What’s the best investment? Property or Shares?
The shares vs. property debate is one of those eternal questions. Each has its diehards with their own set of statistics that prove that one is a better bet than the other.
Both arguments are pushed by vested interests: money managers rake in billions a year by taking a tiny slither of your investment and making it theirs (via asset-based fees), and there’s an entire industry of agents, banks, politicians and retailers that feed off a strong property market.
Shares can be a more volatile investment than property investment. Over the last year, the value of shares has declined by over 40%, while overall national property prices have risen slightly. The other thing to remember is that with real estate you have the safety of bricks and mortar, so even if prices fluctuate with the property cycle, you don’t have to sell until you are ready. This contrasts with companies on the share market which can go bust, leaving share holders with share certificates that are worthless.
The huge advantage we see in investing in property is the idea of “using other people’s money” or LEVERAGE. The vast majority of property investors are using substantial leverage, borrowing hundreds of thousands off the lender and looking for growth. The majority of funds placed in the share market do not tend to be leveraged but are more likely to be owned asset (cash). A fabulous return of 20% gross on $100,000 invested in shares would see your wealth grow by $20,000. A 5% growth on a leveraged property of value $600,000 would see your wealth grow by $30,000 gross. There is a place for both types of investment but property does tend to do better after all considerations.
