Investors Discuss Property Versus Shares

The debate on whether to invest your money in property or shares continues in PropertyTalk’s discussion forums. Over the last decade, our property centric forums have enjoyed comparing the two investment types, but it’s no surprise more users have staunchly favoured property.

In the latest discussion sentiment suggests the tide is turning and shares are looking a rosier option. Why the change of heart and is it just emotions running high due to tenancy rules changes or are property investors convinced the grass is greener with shares and the time is coming to sell down their property portfolios?

Your Money Needs To Make Money

Irrespective of where you invest your savings and gear it up with leveraging, your money needs to make money; therefore, the numbers have to add up. Your investment incomings (rental income, shares dividends) must exceed outgoings (interest payments, fees, etc.) and a ‘profit’ made. It’s this number that’s continually debated, can you make more money from investing in property or shares?

Inc asks the question “should you invest in Real Estate or Shares” and while experts say, over the long term it’s the share market that is a better investment than the property sector; however it’s not that cut and dry, and it can not be proven. The investment types are not the same, so you can never compare them equally.

All types of investment come with risk, and it’s our personal preferences which dictate what we invest in so there really can not be one outright winner.

Some investors will always prefer ‘bricks and mortar’ and buying the physical land and home. Whereas when you invest in shares, there’s less emotion, you’re purchasing a piece of a company, and one you don’t have any actual control over unless you’re buying a controlling share of it. For many folks, having the full control of the asset is the only way they will proceed.

Property Is Personal

So where do you invest your savings, and maybe use leverage will come down to your personality and preferences and on PropertyTalk. At the same time, many investors will always favour property they will continue to analyse which is performing better at the time of writing.

One PropertyTalk forum user says:

I can go dump money into an index fund and earn 9% with no hassle

The same user says the return for his rental property portfolio is 6%. While a situation like the one above doesn’t look ideal, it may still be a great investment.

However low yields and cash flow problems will make selling up a more attractive option for some landlords but remember the share market also has its challenges. Fluctuating share prices equally unnerve investors in much the same way a 10% or more drop in house prices scares many property owners.

Shares Easier To Diversify

With shares, though it’s easier to diversify than it is with property and your money is not tied up in the same way as property ownership. It can take weeks if not months to sell a property, whereas you can sell shares within hours if not minutes.

Property is, however, a great place to park your money to hedge inflation and provide housing and the latter is ‘emotional’, i.e. there is a ‘feel-good’ emotion from providing a home and in a small way know you’re ‘doing good in the hood’.

Leverage

One of the core debates in the current property vs shares discussion is on how easy it is to leverage against your asset. Is it easier to leverage, i.e. get a loan against the security of a property or shares? Inc says it’s easier to leverage against stocks than real estate whereas some real estate investors believe it’s the other way around and easier to get a loan against a house.

What’s indisputable is, it’s easier to get started with shares, as the investment required is a lot less than purchasing a property. If you’re starting, maybe you use the share market to build up a deposit for your first property and continue with both strategies.

Whichever way you look at it, all investing is risky, and global events can change the certainty of ROI from any investment in the blink of an eye. Putting all your eggs in one basket is more precarious than a diversified approach so maybe invest in both shares and property.

Whatever you invest in, study the historical performances and understand the cycles, so you know when to buy, hold and sell. Plus join in discussion with experts, they’re sure to let you know what’s working for them.