Property versus shares

Property versus shares – where is it best to invest?

It’s been a close-fought fight for many years, and diehard supporters of each side have zero respect for the opposition.

Both shares and property have looked like punch-drunk former champions in the years after the GFC. But for an investor the answer to the top question is pretty simple. And, as a bonus, it rhymes.

If you want long-term growth, consideration should be given to both assets classes.

Cash is a safe haven but never a growth investment, and in recent months its returns are looking pretty ordinary

If you remove one of the other two from your investment portfolio, you’re not left with much diversification.

Of course, there are many different types of property and experts recommend holding a mixture if you can. The biggie for Aussies is residential real estate, but commercial property ranging from retail to industrial to holiday apartments can be bought directly or through investment funds.

Direct shares are simply small slices of a business, and will make you a part-owner of household names such as Woolworths, the Commonwealth Bank, Telstra, Coles and Bunning’s*

If you own both direct property and shares, it can help balance your asset mix because they tend to follow separate paths.

When shares were in the scrap heap in 2008 and early 2009, direct property was doing pretty well.

Similarly, direct property has been flat this year but shares have sparked into life since July 2012.

Direct shares are a lot more volatile than residential real estate, but also have much lower buying, holding and selling costs.

You can touch property, of course, but you can also hug a Woolworths store if you really want to; not recommended!

Millions of Aussie investors have been burnt by investment and superannuation losses in recent years, but if you ignore direct property and shares you’re only ever going to have low-income cash investments where the value of your initial dollar gets continually eroded by inflation.

Nobody expects either option to shoot the lights out in 2013, so taking a long-term view is vital. Both options should be viewed as long term investment options, beyond 7 years is normally suggested.

Also vital is the ability to sleep at night when volatility strikes and an investment time frame that lets you ride out the inevitable future storms.

Shares versus property? There are no losers. Or winners, depending on your view of the world.

*Refer to General Advice Disclaimer below.