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Property vs Shares – where should you invest?

Property vs Shares - where should you invest

Property vs Shares

If you've got some money stowed away that you're hoping to invest - particularly if you happen to be the proud owner of a self-managed super fund (SMSF) - you've got a conflict on your hands. There are legions of different avenues to invest your money. But when it comes down to it, you're probably going to be tossing up between investing in property and shares.

The most recent Russell Investments Long-term Investing report painted a complicated picture regarding this question. According to the report, while shares outperformed property during the decade to 2013, over the last 20 years, residential property investment brought a higher return to investors.

With either choice seeming like it has great potential, what will you decide to do with your SMSF? There are more factors to consider than simply the potential return.

 

 

The case for shares

One of the advantages of investing in shares is the relative ease with which you can enter the share market. It takes as little as a few thousand dollars, which makes it accessible and realistic for many consumers.

By contrast, according to figures from RP Data for the three months to May 2014, median house prices in Australian capitals range from $345,000 to $678,500. This kind of capital may not be at everybody's fingertips.

Moreover, the startup costs are much lower. While you'll have to pay a brokerage or transaction fee upon starting out in shares, this pales in comparison to the stamp duty - or five percent of the property price.

Finally, the liquidity - another way of saying how easy it is to sell or buy assets - makes shares potentially attractive. If you have a change in your finances, it's relatively easy to sell a few of your shares. The same can't be said for that two bedroom apartment.

The case for property

On the other hand, one of the big draws of property is that it is a relatively stable asset. The price of shares can vary wildly from one day to the next due to the ease with which they're bought and sold. And we've all heard the horror story of someone who invested into what they thought was a sure thing one day, only to find their investments had become worthless the next.

Property vs Shares - where should you invest

By contrast, owning a piece of real estate - a physical, tangible investment - can potentially bring more security. Anthony Fasso, AMP Capital Chief Executive International, recently commented on the trend toward investing in property in light of the risks investors see in the global economy.

"’Investors' planned allocation increases for the rest of 2014 are most pronounced in alternative assets especially in private equity and direct real estate and infrastructure,” he said.

Moreover, you can typically borrow money at a much more favourable rate to purchase a property than to buy shares. The volatility of shares means lenders are more careful about financing a loan for stock investors. By contrast, those getting home loans are likely borrowing for a much higher proportion of their purchase.

In all, there's no right answer. Either can be a strong investment - but you have to seek specialist advice to determine which works for you.

Read more at http://www.ratecity.com.au/savings-accounts/news/property-vs-shares-where-should-you-invest#SR9KjGfI4zJtravE.99

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