Given the persistent extra-low interests rates, investors are generally aware of the opportunity cost of holding cash. Sharemarket and property market are two of Australian’s favourites and people debate about where to invest as far as we can remember. There is a good article I came across recently from Betashares and I listed the main points below for your reference and you can also click the link here to read it in more details.

Potential for growth
Both investments offer the potential to grow in value over time. property produced slightly better returns on a gross of fees and tax basis than shares generally over the long term. But all comparisons have their limitations, returns vary based on the timeframe selected, especially if you break property down into different regions or equities into various sectors. And there have been periods of boom and bust for both asset classes. Returns change further once gearing is introduced into the equation.

Investing in either property or equities can provide income as rents and dividends. Both provide roughly similar gross income over the long term, but it becomes complicated when factoring franking credits for share investors and tax deduction for property investors largely depended on the marginal tax rates the investors have.

Maintenance and transaction costs
With property, there will be yearly maintenance costs for repairs, upkeep, and upgrades. If you use a property manager, there will be costs associated with that too. Other costs associated with starting your search, and after initial purchase, include search fees, pest and building reports, legal and conveyancing fees, and stamp duty.

With equities, there may be transaction costs when you buy and sell, such as brokerage. If you are using an adviser or broker, there may be fees or costs to manage the portfolio. If you use managed funds or exchange-traded funds (ETFs) to obtain equities exposure, there will be management costs.
It is easy to know exact ongoing costs for equities, for property the maintenance costs can be unpredictable if something unexpected occurs.

Ability to enter the market quickly.
Buying a property takes some time. It is not easy for everyone to have the deposit. It can take years to save up for these costs and sometimes you just don’t have the borrowing capacity based on your income and existing capacity.

By contrast, if you are ready to invest in equities, you can get started with as little as $500, or even less (depending on your broker’s trading limits) – all you need to do is open an account with a trading platform. It really can’t be any easier.

Two biggest pros for investing in property.
1. Leverage – When you purchase a property, you usually borrow up to 80% leveraged, therefore your returns are much better if property price appreciates over time. Far fewer share investors gear into their investment with 80% because of the potential for margin calls and share investment loans are typically at a higher rate than property loans.
2. Add value – with some hard work, through renovations, upgrades and additions you generally should be able to add value to your property.

Two biggest pros for investing in the share market.
1. Diversification – whereas property investors typically invest in a small number of assets, share investors can easily spread their money across a wide range of investments to a diversified portfolio with low cost.
2. Liquidity – If you stick with shares, you are holding investments which generally have a high level of liquidity. Shares settle T+2 (trade date +2) – when you sell your shares, the proceeds will be in your account two business days later. This is a significant benefit if something unexpected comes up and you need to access some or all your cash. Compare this to the time it takes from deciding to sell an investment property to when you receive the proceeds of the sale. Plus, if you do not need all your funds, you can’t just sell off a bedroom!

Investing does not just come down to which asset class offers the best returns. You need to consider the risks associated with the asset, your personal situation such as your goals, financial situation, risk appetite, and age. Diversification across different asset classes is key. A healthy investment portfolio should contain an element of both shares and property. There is no reason why you cannot seek to benefit from both asset classes.

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