The Great Investment Debate: Shares vs Property
The Great Investment Debate: Shares vs Property
- November 11, 2018
- Posted by: Daniel McGregor
Given we’re seeing both property and shares dropping in value at the moment, it seems a good time to write this.
Most of us think investing is something we should do but with so much information out there, it becomes overwhelming. Just the word ‘investing’ is enough to scare many people! Investing seems complicated, hard to understand and something only rich people do. Here’s the thing… investing isn’t something only rich people do, it’s something smart people do. The reality is that if you ever want to be financially free, investing is something you MUST DO!
So many options, so much information, so many people trying to sell you different things… many people find themselves paralysed with indecision and never get around to investing. Or they only take it seriously when the alarm bells start ringing close to retirement, by which time it’s too late to make use of the most powerful investing tool available to you – time.
Speaking of time… NOW is the time to invest! That’s because if you sit around waiting for the perfect time to invest, that day will never come. There is always bad news in the world and if you use bad news as a reason not to invest, you will never invest.
So, where to from here? When it comes to investing to grow your money, there are millions of options, however, at a broad level, we can break it down into two options – shares and property.
For most Australians, investing in property is something they feel comfortable with… after all, they’ve bought a home for themselves, so they feel like they have some experience. It’s reasonably easy to borrow to buy property, and people like the idea of being able to drive past their physical asset and see that it’s still standing. Emotionally, an investment property is reasonably easy to cope with. That’s the end of the list of the positives of investing in property.
Property is expensive to buy and expensive to hold on to. Many people buy an investment property without having factored in that properties wear out, things break, things need fixing – carpets, curtains, heating, air-conditioning, plumbing, electrical… there’s a lot of expensive maintenance in owning an investment property. Not to mention the rates, the insurances and the cost of paying an agent to manage the place.
“It’s tax deductible”, I hear people say. Which leads to the issue of negative gearing. Negative gearing means losing money, the investment is running at a loss. A story for another time, but tax deductions should not be the rationale for investing hundreds of thousands of dollars into a single investment.
And lastly, as an investment property owner, you have to deal with tenants. I’m sure you’ve heard a few horror stories there. That is, of course, if you have a tenant. If you have no tenant, you have no income from the investment!
Now, mention the word shares and everyone starts to panic! Why?
Well, the simple answer is that people fear what they don’t understand. Most people’s perception of shares comes from seeing bad news stories on the news. Now it doesn’t take a media expert to know that the media thrives on selling us bad news. Bad news gets our attention. Can you ever remember seeing half an hour of good news? When the stockmarket has a big fall, it’s ‘news’. When it goes up a lot, it’s only in the finance report which most people don’t watch.
Do shares go down? Yes! We regularly have sharemarket falls. Just the same way as the property market goes in cycles of ups and downs, so too does the sharemarket. Shares just tend to have more measurable ups and downs.
But here are the facts… relative to property, shares are cheap, easy to buy, easy to diversify, easy to manage and easy to sell. Investing in property is a high-cost, high-risk investment strategy.
As an INDEPENDENT financial adviser, I could easily recommend my clients buy investment properties, but if I did that I’d be going against all the knowledge I’ve spent years studying and working to accumulate. My clients pay me for advice, not to sell them products. It’s worth mentioning that my wife and I owned an investment property in Melbourne many years ago and we did really well out of it. However, we’ll never own another investment property, as there is a far easier, safer and logical way to make money… that is, becoming a part owner of the biggest and best companies here and around the world. So, if like many people you’ve been scared of shares, then let’s change the name… don’t buy shares, buy businesses! Becoming a part owner of the ones you pay money to every day of the week is smart investing. Makes sense doesn’t it!
If you want to learn more about you can become a smart investor by SAFELY investing in businesses, just give me a call for a FREE financial health check.
Cheers,
Daniel