Investing In Shares vs Property
Investing shares, versus investing property. Great question. I’m a big believer in diversification, so if we had the propensity, why not do both. One way to look at it is, we could look at our super, over here, as our share or our stock component of investment. And then in now own name, we could move that property as our investment to diversify our assets. Now, why do we want to do that? It’s all about risk minimization and I can spell. Now, this is a perfect time to be talking about risk mitigation because we’ve got the Coronavirus and the impact that it’s had on the stock market. There have been some of the biggest dramatic losses in the stock market, in history through the Coronavirus issue. Now that doesn’t mean that buying stocks is horrendously bad. It just shows that it goes through volatile lines and the market will rebound in time, but depending on our age, it could be impactful.
However, if we talk about investment in property, the property has its own risks associated with it, but the extreme volatility is not as prolific as we can say with the share market. You could say, every guy could argue that 2019 with the Sydney market, had a correction and dropped. Yes, the Sydney market did and different markets in the property have different seismic graphs. So, that might be Sydney, with obviously [inaudible 00:01:49] way to dramatic, but let’s go there. But, then you might have a city like Adelaide, which is more steady, but without the traumatic lines through it. But, what happens is by having some property available in your portfolio and also having shades portfolio, what we’ll find is that our risk is mitigated. So, let’s say in 2020, we’ve all fifty percent of one-million in super and property. Well, fifty percent of one million, and we had a thirteen percent drop. That means our Five-hundred-thousand portfolio, would be down to 3.50.
Property prices for the month of March in 2020 actually went up. [inaudible 00:02:40] Let’s just say a flat line and stay even. So your five-hundred-thousand dollar asset is still Five-hundred-thousand. Now you can pay, if you had that whole million just in the stock market and it had a 30% fold, our portfolio would be around six-fifty to seven-hundred-thousand, right? Compared to having diversity in your portfolio. We’ve only lost one-hundred and fifty, and remember the one tip to remember, you only lose if you sell. So the biggest problem investors have is we panic and we sell when the market goes down. Sometimes we need a whole of our nerve and white for the market to correct. So, old markets work on a business cycle [inaudible 00:03:36] and generally, that’s a 10 year period. You think about it, GFC was about 10 years ago.
We had a crisis just before the GFC around 2000 dot com crisis. 1991 we had the recession. We had to have every 10 years says a major correction. We just need to be prepared for it. And it said that’s going to happen in structure our portfolio wisely. So, therefore, what do I recommend, on a general nature, not specific to anybody? Have a diversified portfolio, which includes some property. And then depending on how much money, you might have different properties in your portfolio. You might have an old house to subdivide a townhouse with a tax and a [inaudible 00:04:25] package with tax. In super, you might have money in shares, you might have some money goal and you might have money in resources. Direct, it’s all about Diversity.
Surround yourself with the right financial expert no matter when it is an investment in shares or investment in property, that can guide you in all aspects. Not every property person can help you with shares. And not every share person can help you with the property. And not many tax people can help you with shares or property. So make sure you surround yourself with the right team, to get you the right outcome, for what you’re looking to do.