Why Property is Better Than Shares

@Realist35 the link above in @Anne11 's post explains LICs etc on pp3-6 or so....

 

back to the original question...................

is property better than shares???? Damn right, if you invested in Sydney and Melbourne, doubling your money in 3 years and leveraging, its bloody amazing.

Of course I may change my mind in 6 months time if property goes pear shaped and I got caught with my pants down.

 

Property better if you're an active investor and capable and time-able to monitor the market to buy, improve, and sell right, and actively manage along the way. Leveraging is great, but you can also get caught out, and possibly selling an IP at a loss because you leveraged at the height of the market, then the market falls and at the same time, are forced to sell (for whatever reason) at a lower price. Renovating isn't what it used to be - buying the 'cheap' reno to turn the sky-high profits is harder (but not impossible, just need the smarts)

Shares are better for those set and forget, but you aren't able to leverage (unless you have the risk appetite for margin lending....)

 

That's still a huge amount of money, 2.4M of cash per household

I figure we'll only need 1M cash to retire back in Europe as it's much cheaper. With 5% paying dividends that's 50k py for both of us, very comfortable lifestyle.

 

Its all about timing regardless whether it shares or property.

If you purchased shares when it crashed in 2008? margin loan that it also risky dependent on size of loan and stocks.

Same as property .... if you purchased in Adelaide in 2013 or Brisbane you could be ****** off, no growth and paying debt. If you purchased in rising markets Syd and Melb you doubled your money.

Active investor what does this mean? I thought we were all active investors, watching for the signs so we don't buy at peak or in downturns. Would you believe people are buying in Perth today, why cos its cheap, its a falling market, easiest way to lose money? ouch. Its just common sense. 24% drop over the last year.

Frankly it is far more riskier proposition buying while ignoring market conditions whether it is shares of property and you are leveraging regardless we are all in the same boat here.

A loss is a loss, even if its on paper.

 

Does anyone have a study showing a performance of shares vs property over the last 20 years in Australia?

I did find a study (see the link below), but it compares unleveraged shares vs unleveraged property and leverage shares vs leveraged property.
ASX - Request Rejected

It would be nice to see how unleveraged shares with dividend reinvestment compared to leveraged property, as that's typically how it's done.

 

Just another observation with regards to the volatility of shares. It's a bit ridiculous. If I bought ASX200 in 2007, even now, in 2017 I would still not have recovered the losses. Please see the attached chart.

Would dividend reinvestment change the outcome much?

 

Unless, as I said to @Gockie earlier you leverage against IP equity via LOC to invest in shares. Creates more deductible debt and your IP's help create your share portfolio preserving cash reserves. End of the day yes it's more debt, but allows asset class diversification without having to sell down or use cash. More pies to put your fingers in. Once PPOR debt is eliminated then you can either pay down IP debt or buy shares with cash. Plenty of options.

 

Or combine both strategies. Borrow against an IP and buy shares with the loan. People are still posting that the only way to leverage into shares is a margin loan but that is not correct.

 

Just played with @truong spreadsheet and did the comparison between leveraged property and shares, this time I used 88% leverage for property. Property wins hands down, 38% more profit made by property over a 15 year period.

@Terry_w seems property makes more sense financially

 

Just a little. And note franking credits are not included in the chart. The result would be even better.

 

But also think about the yield return, maintenance, ongoing costs and if you wanted to sell the property (eg. Too much maintenance and tenant issues or needed the money urgently)... ta da! CGT* on the whole** asset

* If you bought in your own name like many do
**You typically don't just sell a percentage of the home...

 

I'm glad my share trading days are long over. During those times I even invested in a stock that went to $0.00. Go me!!!

Property has taught me the importance of buy and hold, patience, and the power of compounding.

Now I'm applying the exact same strategy towards boring-old LICs and index funds.

I have property to thank for helping me correct my emotional and financial intelligence.

 

I think.... Successful long term property investors will tend to be successful share investors. Especially if they participate on this forum.

 

Hey guys,

I played a bit more with the spreadsheet made by @truong and I found the following very interesting:

1. Even at 88% LVR, leveraged property performs the same as unleveraged shares (last time I made a mistake by not taking LMI into account).
2. Another important thing - 100k invested in shares is not leveraged. There is no loan involved and no risk of not being able to hold due to rising interest rates.

So this makes shares much more attractive. Have I missed something? @Terry_w @truong @austing your thoughts would be much appreciated.

 

Can you share it?

 

My apologies, 200k difference at 88% lvr.. oops..

No difference at 80% lvr..

 

You could spend forever playing around with spreadsheets. Both shares and property are great for creating wealth. What's more important is how well you sleep at night when holding particular assets. How will you feel if the sharemarket crashes and the value of your portfolio is cut in half? Can you be sure you won't sell out of fear at the worst possible time?

Here's one of the main reason I only invest in Shares:
Why Property is Better Than Shares

The other is generous income. Here's a chart showing income from shares. It's rare for me to show this chart. Drum roll please:


If LICs are of interest here's an information guide (see attached).

You may find index funds / ETFs easier to understand. Eg
https://api.vanguard.com/rs/gre/gls/stable/documents/7639/au

You already own two properties, adding shares would give you diversification to another asset class. Then again do you already have exposure to shares through Super? Only you can make this decision.

Not advice.

 

Hey, Thanks for being so helpful. I'll definitely read more about LIC's. I'm seriously considering diversifying into shares.

How did you handle the big drop in 2008, especially if you bought in 2007? I suppose you still made decent profits due to dividend reinvestment.

For me personally I love the idea of holding shares and not stressing about whether I'll be able to hold of IR rises by x%. And yeah, I do have some shares in super but it's negligible.

 

A bit uncomfortable at times as in previous times of market mayhem. But as a dividend investor you take comfort in that the income keeps coming in. Dividends are no where near as volatile as share price. Additional comfort comes from having a generous cash buffer in place in case you need to top up any dividend shortfall to meet living expenses (we're retired). I've never needed to do that yet.

The good news is that these times are a wonderful opportunity to buy future income streams dirt cheap.

All this has been discussed here multiple times previously so it would be worth taking the time to read some of the threads here.