• Christopher Hall

Property vs Shares


The property vs shares question is one that I struggle with a lot as I’ve studied shares for 15+ years. So take this opinion as biased at best!




Here is a chart of the ASX200 for the last 20 years – with dividends reinvested.



You can easily see the GFC in 07/08/09 and CV19 recently.


What this chart says is that even if we bought shares at the peak before the GFC crumbled away, four years later, the investment would be back to break-even (assuming no cost of borrowing etc).


Any point after that is strong growth.

Now property is higher, but that all depends on where you bought, which street etc.

In FY20 we’ve seen tax returns of clients who have held property for more than10 years, who have loans of less than half the property value and they barely made $5k profit after all expenses.


This is on property valued at $900k+, fully tenanted and with little to no CV19 discounts.

I also know they ‘invest’ a lot of their own time on the body corporate/management of the property.

They’re not the only clients who have similar rates of return.

Here is the AU house price index or this one that I use in the monthly reports for Sydney housing yields. Remember, just like shares and their dividends, as prices go up - yields go down.

Summary:

My take is that property is great for most people because it leverages them (via the mortgage) into an asset class


AND


they pay off the mortgage – which is a forced savings mechanism.

However, if one has the discipline to maintain a similar savings routine of mortgage payment equivalent, that’s a great step in the right direction..... namely investing those savings in assets (shares, bonds/Ark etc.), and this is a great formula for wealth creation.

Other aspects to consider are:

  • Leveraging into the investment assets

AND

  • Utilising taxation benefits

Add these two extra components and you have a ROCK SOLID wealth accumulation formula.

Bonus:

Here is a great article that a few of my friends contributed to. The key takeaway is that about four of them say to just buy the plain old share market index and keep adding to it. That’s the winning ticket they would recommend to themselves as 20 year olds. And this is from guys running billions of dollars as stock-pickers!


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