John's Thoughts: Shares vs Property
Let's box it out!
30/04/2015 by John Hopkins, Executive Chairman
This age old debate is nearly always a disgrace; a disgrace because often the people leading this argument are either driven out of vested interest or ignorance (or sometimes both).
I was recently listening to ABC radio and Marcus Padley of Marcus Today, a regular share market commentator, was discussing investment and the industry generally. I believe his down to earth, experienced and fearless advice and conversation is a delight to listen to (especially when much commentary in the media can be considerably bias). Marcus’ commentary led me to think about the importance of people understanding the basics of investment.
There are three categories of investment; cash, equities and property. There are three ways to invest in these three categories of investments; directly, in some form of syndicated investment or in professionally managed investment funds.
And whilst superannuation should most definitely be considered an investment (assuming the superannuant is placing their funds in accordance with the regulations), it is not a ‘category’ of investment, nor is it a method of investment; it is a tax benefitted circumstance for certain long term investment funds.
The foundation stone for correct investment management of a portfolio is balance; balance for a spread of investment and a spread of risk.
When it comes to balance across the three types of investment categories, it can be balanced by cash for reserve and flexibility purposes, and equities and property for growth.
Balance is not simply one category of investment; rather it should be all three. Depending on individual circumstances (and taking into consideration the relevance of gearing and, to a degree, the timing of entry in the market) balance of investment should be both equities and property.
I urge you to be cautious of organisations that endorse or advise against a complete balance of investments.
There are certain financial planning organisations that advise their clients to only purchase shares in property related corporations, property trusts or property related managed investments.
Whilst certain property trusts may be appropriate for certain investors, very often these investments do not, or are not able to, perform in line with real property markets. This is because they often respond more with share markets. Also, the asset value of these options may be severely impacted by the market exchange mechanism, not to mention the fact that they are often illiquid.
Direct property investment is a real and important option for many investors of all ages.
When considering any type of investment, ensure you receive appropriate advice and do not be misled by the uneducated, irresponsible or vested.
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