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How to choose investment vehicles (Part 1): Shares v Property?

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One of the most common questions investors agonise over is whether to invest in shares, property, or a combination of both. Usually people have their investing favourites and biases. Financial planners and advisers will try and get an idea of your:

  • investing time frame
  • personal preferences
  • risk profile
  • goals

Below are some of the planning tools freely available that will help you answer these questions.

Some arguments for, and against, shares as an investment vehicle are:

Why invest in shares?  – some ‘pros’

  • liquidity 
  • low entry and exit costs
  • little active management
  • entry into the property market through vehicles such as real estate investment trusts (REITs/(Australian) AREITs) and Exchange Traded Funds (ETFs)

Why not to invest in shares?  – some ‘cons’

  • volatility/risk
  • lack of personal control and ability to add value
  • too much or too little knowledge and understanding about the company, its business, its board and management

Often people invest in shares because they aren’t comfortable investing in property because of:

  • pressures on borrowing, affordability and capital growth (esp in hard financial times) 
  • property bubbles
  • the need for active management
  • vacancy and tenancy risks

Financial planners are restricted in the advice they can give on direct property investment. It’s often then left up to you.

If you understand both and any inherent biases behind the information – you’ll  make better investing decisions.

Our Investing Report #1 Choosing investment vehicles: Shares vs Property has more resources, articles and tools to help you.

In Parts 2 and 3 of  “3 Tips for choosing investing vehicles” we look at investing in property and how to choose financial advisers.

Some useful resources for you:

Check out our free Investing Guide (just subscribe and it’s yours!) where you can get started on questions you should ask to choose your best investment vehicle. In it are links to financial planning sites and self assessments such as:

 

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