The first question you are likely to ask when entering the world of investing is: “where is the best place for me to invest my money?” Investing takes many forms but often the most common choice is between investing in property versus alternative methods like stocks or shares.
Investing is an important part of a wealth creation plan, offering a way to save or build your wealth through a tangible asset. There are pros and cons to property and alternative options, so make sure you consider every avenue before committing.
Risks and Returns
When it comes to your Return on Investment, comparing property versus something like stocks can be difficult as the factors affecting price, value, and returns are unique. However, history shows some similarities, with both real estate and stocks taking a hit during economic recessions.
When it comes to risk, economic highs and lows aren’t the only things to consider. When it comes to property, the risk is in the long game. You can’t expect immediate results and you can’t cash in a property quickly. You may also have to deal with repairs and maintenance and hiring staff to help with the management of the property.
On the other hand, while stocks require less hands-on work, they can also be much more volatile. Fluctuations in the market happen all the time and can be huge in either direction. You also need to ensure you diversify so you don’t have all your eggs in one basket.
Despite these risks, there is high reward with both and choosing the best strategy for you is likely dependent on the cons you are willing to take to get the pros.
Property Investment Pros and Cons
PROSHistory of steady returns You receive a passive income There are tax advantages You have the ability to leverage the asset Accessible |
CONSYour money is tied to one investment It’s labour-intensive Appreciation isn’t guaranteed Requires large initial capital
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Stocks and Shares Pros and Cons
PROSEasy to diversify Minimal transaction fees Highly liquid
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CONSExtremely volatile Requires diversity Selling can trigger big taxes Can be confusing |
At the end of the day, any investment comes with a certain amount of risk and reward. Typically, it is recommended to invest in more than one area if you can. Property is one of the most common investments a person makes in their life, but this can be supplemented by stocks and shares. Understanding your options and having a wealth creation plan can help you far into the future. We partner with trusted financial advisors to help our clients make the right decisions, so get in touch to find out more.
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Considerations For Finding The Right Investment Property
