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Property or Shares?

by Shane McGrath

13 May - 2010 - 12:00 AM

Tags: shares-property-investment


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Which is the better investment? It's a question that comes up again and again. Let me first say that there is no right answer, it all depends on your own situation and your own goals. This point is very important because we are not all the same we have different jobs, family concerns, tax concerns and different risk tolerances.

While some experts are firmly in one camp or the other, many agree a portfolio that has some of both is the best for most investors.

Property was the “in” thing for many years through the boom – now the market has cooled and looks to be starting a new upward trend. This has happened time and time again doubling about every ten years. The one thing this points out is that residential property operates in a cycle, so too does the share market and it generally operates in opposite to residential property. When prices tend to rise in the share market property tends to cool and when the property market is booming the share market cools. This is a generalized over simplification of the cycle as many things affect the economic cycle but you get the picture.

So again the question of which is better is crazy, it's more of a question of what investment do I feel comfortable with and what investments do I hold to achieve my goal. Properly selected property can make you rich so can properly selected shares. Just think for one minute that you could invest in the very same products that the richest people in Australia invest in, do you think that could be a wise investment? Believe me they don't like losing money just like you!

I find talking to clients that most are bias towards residential property because they understand what it is and how it works, and shares are that risky thing that rich people do, and that is where the issue lies it's in the understanding. If you truly want to make an informed decision then you need to understand both sides.

So where do you start, the ASX has great resources on understanding the share market and they offer small online courses that you can access for free on http://www.asx.com.au. Then maybe look to a financial planner to get started.

Property investment can be just as confusing not in the sense of how to buy but what to buy, just in selecting shares that will appreciate you need to select a property that will increase above inflation to make you money. There are many property seminars that you could go to but unfortunately most have another agenda, so a good place to start is read a lot of Australian books on property and property investment. The books by Jan sommers is a good start, Access One also has a great resource of information from researching property prices to structuring your finances to maximize profits.

Only when you understand both sides can you make an informed decision but remember having all the information is only one part of the equation, doing something is what will make you rich.


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