Is buying direct a good investment?

[Novakm]

First a little background. Way back in 1993, I went to WDW with the family, and stayed at the Poly. It was great! At that time, I was approched by a DVC salesman about OKW. It sounded like a great idea, but there was no way I could swing it at that time. Fast forward to now, and I have 6 grandkids who are now old enough to go, and I want to bring some of them every year. I am waiting on ROFR for AKV. The suspense is driving me nuts, so I did a little math:

Dow Jones in 1993 = $3,747
Dow Jones today = $14,089
That's an average increase of 7.2% per year


Week rate for room at Poly, Late August with 25% discount off rack rate
in 1993 it was $1050
Today it would be $2261
Thats an average increase of 4.12% per year.

Suppose I bought 190 points of OKW for $59/point back then ($11,210). I would have paid my MF every year out of pocket, gone to WDW, and had a great time.

What if I had invested that $11,210 in the stock market instead? Let's assume I still spent the same out of pocket as I would have spent on MF. I would need to come up with the difference between MF and the going rate for a room (still taking vacations at WDW), so I would take some out of the stock market each year to make up the difference between what my MF would have been and the cost of a room at the Poly.

If I had done that, my original $11,210 would have grown to $18,591 by now in the stock market. That would not be enough to buy those 190 points direct, so if I wanted to buy DVC direct, I would have been better off to have bought the points back in 1993 than investing in the Dow and buying this year.

Of course, If I wanted to cash out today, the 190 points would net only about $9,500 resale, but selling off the stocks would be $18,591, so the Dow would have been a better investment.

(It's interesting to note that the cost per point has increased by about the same amount as the cost of a room at the Poly.)

So there you have it - buying DVC direct would have been a better investment than the stock market. (unless you don't want DVC)

Buying resale would be even better!

 

[disneynutz]

Did you figure in the yearly increase in dues cost?

Do you vacation at Disney yearly and consider the total vacation cost or did you stay home once and awhile and save your money?

The yearly total cost of a luxury Disney vacation is what can be really expensive, owning a contract in compassion is a small cost.

Bill

 

[DVC Dude]

So there you have it - buying DVC direct would have been a better investment than the stock market. (unless you don't want DVC)

Buying resale would be even better!

Yep, but that was then and this is now.

I am not too confident that DVC (bought direct from Disney) will be as good as an "investment" as it was in the past.

There really is no correlation between the stock market and DVC, but the major difference is NOW the price of resale is a much more compelling value vs in the past.

 

[ELMC]

To be clear, DVC is a timeshare. When you purchase DVC you are purchasing the right to book a stay at a DVC resort for a given amount of time. You are prepaying for a portion of your vacations and committing to subsidize those costs by paying maintenance fees every year. There is NO aspect of DVC that should be referred to as an investment. Whether or not you can realize a gain on the purchase or sale of DVC or if the purchase of DVC may save you money in the long run vs. other options such as investing is irrelevant.

I get what you're trying to do here, and it's amusing, but it's an idea that's flawed from conception.

 

[bumbershoot]

Well I thought it was an interesting idea, and not irrelevant at all. It's two different things to do with a chunk of money. Looking at what that money might have done if you'd chosen differently is interesting.

And considering the OP mentions paying dues the whole time AND makes sure to mention the caveat of IF you want to have DVC I think he's covered the concept that there are dues involved and you're probably going to WDW/DLR already (and have the surrounding expenses thought of).

I had a kneejerk reaction of "it's not an investment" until I actually read the post, and then I realized that my reaction was irrelevant for what the OP was actually saying.

 

[Minniesgal]

We would never consider DVC as an investment the same way a holiday or a luxury car is also not an investment. I would only buy DVC as something you really want to own. We bought our initial points direct and the rest resale but we bought because it was something I really really wanted to own not because I thought it would save me money. I bought fully aware that I would spend more because I had bought simply because it will mean we go to WDW more frequently. While I agree that people need to be sensible with money life is also to be lived and we should all have I. Our lives a little of what makes your heart sing and that's what my points are to me. I would never have bought for any other reason

 

[ELMC]

Well I thought it was an interesting idea, and not irrelevant at all. It's two different things to do with a chunk of money. Looking at what that money might have done if you'd chosen differently is interesting.

And considering the OP mentions paying dues the whole time AND makes sure to mention the caveat of IF you want to have DVC I think he's covered the concept that there are dues involved and you're probably going to WDW/DLR already (and have the surrounding expenses thought of).

I had a kneejerk reaction of "it's not an investment" until I actually read the post, and then I realized that my reaction was irrelevant for what the OP was actually saying.

I disagree. The OP refers to DVC as an "investment" several times in his post. It's not. It's an expense.

 

[wdwdano@yahoo.com]

I disagree. The OP refers to DVC as an "investment" several times in his post. It's not. It's an expense.

I don't know if I could totally agree with that. I think it's a split yes it is an expense directly, however it it an investment in the quality of life, with family, experience and memories. We only get one go at life. It's kind of like shopping at whole foods vs another grocery store. Yes it is expensive but it is also a healthier lifestyle in hopes to live longer and feel better. Directly it is expensive but over the long term that investment will pay for itself.

Just my opinion.

 

[Novakm]

Disneynutz, yes, I did use the actual cost of dues since 1993. I also used the actual stock market performance each year.

As far as an investment goes, here is my thinking. I was comparing investing in the stock market vs buying DVC. The first option was to buy DVC in 1994, using cash. The second was to invest that money in the stock market, and let it grow, with the hope that by waiting I would be better off. I thought it was interesting that if I had the free cash in 1993 and bought DVC then, I would have been better off buying DVC then than investing it and waiting until today.

Of course, I understand that buying resale puts a different spin on things. If I had bought resale in 1993, it would have been far better than investing in stocks.

I also made some pretty big assumptions about actually being able to afford a Disney vacation each year. If you can't afford the tickets, food, etc, you probably should not be buying DVC. I also assumed that I would have picked the right stocks when investing, and not invest in any of the thousands of stocks that are worthless now. Neither of these was a sure thing.

I would also agree that what happened over the last 20 years is not a sure fire indicator of what will happen in the next 20. I suspect that the cost of a Disney vacation will continue to rise, and that the cost of DVC will continue to track the price of a room pretty closely. Does this mean its better to buy now than to wait? I can't say.

 

[Novakm]

ELMC, I think you would also agree that for many people, putting money in the stock market has also been an expense. Yes, the market has rebounded, but there are still many people who lost thier life savings because they did not or could not ride it out.

 

[Novakm]

One final note on an investment.

If putting away a huge chunk of money to hedge against inflation, then what is an investment?

 

[ELMC]

So there you have it - buying DVC direct would have been a better investment than the stock market. (unless you don't want DVC)

ELMC, I think you would also agree that for many people, putting money in the stock market has also been an expense. Yes, the market has rebounded, but there are still many people who lost thier life savings because they did not or could not ride it out.

No, I would not agree. I would consider that a bad investment. I have had money in the market since early 2000s. I left it there and didn't touch it, all throughout the highs and lows that came with that decade. It is worth more than what I started with, even considering 2008. The fact that people overextend themselves or chose to (or were forced to) sell at a loss does not support your argument at all.

One final note on an investment.

If putting away a huge chunk of money to hedge against inflation, then what is an investment?

Explain to me how annual maintenance fee increases that average close to 4% is a hedge against inflation? I get that you want to argue this point, but that doesn't make you right.

Spending money on DVC may very well be an economical way to vacation. That much I agree with and that's why I own DVC. But you said that buying DVC would have been a better investment than the stock market, which is patently false. You are conflating issues. If you are investing in something, you are putting money away with the reasonable hopes of liquidity and growth of principal. With DVC you are committing money that is not liquid, most likely depreciates, and comes equipped with annual maintenance fee charges. This is a vacation option, and not an investment. You can try to spin it any way you want, but if you consider DVC an investment along the same lines as the stock market or a bond fund then you are simply incorrect.

 

[crisi]

You are missing the dividends from the Dow, you are only adding in the gains.

 

[sndral]

I actually did a similar type of analysis a few years ago, but used my actual % returns re: investments. Basically I figured this is the chunk of change I need to buy all the DVC pt.s I want to stay for X amount of time @ X resort in X unit. If I take that chunk of change and invest it in the market, what are my returns and how much of my unit costs would they pay? Then I compared my returns to room cost (minus maintenance fees that I'd be paying anyway if I owned DVC.) My goal was to convince myself to buy, I actually found I was better just investing and using returns to pay for the unit from a strictly economic standpoint - I think my investment money + returns lasted longer than the yrs on the contract, or something like that. I'm back seriously considering buying again, so maybe I need to run the numbers again as I'm sure my actual % returns have changed, since I've become more conservative as I age investment wise plus we had that recent bear market.

 

[786boxer]

Buy direct iv made lots of money

 

[MoreTravels]

Buy direct iv made lots of money

Hindsight is always 2020. If you did not buy DVC but got Apple shares instead, you would have done a lot better in the last 10 years.

 

[Dean]

ELMC, I think you would also agree that for many people, putting money in the stock market has also been an expense. Yes, the market has rebounded, but there are still many people who lost thier life savings because they did not or could not ride it out.

I wouldn't agree for mutual funds. Worst case scenario would be if you put it all in at the high point and sold it at the low point, you'd have lost around half the money. By your numbers if you'd have invested it in an index fund in 1993, you'd have several times the original investment. Of course that assumes all you spent on vacations you would have used DVC for was the amount of the yearly dues which is unlikely. Of course had you used DVC compared to the same trips at a Deluxe, you would have come out ahead. Comparing to a moderate, you would have been roughly break even but would have had better.

Buying resale early on wouldn't have helped that much, up until the last few years resale was around 80% of the retail price. I did buy resale in 1994 and the price paid was around 80% at that time. There wasn't much of a resale market or access at the time.

Directly it is expensive but over the long term that investment will pay for itself.

Just my opinion.

Historically used for DVC only comparing to Moderate or Deluxe that would be the case, however, that logic doesn't hold going forward, IMO. Esp with resale being roughly 50% of retail currently.