RULE 46: Property, In The Long Run, Will Not Outpace Shares

05:00 0 Comments



Chief (Mrs) Dupe Jemibewon, Businesswoman & Real Estate Expert

So, you’ve built up a bit of money to invest - where to put it? Property and shares are two popular choices, but which to choose? In the aftermath of the ‘dot com’ crash of 2000 when share prices started to plummet, many people in the UK turned from investing in shares to investing in property. It’s not surprising really - many people who invested heavily in shares in the late 1990s saw the value of many of those shares drop so much it really hurt - and some companies folded completely meaning investors lost all their money.

With people turning in huge numbers from shares to property, the buy-to-let market boomed and with greater demand from investor buyers, house prices rose. Eventually we reached a point where in some areas there was a glut of property available to rent and income from rental properties failed to match expectations (supply outstripping demand). However, those early into the buy-to-let boom who bought in the right areas did well. In the years since 2000, however, share prices have recovered and those who could hold on to their shares on the whole have seen their value climb again. 


“I stress potential here as it doesn’t always get realized - the value of your shares, or your property, can go down as well as up. There’s always risk. The other reason to prefer shares to property alone is that shares - especially a nice well-balanced portfolio - will give you a decent risk spread, the more variety the less the risk. Did you know that in a slump, baked bean sales go up?”

So what’s the right thing to do? Property or shares? Well, shorter- term blips notwithstanding, in the longer run, shares will outperform property. Don’t get me wrong - there’s always a place for property - it’s about getting yourself a good spread of investments - a portfolio as the professionals like to call it. Any decent investment portfolio is going to include property as a matter of course.
One big advantage of investing in property is that you can live in it (as we said in Rule 43; you have to live somewhere and you can’t live in cocoa futures). Alternatively, if you’re buying to let, you will get income from the rental of the property (though you have to be extremely careful that the rent is as much as you hope it will be, that you are sure there is enough demand for rental properties in that area, and so on).
With shares, you hope to get regular income in the form of dividends paid to shareholders, but the greatest return usually comes from a long-term increase in share prices. And quite simply, as companies have greater potential for growth than property, the longer-term picture should see shares giving you a greater return. I stress potential here as it doesn’t always get realized - the value of your shares, or your property, can go down as well as up. There’s always risk. The other reason to prefer shares to property alone is that shares - especially a nice well-balanced portfolio - will give you a decent risk spread, the more variety the less the risk. Did you know that in a slump, baked bean sales go up? 

From The Book; The Rules of Wealth by Richard Templar
(Read Rule 47 of Rule of Wealth tomorrow on Asabeafrika)

Read-to-Wealth Series

POWERED BY:

http://www.proshareng.com/

Asabe AfrikaTV

Asabeafrika leads with a content of celebrity interviews, society stories, events and biographies that seek to celebrate success among people of all races with high emphasis on black celebrities home and away.

0 comments: