Why Shares are Better Than Property

I am retired and care free, no more tenants, no CGT/offset accounts etc, etc ...

 

And for those who invest in ETFs, say two or three, that is the number of documents necessary:

• each year to do your tax return, and
• to hold in the event a sale occurs at some date or for your executors.

 

As a 25 year property investor before discovering ETFs through this site (ironic, isn't it, got turned onto shares through a property forum I came to for finding my next IP?), having bought and sold a number of PPORs, IPs and involvement in 3 large developments, I wish, wish, wish I had not believed all that stuff about bricks and mortar, and they're not making anymore land 25 years years ago.

The nightmare of dealing with banks, property managers (all our IPs are in different cities than we live in), insurances, shonky developers and builders, minimal return on any cash in offsets waiting for the next purchase (current loans are 3% which is the return we are getting on cash sitting in the offset, even the most conservative ETFs have given us over 4% dividend return in the last year and I haven't had to have a single conversation with a mortgage or insurance broker).

We have already started discussing when we are going to sell our final IPs and put the money into ETFs. Waiting for location of IPs to reach the next peak in the growth cycle and then they are GONE! In the last 12 months, can't count the tens of thousands we have spent on repairs, maintenance and management of the properties. All money that could have been making money with no interest charge.

So grateful for this forum.

 

And when a "market correction" occurs this will likely be the next battle. A very difficult battle too.

 

Thanks @SatayKing, it's buying the majority of our portfolio in March last year that has given us +/- 20% capital growth. When the dips and drops come is when we've learned to make bulk purchases in addition to the DCAs.

 

He he. It was mostly a reminder to myself as I can be a worry wart at times and who would have thunk [sic] that? Plus having to swallow a bitter pill as well as my pride by admitting I am not good, probably below average in fact, with both choosing shares and the decision making involved.

 

Will you sell when the market is down 30% or 40%?
What if trading is suspended?

 

Best time to buy. Tough if no cash but then Post #244 applies and time to learn how to watch grass grows.

Probably saves them from doing something really dumb.

Have yet to see either the older LICs or the vanilla ETFs suspended (except in the latter case during as short period for primary applications or redemptions when distributions are involved.)

 

I have always kept a cash buffer, enough to see me through a couple of years.

 

Shares don't suffer flood damage like property can - and often be uninsured for it

 

Sounds more like poor asset selection than asset class. Most of these issues can be non issues. If you cant generate multiples of both income and CG on your interest, yes shares maybe better . But you could just as easily buy dud shares too and more easily have capital loosses. If you have cash in an offset kind of defeats the purpose of property and it will give you poor return on equity, Insurance is SFA mines gone from about $ 400 a year to 600 but still SFA, on the commercial tennants responsibility. On the development yes that is a pain in the arse but the 3 I have developed in the last 20 years have required virtually no maintenance expenditure, not even a tiny fraction of what I claim in depreciation. Management problems is also a property selection issue. Property is the safest place to put your capital and give reliable income and best way to fund share purchases. When you could build houses for $200k (which have a much much lower base cost because of depreciation) and rent them out for $ 25k a year now, and buy land that gives 50% p/a return on purchase cost, it is an excellent return for risk.

 

Why shares are better than property:

• On average they have better unleveraged returns because they can capture a return from other people’s human intellect and work in a way a physical asset like real estate cannot.

• Internal management to deal with the problems – which allows scalability before becoming management resource constrained from the investor’s perspective.

• Internally leveraged – no recourse debt is far better than recourse debt used by direct real estate investment. Only those that can’t get non-recourse debt take on recourse debt.

The top 1% invest 61% of their wealth in one asset

 

@dunno such interesting graphs. It can be a long investing journey moving from property to equity

 

Do the rich actually choose to invest more of their wealth in equities? Or just that a lot of the rich get that way by building companies they own shares in? For the not so rich most of their wealth would be disproportionately ppor.

 

I think that is the case - they include business interests in shares which most rich people do have more exposures. While poorer people might invest more in real estate or their own home, which might be counted in that diagram above.

 

Anyone's opinions changed since the last post (March 22), given recent events across the country? I'm always fascinated by these X vs Y debates - knowing there'll never be a good answer, but the discussions are really interesting.

 

Yes they do. Because they are already rich and don’t need the hassle of property. If your RICH ( What ever that means ) then you don’t need outsized returns. A simple equity market average of say 7% p.a will be more than enough to live comfortably and continue growing the pie indefinitely.

If anyones opinion has changed due to the short term market movement then I would put much weight on that opinion. I think investing wether in property or shares you should be looking at it from a long term perspective. The market going through a downturn shouldn’t change your plan, if you had a solid plan to start with.

I’ll add one more plus to the shares over property argument. For those holding property in Queensland i hear the new land tax arrangement would make IP significantly less appealing.

 

Property becomes less attractive by the day!

 

Yes, it’s made me like shares even more, as I get older I realize time is the most valuable commodity. Shares are far less time consuming than property, worst part is going to the bank to do cash outs against property to buy shares.