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Choosing Between Property And Shares Investment


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Have you been thinking about whether you should invest your hard-earned money in the shares or a property?

The number of people who turn on investment to preserve and grow their money is continuously growing. In fact, property and shares are the two most common ways of building wealth in Australia. Regardless, choosing between the two can be difficult because shares and real estate both can generate reliable income and capital returns for Australians over the long-term.

And because of the plethora of options for buyers and investors, including the premium variable home loan and mutual funds, the best is actually subjective – it will largely depend on which way you look at it.

Why invest in a property?

The winner in the last decade is obviously an investment in a property. If we look at the future, in many ways it’s anyone’s guess, both these types will go through periods of doing well, and then come back to normal.

Generations of Australian’s have never seen property dive, but take note that stock crashes more often, so the property is the best bet. Regardless, shares have generated reliable income and returns for Australians over the long run.

Should you invest in shares or property?

Choosing the best one to suit your needs will be based on your unique timeframe and understanding of the advantages and risks associated with both. These include lifestyle, budget, income, tax implications, as well as personal values.

Shares pros and cons.

Considering diversification, shares provide you with easy to gain exposure to thousands of companies to minimize risk. There is no leverage as well, which means you can’t lose more than you invested. Interest rates normally have less impact on share prices.

There’s also the potential for franked divided benefits, low transaction costs and fees, plus little ongoing effort after your initial investment.

The shares, however, can be easily bought and sold, regular income from dividends. You don’t get a physical asset, and it’s more volatile in the short-term. Do note as well that the entire market can have periods of weak performance.

Property Pros and cons.

With a property, you have peace of mind and stable place of residence or source of income when you decide to rent it out. You also have the flexibility to renovate. It also lacks correlation with other asset classes and good protection against inflation.

Also, you’ll be able to borrow more and leverage returns which can be good during times of low premium variable home loan interest rates.

In general, however, the lack of liquidity can be an issue plus you’ll be unable to change mind after initial commitment. Poor diversification and high concentration on a single asset could be an issue too. Take note that higher repayments are also possible if interest rates rise.

If you’re not careful, there can be a relatively high transaction costs associated with buying, selling and property maintenance.

End Note.

That’s the basics. So, which one are you considering? Property or shares investment? Share it with us in the comments below.