Shares vs Property: What do I invest in?

March 25th 2024 | Categories: Investing |

It doesn’t have to be all or nothing.

These days surplus cash can feel like a scarce commodity, but it’s always worth thinking about your next investment move that will help reach your future goals and ultimately lead you to live your best possible life. At the heart of many wealth building strategies lies the timeless debate of property versus shares. While there’s loyalist on either side, both options offer distinct advantages (or hurdles). Let’s stack up the commonly discussed factors when it comes to investing in:  

Property: 

Pros: 

• Potential for physical value enhancement in investment. 
• Active investors can achieve high returns. 
• Tax benefits such as negative gearing, depreciation, and primary place of residence (PPOR) capital gains exclusion. 
• Acts as a hedge against inflation. 
• Generally, exhibits lower volatility compared to other asset classes. 

Cons: 

• Requires active management. 
• Substantial initial capital investment necessary for a deposit 
• Significant entry, ongoing and exit costs, in addition to initial investment.  
• Lack of diversification—limited to one asset class in a single location. 
• Risk of mortgage stress, with unforeseen interest rate increases or tenancy issues. 
• Vulnerability to various unforeseen incidents such as property damage or maintenance issues. 
• Illiquidity—may take at least 6-12 months to liquidate the investment. 
• Cash flow dependency, necessitating a sizable buffer for emergencies. 
• The possibility of severe financial repercussions if things go awry. 

Shares: 

Pros: 

• Passive investment requires less time and effort. 
• Offers extensive diversification. 
• Low entry and exit fees. 
• High liquidity—ability to sell partial holdings as needed. 
• Minimal bookkeeping requirements. 
• Franked dividends may be advantageous. 
• Limited potential loss to the invested amount. 

Cons: 

• Inability to physically enhance or add value to the asset. 
• Lack of control over investment performance—susceptible to market fluctuations. 
• Limited leverage opportunities (in comparison to property investments) 
• Potential for margin calls if leveraging is pursued. 
• Higher volatility compared to property. 
• Fewer tax advantages (again, in comparison to property investments).  

Still on the fence? No investment decision should be made at face value, rather dependent on your tailored investment strategy. All well informed investment strategies should take into account…  

1. Your income 

Looking to travel extensively, quit your job, go back to study or start a business? Many big life decisions can impact the future state of your income. The key factor of investing in property is your ability to service that mortgage, especially if you undertake a variable loan that recent rate rises. 

2. Your involvement 

 Investing takes work. Some investment products and strategies are more time-consuming than others. Jumping into the real estate game or selecting stocks can be a lengthy and involved process, while investing in index funds or ETFs can be considered a much simpler process. It’s a common misconception to believe the most important factor when selecting an investment product or strategy is the one that will make you the most money. Whether it’s shares or property, any investment that inspires dread, anxiety and procrastination is not a desired one.  

3. Your resilience 

Mindset is ultimately everything when it comes to financial freedom. As mentioned above, if your investment product is causing you a myriad of negative emotions – the journey might not ultimately be worth the pay off.  

One advantage of investing in property lies in its intrinsic value and widespread acceptance within Australian society as a celebrated and familiar investment avenue. This familiarity often fosters a sense of security, albeit potentially misplaced. Unlike shares, where market data is readily available around the clock, property investments shield investors from 24/7 market updates. There’s less opportunity for knee-jerk reactions to market fluctuations, mitigating the tendency to panic over temporary downturns. No matter what you pick, be honest with yourself and be prepared to build resilience through the highs and lows of investing.  

No matter your choice between investing in property or shares, you are ultimately what plays the pivotal role in the success of an investment. Designing an investment strategy that aligns with your financial goals, values and personal circumstances is the key to winning in the wealth management space. 

Our trusted financial advisers are here to help no matter the stage in your financial journey, book a session today to discover how we can empower you to live your best possible life.  

You may also be interested in our articles:

• Buying shares vs investing more into your super
• How will you use your super?
• How to boost your super with a lump sum
• Is it better to invest in property or shares?

Want a Complimentary Consultation?

Fill in the form for a complimentary consultation with a Financial Adviser and start living your best possible life.

What you need to know: This information is provided by Invest Blue Pty Ltd. (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice regarding those matters and seek personal financial, tax and/or legal advice before acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.