Shares Vs Property

One of the most common mistakes investors make is choosing a side, shares or property.

Why choose when you can have both, simply invest through listed property trusts. This allows you to diversify into different property sectors such as industrial, retail, residential and commercial property.

The facts are both make a solid return, statically over the long term shares have performed marginally better then property, however, if you take closer look at the investment cycle, at different times property will outperform shares and vice versa.

Keep in mind when investing in property you can invest in direct property (rental property) or you can invest in listed property trust through shares. The below comparison looks at investing in direct property vs shares.

The key between choosing between the two investments is determined by the following factors:

1.      Cash Flow – Investment in property will require regular cash from your other income to cover expenses. Shares do not; in fact they will give you more income.

2.      Volatility – the price of a share will be more volatile than direct property.

3.      Borrowing – it is easier to borrow to buy a property then it is to buy shares. Also you may be subject to margin calls on borrowing for shares.

4.      Diversification – generally property investors lack diversification as such carry more risk. Shares easily allow you to cheaply invest in different sectors such as banks, materials, retail, consumer staple, IT and Health Care.

5.      Entry and Exit fees –property has high entry and exit costs. The cost to invest in shares is cheap in comparison. This allows you to be more agile with your investing.

The key to any good investment strategy is sustainability. You achieve this through good diversification of your investments assets. A mixture of shares, property and cash generally provides the best result. The key is to increase and decrease weightings depending on what economic cycle we are in. Holding property through listed property trusts such as Stockland and Westfield allows you to increase and decrease your exposure quickly and cheaply.

As mentioned in my pervious article “Is time on your side” investing is an ongoing process, to get the best results you need to continue to make changes to suit the economic climate. 

 

If you need help contact Grow Your Wealth for a free initial meeting. Costs nothing but your time.