Shares or Property?

[shezian]

Which do you think is a better investment, shares or property?

My mum keeps telling me that property is the best and l keep saying shares. She sais the bank will always lend you more for property whereas for shares they won't.

She has done very well out of property so l guess she just feels more comfortable with this kind of investing. For me property just seems to be a headache and moves too slow for me.

What are your thoughts?

Thanks Sue

 

[Judd]

First, I doubt whether you will welcome my comment.

Why care what your mum or anyone else thinks? I will assume you're an adult so it's your money. Invest it however you want and in a manner which is comfortable to you with the proviso it's done in a legal manner of course.

 

[radson]

ooh my first post.

Im an investor agnostic and have had property and now have managed funds and shares, looking to purchase some property again.

Does it have to be an either or scenario. If possible diversification is the key isnt it?? Can you invest in both or do you have to be locked into one or the other.

You certainly can borrow money from the bank from shares. Im sure comsec would love to lend you some moola at 6.99& fixed. All the benefits of positive or negative gearing without having to figure out depreciation or pay stamp duty etc.

But yeah property is more tangible, you can see it, inherently more stable...although I love the hypothetical question of what the markets would be like if shares were valued once a year and property 1000 times per day.

Both property and the ASX and Dow are considered expensive at the moment, but only other options seem to be to park your money in ubank accounts and earn a whopping return 1 percent and a bit above inflation.

If you do have money set aside for property i.e the deposit, and the stamp duty and teh gazillion fees that are leeched of everyone at the beginning of the property buying process , then perhaps you can get a sneaky $100 a month into a managed fund. Im currently with foragerfunds (formerly intelligent investor) and quite like their style. ..or hey if you chuck all your money into shares, how about picking up some A_REITS. to get exposure to commercial property. I have the VAP Vanguard Property index thing happening. Its been steadily increasing and paying a decent dividend too.

So yeah, not an easy decision and in my opinion be aware of people who are too evangelic about their investment class of choice.

Good luck.

 

[Value Collector]

Which do you think is a better investment, shares or property?

In my opinion, having both in a long term portfolio is a good Idea

My mum keeps telling me that property is the best and l keep saying shares

.

What's her argument for property?

Whats your argument for shares?

She sais the bank will always lend you more for property whereas for shares they won't.

You can lend to by shares, and the bank can use both shares and property for security.

But why would you want to go in the maximum of debt? I would never choose an asset class just because the bank lends the most to it

What are your thoughts?

The point of my investment portfolio is to supply me with Cash flow to fund my life style, while growing my capital base and protecting my funds from being eroded by inflation.

To achieve this out come I use both Shares and property,

The share market is a great way to get exposure to a cross section of businesses, by choosing a mixture of good businesses, you can ensure your share portfolio will see growing cash flow and an appreciation in market value over time.

Owning some property will give you a steady weekly income regardless of the share market fluctuations, your capital value will be protected from inflation, and you should see some market value growth even after inflation as the population grows.

Both asset classes are subject to fluctuations though, and you have to be able to identify value when making purchases, the share and properties market can both offer good value sometimes and terrible value at others.

 

[Value Collector]

ubank accounts and earn a whopping return 1 percent and a bit above inflation.

yep, and if you factor in a 30% tax rate the return is negative.

I much prefer good property and good businesses to cash.

It fluctuates, but I try not to keep more than 3 years living expenses in cash, any more than that and I am unhappy.

 

[darkhorse70]

Property is crap imo. After you adjust for inflation, maintenance, fees, agents, interest assuming you have a loan you are left with very little. Maybe a couple percent. Given the liquidity of the stock market, the slippage etc and the awesome returns which you can find as well as the more predictable/less volatile id always go for shares. Hey but what do I know im only 21 and have had neither haha.

 

[ROE]

Shares vs Properties it doesn't matter and none is much better than the other
the key is what you comfortable with and can sleep at night and don't get heart attack over it.

each asset class has its pros and cons there is no clear winner, it comes down to personal preferences
and what you can deal with

All successful investors can make both properties and share works... Price you paid for an asset is more important what it is

 

[ROE]

Hey but what do I know im only 21 and have had neither haha.

you definitely got more to learn by just ruling out properties as a no go zone.

 

[Judd]

Property is crap imo. After you adjust for inflation, maintenance, fees, agents, interest assuming you have a loan you are left with very little. Maybe a couple percent. Given the liquidity of the stock market, the slippage etc and the awesome returns which you can find as well as the more predictable/less volatile id always go for shares. Hey but what do I know im only 21 and have had neither haha.

Maybe or maybe not. Whichever is the better I still wonder, given the way the OP has phrased the matter, if the issue of who is to make the decision, the OP or the OP's mum, has been resolved.

 

[Value Collector]

Property is crap imo. After you adjust for inflation,.

Inflation is the value of money going down, By owning a Building and land, You are hedging against inflation. Over time you should see your weekly rent and the capital value of the property increasing with inflation (provided you didn't over pay to begin with)

interest assuming you have a loan you are left with very little

.

That's true with both property and shares, the market average dividend yield is 4.3%, Margin loans are around 6.9%, so a 100% loan will see shares produces negative cash flow.

Given the liquidity of the stock market,

that's a pro and a con, the liquidity has allowed many people to panic sell, locking in losses at the worst times, when holding would have been the best thing to do.

the awesome returns which you can find as well as the more predictable/less volatile id always go for shares.

I agree the returns can be awesome in the share market, I can't see how you can say they are less volatile though.

Hey but what do I know im only 21 and have had neither haha

hopefully you'll get the chance to own both eventually.

 

[beachlife]

It seems to be accepted that both have similar growth returns and both have similar cash returns by div's or rent, but property has way more expenses and less flexibility.

property has
Much higher stamp duty
higher real estate agent commissions
land tax
management fees
rates
maintenance
tenant hassles
no way to insure against a down turn
very poor liquidity
and if you need a bit of capital back its impossible to sell a portion of it.

Shares are far superior, just no reality TV shows pumping them up.

 

[Value Collector]

It seems to be accepted that both have similar growth returns .

I don't think that is the case, I mean a well chosen growth business can certainly grow at a much faster rate than the compounded effect of inflation and population growth would allow a properties price to increase.

I think the benefits of property eg, stability, regularity of income etc mean it is worthwhile having in a mixed portfolio as insurance against a gfc event where share prices and dividends were slashed.

out side of that though well chosen shares should perform better, But its still probably worth owning atleast your own home.

 

[shezian]

Inflation is the value of money going down, By owning a Building and land, You are hedging against inflation. Over time you should see your weekly rent and the capital value of the property increasing with inflation (provided you didn't over pay to begin with)

.

That's true with both property and shares, the market average dividend yield is 4.3%, Margin loans are around 6.9%, so a 100% loan will see shares produces negative cash flow.




that's a pro and a con, the liquidity has allowed many people to panic sell, locking in losses at the worst times, when holding would have been the best thing to do.




I agree the returns can be awesome in the share market, I can't see how you can say they are less volatile though.




hopefully you'll get the chance to own both eventually.

Does property double every 10 years? Also, what has property returned over the past 20 years compared to shares? Lastly what is considered a good return on shares? For me anything over 30% per annum is considered good. Is this to0 ambitious? I know through experience l can achieve this, and maybe this is the reason why property doesn't seem lucrative. Less dealing with the banks, less paperwork, less dealing with tenants, and liquid.

 

[ROE]

For me anything over 30% per annum is considered good. Is this to0 ambitious? I know through experience l can achieve this, and maybe this is the reason why property doesn't seem lucrative.

if you can make 30% return a year you can be a billionaire in less than a life time
starting with 30K

Is this too ambitious?

 

[RADO]

If you are looking at real rate of return, historically shares have had a higher rate of return followed by property, fixed interest and cash. This isn't personal opinion, this is fact. Nevertheless property is still a real good way to invest if you know what your doing.

 

[RADO]

if you can make 30% return a year you can be a billionaire in less than a life time
starting with 30K

Is this too ambitious?

This Fund has achieved those figures http://microequities.com.au/our-funds/deep-value-microcap-fund/?gclid=CjwKEAjwiumdBRDZyvKvqb_6mkUSJABDyYOzyzGGvVRy6y2oNFqllzTGIJf61CJcz-7FRJdtUiLgABoC7Z7w_wcB although they haven't been around for to long, inception date is 2009 and recently they raised their minimum investment amount from 50K to 100K, morning star highly rates them as well.

 

[Value Collector]

Does property double every 10 years? .

In some 10 year periods it would, you need a compounded rate of 7.2% to achieve a doubling in 10years, If you are counting the total return including rent it would be pretty close to that figure. eg that 7.2% return might be made up of.

3% Inflation based Capital appreciation
3% net rental return after expences
1.2% Actual property value growth due to population growth

Also, what has property returned over the past 20 years compared to shares?

Depends on the area and property type. different areas have seen different value growth and different property types see different rental returns

Lastly what is considered a good return on shares? For me anything over 30% per annum is considered good. Is this to0 ambitious? I know through experience l can achieve this,

30% per annum is a good return in any one year, But if you could achieve that consistently over decades, that would make you the most successful investor of all time. Warren Buffet is regarded by many as one of the greatest investors of all time, and over his life he has averaged 23% (or there abouts).

You'll have years where your up, others where your flat and some where your down, But if through all that you can average 10 - 15 % across your portfolio, your going to do very well.

If it comes to working out what rate you need to get to live off, be more conservative, do your calculations based on earning 8%, and have a couple of years living expenses and your own home paid off, that will give you a nice buffer.

and maybe this is the reason why property doesn't seem lucrative. Less dealing with the banks, less paperwork, less dealing with tenants, and liquid

I wouldn't suggest rushing into debt to get property, but once your starting to get a decent net worth, it starts to make sense to have some property, At least your own home.

 

[Value Collector]

This Fund has achieved those figures http://microequities.com.au/our-funds/deep-value-microcap-fund/?gclid=CjwKEAjwiumdBRDZyvKvqb_6mkUSJABDyYOzyzGGvVRy6y2oNFqllzTGIJf61CJcz-7FRJdtUiLgABoC7Z7w_wcB although they haven't been around for to long, inception date is 2009 and recently they raised their minimum investment amount from 50K to 100K, morning star highly rates them as well.

That funds only been operating since the bottom of the GFC crash, So they have only been around for the Boom part of the boom bust cycle. coming out of the gfc we were in a very target rich environment, there has been years I have made over 100%, It would be silly for me to think this is always going to be the case.

 

[shezian]

That funds only been operating since the bottom of the GFC crash, So they have only been around for the Boom part of the boom bust cycle. coming out of the gfc we were in a very target rich environment, there has been years I have made over 100%, It would be silly for me to think this is always going to be the case.

This 30% return is the average over 25 years. Some years can be as low as 5% and as high as over 120%.
I tend not to trust in investing my money in others as l know there a huge risks in never getting your capital back, and have lost trust in investing with others from previous experience.

I would love to be able to borrow to invest more into my trading as l know its a fantastic and secure low risk investment.

Did Warren Buffet make 30% each and every year, or were the returns variable from year to year?

 

[shezian]

This 30% return is the average over 25 years. Some years can be as low as 5% and as high as over 120%.
I tend not to trust in investing my money in others as l know there a huge risks in never getting your capital back, and have lost trust in investing with others from previous experience.

I would love to be able to borrow to invest more into my trading as l know its a fantastic and secure low risk investment.

Did Warren Buffet make 30% each and every year, or were the returns variable from year to year?

Sorry what does Morning Star Rating mean?