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Diary of a Dumb Investor: I’ve piled into property

I spent my last £1,000 of cash on Friday, ploughing it into a UK property investment trust as world markets trembled.

 
Diary of a Dumb Investor: I’ve piled into property

My friends, I’ve reached a historic point in my investment career: I spent my last £1,000 of cash on Friday, ploughing it into a UK property investment trust as world markets trembled.

Read Dumb Investor: the story so far

Yes, investing right now is a scary business – especially since Frau Merkel spurned my plea last week for Germany to sort out Greece and the eurozone once and for all.

Andy Rumble, a Citywire reader, warned that there was ‘no safe place’ and that my share portfolio would be ‘toast’ for a long time. ‘Throw is the towel and let markets find the true value of assets and stop propping them up,’ he told me. ‘The longer we wait, the more it will hurt.’

Depressing stuff! Yet Wayne Roberts, another reader, gave me some succour, saying ‘blood is on the streets now’ and markets are ‘desperate’ to go up. ‘As soon as Greece is dealt with you're going to regret that you didn't buy now... and Greece will be dealt with very soon as I think the whole world is sick of hearing about it,’ he noted.

I did wait a number of days for some sign of action on Europe; but on Thursday, when the FTSE gave up an eye-watering 4.7% of its value, I decided that there was no point in hoping for immediate salvation from the Germans.

A line from Strictly Ballroom, one of my favourite films, came to me as I hesitated on Thursday evening over whether I was really ready to become fully invested. ‘A life lived in fear is a life half-lived,’ says Fran, the ugly duckling dancer.

And you know what? I refuse to live in fear. I chose to make the London stock market my ballroom – and dance my way to riches, all dolled up in a contract note for TR Property, the investment trust in which I bought shares on Friday morning.

I’ve had my eye on the trust for a while now, ever since I drew up a portfolio plan that had a slot in it for commercial real estate – for the sake of diversity. About 90% of its assets are invested in listed property companies – like Land Securities (LAND.L) – and 9% is in directly owned UK real estate, a large amount of which is in London.

On the face of it, this was neither a great performer nor a particularly cheap pick. The trust’s net asset value has gone nowhere in the past three years, although its total return to shareholders was 10% over the period. And the trust’s shares were trading at a discount of 5% to its net asset value (NAV), annoyingly narrower than their average discount of 10.2%.

But surely the thinner discount is a vote of confidence in the trust. Would I really be better off to pile into some dog that has been absolutely battered in recent months? The point is that I need some property in my portfolio, believe in what TR Property does and refuse to be thrown off my plan by jittery markets. And I will not live my life in fear, dammit!

So I forked out £1,020 for shares in the trust at 157.10p – lower than their June high of 203p and far below their 2007 peak of 262p – coughing up £11.95 in commission to Hargreaves Lansdown, my online broker, and £5.10 for stamp duty.

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14 comments so far. Why not have your say?

andy rumble

Sep 26, 2011 at 13:26

Good luck with it. Despite my pessimism, the fact is NOBODY really knows the future of the stock market or we'd all be rich!

I think there will be a big bounce on the markets once it 'thinks' Greece is sorted. But aside from these bounces, my belief is that down is the only direction for the foreseeable future for reasons I have already given.Although we are focusing on Greece, debt is a problem of the western economies and they can't all be propped up forever!

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snoekie

Sep 26, 2011 at 15:32

Andy, I think you are right, and whilst it looks like the the Euro bunch are now making the right noises (noise only) let us see what they do.

But what about the States? You have that dog Boehner in the manger and snarling at any suggestion of clawing in tax or get rid of tax breaks/allowances for the biggish money earners to bring forward/reducing the massive US govt debt.

With so many repossessions going on and scarce jobs, I do not see any real bounce, more sluggish rises, after flat lining for a while.

I am still sitting on my pennies for the moment.

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John Salmon

Sep 26, 2011 at 17:54

I bought £1000 of this stock in 92 and it went up to over he £100,000 mark but is now down to about £60,000 So best of luck lands ender

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RL

Sep 26, 2011 at 18:10

I'm not a great believer in Commercial Propery right now, though TRPIT is the right vehicle.

Why? Ultimately property values are driven by rents and they aint going nowhere for years. Property rents are driven by GDP growth, not (except possibly housing rents) by inflation. For this reason property is what they call a late cycle investment, so you are way too early IMHO.

As a much more minor point property investment trusts tend to overdistribute so turning capital into income every year. This is bad news if your CGT rate is below your income tax rate.

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Michael Peters Fenwicks

Sep 26, 2011 at 18:42

DI,

at times I 've often looked at your dealings like those of Delboy's picking however on land securities your judgement seemed to have improved.

Well done on this one as I do believe you won't loose but you should have got in earlier six months ago.

For the market it is a cynical place at moment because external factors are driving sentiment - Politics.

Best advice stay with it as it is not where you start counting but where you stop.

Show me anyone here who has not lost money and I point fingers to a liar.

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Chris B (Slough UK)

Sep 26, 2011 at 19:26

Well the markets are due a rally, so if they can just announce something that seems like a fix for Greece the markets should bouy ...for a while ahem. Personally I wouldn't touch property during a bear market. Then again I wouldn't touch hardly anything in a bear market unless it was to the short side. Bon chance.

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snoekie

Sep 26, 2011 at 19:55

I love all these people who are loosers, presumably they are free and easy.

99% of the time the mean, I am sure, lose which relates to loss. Does it also mean that they are free and easy about their losses?

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john_r

Sep 26, 2011 at 21:49

TR Property seems more of a trust of property trusts with a minority of direct property investments. Good for diversification I suppose but not so good in having two levels of charges. Still - yer pays yer money and takes yer chance.

I recently sold my British Land REIT but have kept hold of Derwent London because of its London focus and CLS Holdings because of focus on London + Scandinavia. I look forward to topping up these funds but not until some clarity returns to the market.

Meanwhile I'll continue to live in fear.

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sil

Sep 27, 2011 at 01:58

Why does it have to be property in this country.

I would recommend selling one item to pay for another. Regular rebalancing is like plowing a field, positive for forcing you to price prospects of the competing assets and their potential returns

I see no gold allocation, the biggest bull market maybe you have a dedication to value traps.

I would sell the bonds as they rely on low rates for higher price and that means politics who are like you say, people prone to disappointing in the end

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Anonymous 1 needed this 'off the record'

Sep 27, 2011 at 11:06

Really interesting...... and really good, an old favourite, recently bought in again at 160..... pity you did not go into a Silver ETF with recent drop to less than $30, just a Trader with these ETF Commodities not an Investor, not greedy just to take 10% each time on the volatility.

First time I have agreed with your normally strange Investments.

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snoekie

Sep 27, 2011 at 15:04

Now ride the roller coaster.

Commercial property in a bear market is a long term bet, longer than Lloyds. Rents do not rise when the markets are squeezed and deals done in the downturn are there until the next rent review (usually 5 years), and even then the review is likely to be static because of the vacancies that need letting.

Hopefully the divis will be relatively stable. Good luck,

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ynys

Oct 01, 2011 at 21:31

At a time when shares are particularly cheap you buy property

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snoekie

Oct 02, 2011 at 01:10

PS, I forgot to say that because of SDLT brought in by the last govvt to squeeze more stamp duty out of the commercial market by aggregating the rents over the life of the lease, newer lease terms are shorter, usually 5 years (avoids getting to the £150,000 threshold where the passing rents are lower, not the case for popular malls), so the upwards only rent provisions that were in old (much longer-25 years, even with 5 yearly reviews) leases cannot be inserted (and those leases are now coming to an end) and market rents apply so a rent agreed in the slump is used as a comparison to keep newer rents down, even reduce the the new rents.

They will eventually rise again.

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John Hill

Nov 11, 2011 at 05:41

I bought TR Prop many years ago, sold it at a very good profit and I am now drip feeding money back into the fund. The manager Chris Turner certainly knows what he is doing.

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