The Low Down on Investing in Property and Shares – Which is Right for You?

| March 27, 2014

Land For Sale checklist for investment property

Anyone who knows anything about money will know that one of the worst things you can do with savings is just leaving them lying around in your bank or even a regular savings account. Not only are interest levels from the majority of banks laughably low, you are also missing out on getting potentially huge returns and profiting from other investments. Sure, some investments can be risky. Indeed, all and every investment carries some degree of risk. But if you do your research right and are careful, these risks are very low, especially when you consider just how great a return you could get. Plus, where’s the fun in playing it safe? Nobody ever became successful by being overly cautious with their cash.

Investment checklist before investment

Investing can be hard work, but it is also a fun and educational activity, and once you have learnt the basics, it is one that will serve you for the rest of your life. Knowing, or deciding, what exactly to invest in can be tricky business. There are a few things to consider before you start, as these will influence your ultimate decision. Think about just how much money you’re dealing with here, and what your ultimate goals are, how much free time you have to monitor everything, and so on. Property and shares are, of course, the most popular ways in which to invest savings and money that is just otherwise doing nothing. But which is the way forward for you? Here are some pros and cons of each to help you decide and get your investment mind racing.
Investing in property

The property market is doing pretty well right now, with interest rates at their lowest in years, and has subsequently became an increasingly popular choice with Aussie investors hoping to make some money. According to an end of year report by top news site, the property market rose to 9 per cent in 2013, a significant boost. However, despite the future looking bright and secure for property investment, the gains are predicted to be a tad more steady in 2014, so don’t be overly optimistic or expect it to rise too much more. 
One of the biggest cons of investing in property is that the property market is incredibly unpredictable, and trends are inconsistent from place to place, making it considerably hard to follow. Just take this data from real estate property valuation and risk evaluation experts RP Data, for example. According to their research, Australia’s house price growth can vary from as little as 1.8% to 14% in one place to another (Adelaide and Sydney retrospectively) in the same time period. Some of this is just common sense and requires a little foresight and research into housing trends, but it can still be confusing. It’s not all bad news from RP, though. In their Autumn Investors Guide, they have also predicted that while there will be various discrepancies, in the next decade house prices will double in as many as 250 Australian suburbs
Which brings us to the next pro, or for some, con, of property investment. Property typically brings in the highest return over a long period of time. While you can make money from it in a short period, it is in the long term, when the property valuation has gone up and up and you have made use of it in the mean time, that you will ultimately see big returns. Another pro of property is just how versatile it is. It won’t just be sitting there – you can use it yourself or rent it out to make even higher returns. Renting out can provide a steady second income, though requires extra time investment too, making it less ideal for those working full time. 
A big con of property is that it requires a big sum of money to get started and put deposits down. For many, this is not affordable and makes property investment out of the question. You also have to take into account stamp duty, an added cost at the beginning. A pro is that unlike shares, which change in price constantly, property prices are much steadier and in that sense, more secure.
Investing in shares

The great thing about shares is that once you learn the basics, it’s fairly easy to get things rolling. The lack of red tape is liberating, especially considering how much is involved in the property market. Not only that, you also don’t need that much money to get a great start and begin seeing steady returns. They make for an easier investment, and one that is easy to monitor alongside a full time job. You are in control of how much time you wish to put into it, while with property, you have little say if you want a steady income.
Another plus: unlike property, shares are flexible. Once you’ve invested in a particular property, getting it off your hands quickly and easily is virtually impossible, and you are basically stuck with it for a long time. Shares, though? No problem. They are flexible by nature, and you can sell and buy in an instant. You can also sell off parts of shares, whereas with a property, that option is absent. This makes the whole thing more exciting, too, and you are more likely to stay engaged and interested. Australia only makes up 3% of the share market, which is a con, but a pro is that you can easily invest your money globally. Getting involved in property opportunities overseas would certainly not be so easy going.
The final decision

Ultimately, there is no clear winner here. Both shares and property have their fair share of pros and cons, and which is preferable is really dependent on your risk profile, your financial and personal situation, and your long term goals. Last year, the Australian Securities Exchange (ASX) and Russell Investments did a study which showed little difference in the returns of each over twenty years; though Australian shares returned 8.9% capital growth compared to property’s 6.5% over ten. With a positive, yet realistic, outlook, plenty of research and thought, the chances are you can make a good return on either of these.

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Category: investment property, Investor

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Property man writes articles related to property , stock market and finance. if you like what you see do bookmark the blog and leave me a comment

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  1. I wantted to thank you for ths fantastic read!!
    I definigely loved every bit of it. I have you saved as a fasvorite to check out nnew stuff you post…

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