A common question by Australian investors seeking advice is whether they should invest in property or shares. According to the 2017 Russell Long-Term Investing Report, residential property has done extremely well over the past few years, fueled by historically low interest rates. Australian shares have a big tax-advantage through the franking of dividends. If you had the choice, which would be the best investment?
The 2016 ASX Russell Long-Term Investing Report is out and it has some interesting highlights. Looking back over 20 years, Australian Residential Property is now out-performing Australian shares. Gross 20 year returns of residential property have been 10.5% and a gross return of 8.7% for Australian shares. A falling dollar, low interest rates, a weaker local share market performances and strong property price increases over the past few years are largely to blame.
However, cracks are starting to appear in the the property market, with many signs of slowing including falling clearance rates and negative growth in median house prices.
As always, the key to long term stability and growth is diversifying your portfolio so that you don't have all of your eggs in one basket. Exposure to international shares, international property and fixed interest will help balance out your asset classes and give you more diversity.
The Australian share market is a daunting place for newcomers to share investment. We all hear war stories of the great crash of '87 and the market falls during the GFC aftermath. Many individual investors are concerned they are going to lose all of their money. The share market, when managed appropriately, is a great place to get exposure to higher long-term returns and bring great diversification to an investment portfolio. Here are some tips to get started.
Mark Sinclair is the principal planner at Sinclair Wealth Services