Property vs. shares: Where should you invest?
Whatever your reasons for choosing to invest, be they as a retirement plan, an additional income stream or simply as a hobby, choosing the most effective strategy can be a tough decision. There's little doubt that some options where you can lay down your money are more secure than others, but effectively weighing the risk against the potential reward can make a huge different to your gains.
Traditional investment on the Australian Stock Exchange (ASX) has long been the method of choice for many of our citizens, however, when you look at the growth figures of shares, you might be interested in finding a better way. Seeking out a property buyer's agent may be a smarter option than a stock broker.
According to the Sydney Morning Herald (SMH), total returns from the ASX add up to 58 per cent in the past decade – not a figure to be sniffed at – but there are more lucrative opportunities out there. For many Australians, those opportunities exist on the property market, which, in comparison, the SMH says has grown by 92 per cent in the same period in Sydney and Melbourne. That's quite a difference in potential returns for your hard-earned dollars.
Seeking out a property buyer's agent may be a smarter option than a stock broker.
The case for property investment
Having a tangible, brick-and-mortar asset means a lot to people in this country. While dabbling in the share market may seem like an exciting and dynamic way to invest, that feeling of having a property that you can see and touch can be remarkably comforting.
Alongside that simple secure feeling of owning a physical location, as far as investments go property is relatively low risk. While people often talk of rises and falls in the real estate market, in reality the value of houses very rarely actually falls – it's the rate at which prices are increasing that usually changes.
In fact, going through figures from Trading Economics as far back as 2002, there are surprisingly few times when Australian median house price growth slipped into negative territory. Even at the end of 2015 and into the first few months of 2016, when there has been speculation amongst industry observers that the nation's property markets are easing, growth still sits at around 2 per cent.
So yes, the rate of growth has fallen sharply in a relatively short time, but the growth is still there.
The case against shares
Let's face it – buying a house is an expensive endeavour, one that can take years. Some might argue that the need for a large amount of capital offers property investors less opportunity for diversification. However, once you reach the point where you own one or a handful of properties, managing your investment can be considerably easier.
The Australian Investors Association also notes that having money tied up in shares on the ASX can be a source of greater stress than property, as short term volatility on the stock market is common. Similarly, much of what can lead to fluctuations can be well outside of your control, with public companies susceptible to changes in government policy, natural or man-made disasters, even just industry or company-specific bad news.
When you own stock in a large publicly listed corporation, unless you are a majority shareholder you will have little or no say in the direction of the company, or input into how its fortunes can improve. With an investment property, however, you usually have much more individual control over the asset and its fortunes.
Rather than being a small piece of a large pie, the property investor is free to make the decisions they think are best, whether that be carrying out renovations to boost value, bringing in the services of an investment property manager or disposing of any assets that aren't performing.