No-one woke up this morning and said: "I just can't wait to go farming at .........(insert your place name!".
And of course in both instances you never make a profit or a loss until you actually sell!
With regard to interim returns the position is a lot more tricky.
Is your property "income-producing" during the period of your investment?
What dividends are you likely to receive from the company?
One of the legs of Warren Buffet's investing style is to place a premium on stocks that have been (or have the potential to) declare dividends on a regular basis.
Also with some types of property maturity can be a blessing or a curse - fruit farmers for example may experience a period of waiting for their trees to reach optimum production and then after certain number of years they need replacing (of course products produced by a company can also go out of style, be rendered obsolete by technological advances etc) so timing of the sale of the property could also affect the return (what potential does the purchaser have to achieve an interim return before realising the asset whether stocks or property could be a critical factor).
And then we have the issue of external factors over which the investor has no (or little control) - changes in government (local and abroad!), economic cycles, natural events.
Currently everyone is trying to deal with the impact of the "tariff" wars.
We are currently working on a book that will be published at the end of May - "Tariff and Stock Prices" which will be available in electronic format for only US$ 4,99. But if your readers place an order and pay now we'll give to them for only US$ 3,99 (ie a 20% discount). Just email us at legaleagles @srvalley.co.za with the words "Tinashe of Money & Moves sent me here" and we'll get back to you to discuss the logistics. Payment will be via Paypal.
Finally talking again of Warren Buffet - we notice he has announced he is leaving office at the end of the year.
Thanks for sharing. I used to invest of the ZSE with the hopes of earning returns in the long run and all the good stuff. But as you mentioned in your last article, the environment is unstable and for an “ordinary” investor like myself who may not have the time to check valuations and graphs to see what time to act, the current environment and scars from the past work against us.
I have noticed a general trend among some Zimbabweans (I have a very small sample size though). Most people view investments as a “cushion” to shield them from life mishaps. Barring any unforeseen circumstances, we expect these to happen late in life, so investing in properties makes sense - by the time we really need them, hopefully we will have had enough.
Another opportunity others are exploring is buying these relatively low cost residential stands and building houses for rentals. Depending on the size and location of the land, if one builds and has tenants, they can be collecting 200 or 300 every month in rentals for quite a while after an investment of maybe 20k or so (over time, since you build on your own terms)
I am also seeing a much bigger interest in rural properties. I’m not so sure what to make of that, but I think it follows the same logic - if life turns upside down, at least I have my rural home to go to.
I love the way you conclude your articles with the money and move section. It gives actionable steps based on the data presented. Thank you for this platform.
Greetings Tinashe
Was in the middle of posting a comment but seem to have lost what I was working on when went back to check on something you had said.
Not to worry will try to recap -
* no need to apologize for for being incorrect - you are asking questions, provoking thoughts and opinions. Think like an economist who spendsr time today explaining how they will be able to tell you tomorrow why what they told you yesterday did not work out.
* in our view critical issues in the analysis must be : period of the investment. liquidity and interim returns.
At the risk of over-simplification (we are new-comers to your stack so have no idea of the degree of sophistication of your readers) property is usually for the long-term (as the form of financing its acquisition usually mirrors); while stocks can also have a long-term view (which is at the heart of the Warren Buffett approach you mentioned), they are frequently held for much shorter periods (especially by share-traders, which also has a taxation consequence). We'll return to Buffett later.
Liquidity rests on the side of stocks. Property purchases also tend to be for larger amounts (you can invest a few dollars at a time in stocks, but you can't buy properties cheaply!). And when it comes to listed stocks there are frequently purchasers waiting in line (depends on your price point and what other stocks within a price-range around that are also available).
Property sales tend to be more difficult to achieve.
Tastes and style change over time and generational attitudes towards property ownership may also change. So for example in South Africa there are many farms on sale at any given time and one of the reasons is that the "younger generation" have gone off to seek fame and fortune in what they have perceived as being "greener pastures".
As we frequently put it : No-one woke up this morning and said: "I just can't wait to go farming at .........(insert your place name!".
And of course in both instances you never make a profit or a loss until you actually sell!
With regard to interim returns the position is a lot more tricky.
Is your property "income-producing" during the period of your investment?
What dividends are you likely to receive from the company?
One of the legs of Warren Buffet's investing style is to place a premium on stocks that have been (or have the potential to) declare dividends on a regular basis.
Also with some types of property maturity can be a blessing or a curse - fruit farmers for example may experience a period of waiting for their trees to reach optimum production and then after certain number of years they need replacing (of course products produced by a company can also go out of style, be rendered obsolete by technological advances etc) so timing of the sale of the property could also affect the return (what potential does the purchaser have to achieve an interim return before realising the asset whether stocks or property could be a critical factor).
And then we have the issue of external factors over which the investor has no (or little control) - changes in government (local and abroad!), economic cycles, natural events.
Currently everyone is trying to deal with the impact of the "tariff" wars.
We are currently working on a book that will be published at the end of May - "Tariff and Stock Prices" which will be available in electronic format for only US$ 4,99. But if your readers place an order and pay now we'll give to them for only US$ 3,99 (ie a 20% discount). Just email us at legaleagles @srvalley.co.za with the words "Tinashe of Money & Moves sent me here" and we'll get back to you to discuss the logistics. Payment will be via Paypal.
Finally talking again of Warren Buffet - we notice he has announced he is leaving office at the end of the year.
Kind Regards
Graeme and Veldra Fraser
www.companylawtoday.co.za
That's true reflection of what actually happened
Thanks for sharing. I used to invest of the ZSE with the hopes of earning returns in the long run and all the good stuff. But as you mentioned in your last article, the environment is unstable and for an “ordinary” investor like myself who may not have the time to check valuations and graphs to see what time to act, the current environment and scars from the past work against us.
I have noticed a general trend among some Zimbabweans (I have a very small sample size though). Most people view investments as a “cushion” to shield them from life mishaps. Barring any unforeseen circumstances, we expect these to happen late in life, so investing in properties makes sense - by the time we really need them, hopefully we will have had enough.
Another opportunity others are exploring is buying these relatively low cost residential stands and building houses for rentals. Depending on the size and location of the land, if one builds and has tenants, they can be collecting 200 or 300 every month in rentals for quite a while after an investment of maybe 20k or so (over time, since you build on your own terms)
I am also seeing a much bigger interest in rural properties. I’m not so sure what to make of that, but I think it follows the same logic - if life turns upside down, at least I have my rural home to go to.
I love the way you conclude your articles with the money and move section. It gives actionable steps based on the data presented. Thank you for this platform.