Martin Hawes and property vs shares

[wfa]

Last night I attended the APIA meeting at which Martin Hawes gave a presentation based around managing your assetts and finances as you enter the golden years (approx age 50+) He posed a question of whether it may be safer, easier and equally (or more) profitable to obtain exposure to the property market through investing in managed property funds (such as strong blue chip funds like Macquarie managed property securites) It is possible (and become easier) to gear share investments with around 70% LVR the current norm, so leveraging is both possible with shares or directly owning property. Property currently still has tax advantages (cap. gains and LAQC's, although these are uncertain for the future) Managed funds are more passive and have greater portfolio diversification (which is what Martin liked about them as you seek a simpler lifestlye in those 50+ yrs)

I am 35yrs old and generally feel property rather than shares best suits my skills, resources and interests as a vehicle for wealth creation... I have a background in building and architecture. I own one investment property and have been steadily gaining knowledge and momentum towards growing my portfolio. I do however wonder about shares...?

I realise what is best for one person may not be the most suitable for another, but would value people opinions and thoughts on the topic of shares vs property investment.

regards
wfa

[LondonKiwi]

My general thoughts on the subject are thus:-

(1) I know the property market after studying this subject for 10 + years both as a passive observer and then an active investor
(2) Based on this knowledge I can quickly see a property that fits my criteria and decide whether I want to look into this further / (and or is a bargain) do my due diligence and then discount or purchase accordingly. .
(3) Property is something I can see view and walk around
(4) Property I can control in terms of adding value, marketing for tenants, tenants selection, financing and refinancing
(5) Shares are an investment form I have not had the chance to educate myself in
(6) Based on this I would not be in a position to see a company that is a bargain
(7) Shares are effectively a piece of paper reporting a share / equity amount in a company. A piece of paper can be "worth" a lot one day and then nothing the next. A property will always be work something to someone if its in the right area.
( I can not directly add value to the share price by adding value to the company other than by using the product and services of that company.

So in summary with shares you have less control that you do in property. When it comes to property funds I'd argue that you are at the mercy of employees making decisions for you based on what they think are a "good thing" . In my experience these so called "experts" know less than you and me!

Property wins hands down in my book and I haven't even started on the advantages of leverage!

That's my thoughts anyway.

LK

[SuperDad]

Shares vs. Property:

I think that it is good to have a bob each way.

One doesn't need knowledge about shares to get exposure to the sharemarkets (both local and internaitonal). Rather, one can invest in managed funds.

And why wait until one is in the "golden years" to diversify?

As for the more specific question, of property vs managed property funds, I think that if one is going to swap property ownership for managed funds, it would not be wise to invest all of one's capital in managed property funds. Diversification is good, mmmkay.

Paul.

[poormastery]

I prefer diversification

The poormastery take is that property tends to be a better asset class for wealth creation, whilst equities tend to be a better asset class for wealth r****tion.

When you don't have much money, the biggest risk can be to not take a risk. Perhaps in these circumstances being an undiversified speculator is better (you don't have much to lose by taking a leveraged but considered punt).

When you have money, you don't want to lose what you have. Personally I would prefer to diversify my assets across different asset classes (property, equities, commodities, cash etc) and have these assets denominated in different currencies. Perhaps in these circumstances the strategy is take a gamble with only a small percentage of your total holdings.

Thus spake poormastery.

Regards,
*poormastery*

[xris]

I believe you come back to the same old thing.

Property=Lower risk=less profit and less loss

Shares=the opposite.

There is more to understand about shares in every sense but for those who do then the money is there to be made. But if you don't then you will get hammered. Risk/Reward once again.

xris

[poormastery]

Risk and return?

Hi xris,

I would tend to respectfully disagree with you.

Poormastery would surmise that property investment is more risky than investment in equities, simply because the former is commonly a leveraged punt, whilst the latter is not (leaving aside derivatives - another topic in itself).

As a consequence of the leverage typical in property transactions, I believe property outperforms equities as an asset class over the long term.

The leverage involved in property makes it a better asset class for quickly generating wealth - or losing it, in my view.

A diversified international portfolio of equities (with other asset classes such as commodities, bonds, cash etc) which is not leveraged is unlikely to suffer catastrophic losses. The prices for these asset classes often move inversely against each other, reducing risk and return.

Regards,
*poormastery*

[Halfway To Paradise]

If you have investment property I don't see why anyone would want to invest in property company shares, that really is putting all your eggs in one basket. If you are going to buy shares surely you would look at all shares available as to what is the best investment sector. This may not/probably won't be the property sector.

[sarahd]

WFA said that Martin talked about leveraging shares as well.

How did he say you can leverage shares WFA?

S

[Realtorman]

Interesting thread. Why would a property investor who has good knowledge of the property market gained over a number of years want to place money in a share market of which they have little or no knowledge just because some commentators say the sky is going to fall on the property market.
How many times have we heard this over the years. How many times has the share market taken a fall or been stagnant.
Better the devil you know that the one you do'nt.
If this present market levels which it looks like doing some very good opportunities will come to aquire good investment propertys.
Why take the gamble investing in some dodgy shares that you have absolutly no control over and you are just there for the ride.

[rueben]

WFA said that Martin talked about leveraging shares as well.

How did he say you can leverage shares WFA?

S

You can leverage shares with a margin loan. Sorry - whats WFA?

[sarahd]

wfa is the person who posted this question

[Hound]

No reason not to do both. There will be days when you curse your property & days when you curse your shares. But they will never be the same day.

The biggest risk in shares is to diversify, the risk being little or no profit over time. Stay away from IPO's advertised on TV & full page newspaper ads. Watch your companies like a hawk, educate yourself about the directors, learn to read company news & reports. With diversification this becomes an impossible task. Finally don't use leverage to purchase shares.

[SuperDad]

Hound,

What do you think of using managed funds as a way of spreading risk? I presently prefer this option, rather than having to get educated about particular companies, and trying to diversify by purchasing lots of different shares. (However I'm presently working on my knowledge of the share and currency markets.)

Paul.

[Realtorman]

Managed fund returns tend to suck compared to your own efforts in investment. They are great for grannies.
Picking a good managed fund is even harder that picking individual shares yourself.

[rueben]

wfa is the person who posted this question

Sorry - Now I feel REALLY feel silly - not enough sleep last night. Thought it was one of those internet abbreviations...