{"id":6789,"date":"2017-10-27T04:55:45","date_gmt":"2017-10-27T04:55:45","guid":{"rendered":"https:\/\/amazingproperty.com.ng\/blog\/property-vs-shares-which-is-the-better-investment\/"},"modified":"2017-10-27T04:55:45","modified_gmt":"2017-10-27T04:55:45","slug":"property-vs-shares-which-is-the-better-investment","status":"publish","type":"post","link":"https:\/\/amazingproperty.com.ng\/blog\/property-vs-shares-which-is-the-better-investment\/","title":{"rendered":"Property vs shares: Which is the better investment?"},"content":{"rendered":"

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It\u2019s the million-dollar question\u00a0\u2013\u00a0<\/span>to invest in the stock market or property?<\/strong><\/p>\n

Outside of superannuation, property and shares are the two most common ways of building wealth in Australia, but choosing between the two can be hard, according to Chris Brycki, founder and CEO of Stockspot, Australia\u2019s first digital investment adviser.<\/p>\n

Brycki, who has more than 21 years of investment experience, says shares and real estate<\/a> have both generated reliable income and capital returns for Australians over the long-term.<\/p>\n

He says there\u2019s no clear answer to which is best \u2013 because it depends which way you look at it.<\/p>\n

\"property<\/p>\n

There are many factors to consider before deciding whether to invest in either shares or property\u00a0\u2013<\/span> or both. Picture: Getty<\/p>\n<\/div>\n

Why invest in property?<\/span><\/h2>\n

\u201cOver the last decade, the winner would clearly be property, but over a longer period, say 100 years, the result is pretty even between shares and property,\u201d Brycki says.<\/p>\n

\u201cLooking to the future, in some ways it\u2019s anyone\u2019s guess, but based on all the data we have, we know over a period of time, both types of assets will go through periods of doing well, but then come back to the average.<\/p>\n

\u201cProperty has had a great period of late, so the chances are it will probably come back to the average,\u201d he says.<\/p>\n

Brycki says there are generations of Australians who\u2019ve never seen property dive, but do remember stock crashes, so believe property is the best bet.<\/p>\n

Shares though, have generated reliable income and returns for Australians over the long run, he says.<\/p>\n

Over the 30 years to 2015, Australian shares generated an average return of 10.8% per year, including dividends, he says.<\/p>\n

Knowing when to invest:<\/strong><\/em><\/p>\n

Should I invest in shares or property?<\/span><\/h2>\n

Brycki says choosing the right one comes down to investors\u2019 timeframes and understanding the advantages and risks associated with both.<\/p>\n

\u201cThere are many factors to consider before making a decision on whether to invest in either shares or property or both.\u201d<\/p>\n

These include budget, lifestyle, income, tax implications and even personal values. Brycki explains some factors to consider before making a decision.<\/p>\n

Investing in property vs shares<\/span><\/h2>\n
\n\n\n\n\n\n\n\n\n\n\n\n
\n

Considerations<\/h3>\n<\/td>\n

\n

Property<\/h3>\n<\/td>\n

\n

Shares<\/h3>\n<\/td>\n<\/tr>\n

\n

General<\/h3>\n<\/td>\n

Pros<\/strong><\/p>\n
    \n
  • Peace of mind and stable place of residence.<\/li>\n
  • Flexibility to renovate.<\/li>\n<\/ul>\n<\/td>\n
Cons<\/strong><\/p>\n
    \n
  • Easily bought and sold.<\/li>\n
  • Regular income from dividends.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
<\/td>\nCons<\/strong><\/p>\n
    \n
  • Lack of liquidity and unable to quickly change mind after initial commitment.<\/li>\n<\/ul>\n<\/td>\n
Cons<\/strong><\/p>\n
    \n
  • Not a physical asset.<\/li>\n
  • Generally more volatile in the short-term.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
\n

Diversification<\/h3>\n<\/td>\n

Pros<\/strong><\/p>\n
    \n
  • Lack of correlation with other asset classes and good protection against inflation.<\/li>\n<\/ul>\n<\/td>\n
Pros<\/strong><\/p>\n
    \n
  • Easy to gain exposure to thousands of companies to reduce risk.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
<\/td>\nCons<\/strong><\/p>\n
    \n
  • Poor diversification and highly concentrated in a single asset.<\/li>\n<\/ul>\n<\/td>\n
Cons<\/strong><\/p>\n
    \n
  • Entire market can have periods of weak performance.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
\n

Leverage risk<\/h3>\n<\/td>\n

Pros<\/strong><\/p>\n
    \n
  • Able to borrow more and leverage returns which can be great during times of low interest rates.<\/li>\n<\/ul>\n<\/td>\n
Pros<\/strong><\/p>\n
    \n
  • No leverage means you can\u2019t lose more than you invested.<\/li>\n
  • Interest rates typically have less impact on share prices.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
<\/td>\nCons<\/strong><\/p>\n
    \n
  • Higher repayments if interest rates rise.<\/li>\n
  • Leverage magnifies losses, so you can lose more than you invested.<\/li>\n<\/ul>\n<\/td>\n
Cons<\/strong><\/p>\n
    \n
  • No benefits of higher leverage during periods of high growth.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
\n

Taxes and transaction costs<\/h3>\n<\/td>\n

Pros<\/strong><\/p>\n
    \n
  • Potential for negative gearing benefits.<\/li>\n<\/ul>\n<\/td>\n
Pros<\/strong><\/p>\n
    \n
  • Potential for franked dividend benefits.<\/li>\n
  • Transaction costs and fees can be low.<\/li>\n
  • Involves very little ongoing effort after an initial investment.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
<\/td>\nCons<\/strong><\/p>\n
    \n
  • Relatively high transaction costs associated with buying, selling and property maintenance.<\/li>\n<\/ul>\n<\/td>\n
Cons<\/strong><\/p>\n