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Bricks & Mortar, Or Shares: Investment Strategies

Investment portfolioIt’s an old and ongoing debate – are your investments in stocks and shares, or those in physical property going to be the most profitable in the long term? Unfortunately, there’s no hard and fast answer that says one is definitely better than the other. However, there are several factors that you may need to consider when weighing up your choices.

Property Investment

For many investors, having a physical asset feels much safer. Hopefully, you’ll see your property rise in value, so it can really seem like a winner from the get go. A tangible asset which doesn’t simply exist on paper, is a big advantage in investment.

Properties can also be a source of alternative income, such as renting and renovation. These features of property value have really been appreciated in Australian real estate over the past couple of years. The ABS figures from June last year covered all 8 major capitals – only 2 of which saw falls in property values over the year.

Another awesome benefit of property is that you can actually invest to improve it – further increasing the base value and potential re-sale and rental values. A good example of this might be renovating a kitchen or even adding additional bedrooms.

Naturally however, there are also downsides to owning properties. The most significant issue to do with property investment, can be that your money will be tied up in said property until you are ready to sell – not to mention that the costs to sell can be high.

Stocks, Share & Investment

Stocks and shares are perhaps a little more fluid than property. It’s a whole lot easier to just sell all of your holdings at any moment, rather than having to wait for an agency to advertise your house – as well as all the trimmings that come with the process.

Another advantage of stock and share investment, is the fact that you are far less likely to need to take out some debt in order to cover the costs of the investment. This means that any money you make from the investment of stocks and shares, will become yours and not the property of the bank.

As previously mentioned, buying property usually involves a high number of fees payable to agents, lenders and other bodies in order to make the sale go through. Even a small property will require a sizeable deposit before things can move forwards. This is not a problem with buying stocks and shares – making them a far more attainable goal when ash is limited.

One disadvantage to stocks and share investment however, is the fact that you’ll need to pay some capital gains tax. This is not payable on investments into your home – but could cost you a considerable amount if you’ve invested heavily in stock and shares.

The Balanced Approach

Generally speaking, most agents would advise that you take a balance approach to investment. The reason for this being that both sides of the coin have different advantages and disadvantages – so don’t put all your eggs in one basket, otherwise you’ll limit the potential for great investment returns.