Investing in Stocks vs Investing in Property

A common question I get asked all the time is around shares versus property. Which one is better? Which one is going to be right for me, and which one’s gonna give the better return?


Let’s start out with shares, my personal favorite. Shares over the last 30 years, have given a return of about 13.5% per year. Property is just a tad over 10%, and that’s listed property. So property has a lot of different markets, but we’ll go with the average of 10.2%.


If you’re looking for the asset that returns a lot better results, shares are by far  better than property. The other side with shares is there’s less cost with owning them.


If you have $20,000 and you go buy shares, there is a small brokerage fee you have to pay, but at the end of the day, you’re generally going to come out and you’re going to own $20,000 worth of shares.

That’s the basic of shares. Better return and the fees are a lot less.


The biggest thing with property is you can leverage what you have. Let’s say you take $20,000 to the property market, you can go buy an asset that’s worth say $250,000.


That’s the biggest value that property offers. You can buy something much larger for your $20,000 than you can with shares.


Shares, if you have 20K, you buy $20,000 worth of shares. With property, your 20k can buy a $250,000 property.


There’s a whole heap of fees around here. Around five percent of that purchase price are going to come back in fees, and that’s a bit of dead money. That’s an advantage to shares where you don’t have that fee.


Let’s say you’ve got that 20K, and you put it down for a property, and you buy a $250,000 place.


Awesome. Let’s say that this place goes up by 10% for that year. So, 10% is $25,000 and the property’s now worth $275K.


But the main thing is the property went up by $25,000, so in theory just looking at it on paper and this basis, you put down $20,000 and you got a $25,000 increase in this property, so you’ve essentially doubled your money that you’ve had.


You can’t get that with shares. So these are the two things that you need to think about when you’re buying property or shares.


Shares gives you the best return, yes, but property gives you the best leverage. Even a smaller increase in that is still going to put you in front.


That $20,000 can give you access to a much larger asset. So over the long run, it depends what your investment strategy is.


The other thing that I will say is that with property it never goes to zero. It always has some value.


Sure, it may decrease by 50%, 60%, 70%, but it always has some value, unlike shares where we seen in the GFC, they can go to zero.


They can go completely bankrupt and you lose absolutely everything. So that’s the downside with shares.


Property, again, is something that you may have the opportunity to improve on If you’re buying a residential investment property, you may be able to go there and add a room, you may be able to add paint, you may be able to do it up and increase its value.


You have a lot more control. Unless you’re one of these guys like Warren Buffett, you can go and sit on the board of Coca-Cola and really have a say over the direction of the company, then shares is kind of left up to the general market and to the management of the company that you’re buying.


Having said that though, there are some great opportunities. Like the REA group whose stock price went from 5c per share in 2003 to $75 in 2018. A 1500% increase. A $1,000 investment would be worth $1.5m.


The basic message is shares give you better return; property gives you much better leverage.



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