Property Data – 10 and 20 yr – Property v Shares

I subscribe to a share trading forum, you should see what they say about property investors ![happy3]

I think when you have a tried and tested system you can make money out of both….

This is a really futile argument. One never invests in the sharemarket (apart from the lazy buggers who invest in index funds), they invest in individual companies…likewise with property.

FWIW…

It all depends on the skills and attributes of the individual investor as to which is better for him/her. People done extrordinarily well in both…

Though for the average slob who refuses to put the required effort in, property is probably an easier and safer bet.

http://www.tradingforaliving.info

HI Guys

We all knew that the property market has been out performing the stockmarket, it was just some diehard stock investors (who see it as some sort of football game and they barrack for the stockmarket) who didn’t want to accept it. Perhaps i’m being harsh on them and they were just ignorant. They are the ones who would never acknowledge that property was the way to go. And i stress was, that data is historical data.

Finaly even the ASX has acknowledged this fact. And Yack this is apart from any leverage (well pointed out).

Alright that fact is out of the way, what is more important for us now is what will the future be ? i ask this question for us to think over i’m not wanting to start debate.

regards westan

The last 3 yrs have been great for property. Take that off and i think you find that shares out performed property. Shares have only really gained back there loss in the last 15 months. A similar thing was done when “money” was on tv and shares marginally outperformed property.

In 3 yrs time could be a bit of a reversal as to what is the better performer.

I do agree property has way better leverage. People can see it and it makes them sleep better etc. Just depends what you can handle really.

Also a boom in either hides fundamental mistakes made by both types of investors, for example holding and hoping whilst equity/capital is diminishing whilst returns could be better elsewhere.

Everything cycles just depends which bike you want to be on, the one going uphill or the one going downhill.

By liking both shares and property can give a better all round view of how the different market forces affect either of them.

Median property price vs All Ordinaries Index…why they cannot be compared.

It’s apples and oranges folks.

With property, only raw selling price is taken into consideration. There are a myriad of expenses and capital expenditures which are not accounted for in this raw data.

Lets take the example of a hypothetical single property which by an extraordinary stroke of luck, qualifies as “THE” medain priced property in Australia.

Lets say it was purchased in 1999 for $200k and just sold yesterday for $400k. A compound return of between 18% and 19% per annum…and a 100% return all up.

Ummmm…but we must deduct a few things….maintenance, repairs, rates, renovations, improvements, transaction costs (we will ignore interest charges as we can gear shares and this will be payable on shares also) etc.

So this property may have had tens of thousands spent on it over that four year period…certainly several thousand…and perhaps even six figures. But this is something we cannot know as is is not revealed by the raw sales figures.

So true return could be *substantially lower.

Now to shares and the All Ordinary Index.

The Allords is an average of stock prices for the largest 500 publicly listed companies. But a proportional weighting is given according to the capitalisation of the company.

In other words the biggest 10-20 companies will completly dominate the Allords. The 400th largest company could go up %300 in one day and the Allords would hardly budge.

Now the largest companies are also, by definition the most mature companies, and widely regarded as having the most limited growth prospects.

In other words the diligent share investor who is looking for capital gain, will avoid these large companies and concentrate on small to medium sized companies with growth prospects.

As an example, I have a contact who has a documented and verifyable capital gain of just under 30% per annum *compounded over the last 21 years. The silly duffer doesn’t believe in leverage…but thats his problem.

So don’t get too smug about the figures released above. They do not represent reality.

Another factor to consider is that the Allords is not adjusted for the payment of dividends. So a certain percentage of value is stripped out of the average by the payment of these dividends. If all companies were able to retain dividends the current value of the All Ordinaries Index would be quite a bit higher by a few percent per year compounded.

I am not saying shares are a better investment, just presenting an alternative reality. Some truely amazing returns are available from both property and shares. It is up to the individual to operate his investment business as they see fit.

As pointed out above there are other factors to consider…the amount of leverage available etc.
but bear in mind that you CAN leverage shares also.

Cheers

http://www.tradingforaliving.info

Some would say Property market would outperform shares market and vice versa, but the reality is depend on what property or shares you buy.

If you buy AMP a few years back and comparing to buying property in Sydney then you know which one do better. But if you buy property in a none performance area comparing to performance shares then……

Why not do both?

Kind regards

Jet Dollars
[Retire Young, Retire Rich] [strum]