What’s Better? Property or Shares?

Singaporeans are no different from people in many other parts of the world when it comes to property. We love to invest in bricks and mortar because we like to see it as a one-way bet. But while property has undoubtedly been a solid performer, it is important not ignore another solid asset class – shares.

So what’s better – shares or property?

Interestingly, there are arguments for both, and here are some of the main ones.

Perhaps the biggest plus to property investing is the fact that land is a finite resource. Therefore, property should, in theory, gain in value over the long-term as population rises and demand for new homes increases.

What’s more, it’s much easier to borrow against the value of a property, so gains are amplified when property prices rise. However, it is important to remember that losses are also magnified if property prices fall.

Shares tend to rise over the long-term too. But you need to be more discerning when choosing which companies to invest in. That said you can always invest regular amounts in an index tracker, which mimics the performance of the stock market.

Another argument that is often put forward for investing in property is that it is a tangible asset. In other words, you can drive past it; you can touch it and see it and assure yourself that it is still there. However, this is where property gets to be a headache also. It has to be maintained, which can take both time and money.

Of course, a portfolio of shares needs to be maintained too, and for that you need to learn the basics of investing, which is something we are keen to stress at Mind you, it’s a lot easier to learn about shares than whipping out your tool box or calling out a handyman. Additionally, while you can learn about shares in your spare time you can’t do the same with a burst pipe that has to be fixed immediately.

Now, unless you are well versed in buying and selling properties then costs are something to bear in mind. It can be quite expensive to buy and sell an apartment or condo after you include legal fees, stamp duty and agency commission. So, it’s not something you want to do too often. By comparison, dealing in shares is much cheaper. Consequently, if you think you may have invested in the wrong share, you can sell them and buy something else instead.

On this point, liquidity is something worth considering too. Just because you want to sell your condo doesn’t mean you can do so quickly. It can take months or sometimes years to sell a property. Selling shares, on the other hand, couldn’t be easier. So if you decide to sell your shares today, the proceeds could be in your bank account almost immediately. Additionally, you can sell just a portion of your share portfolio, but you can’t sell a house brick by brick!

There you have some of the arguments for investing in property and shares. In my view, both are great assets to own, and should deliver good long-term returns.

However, since I already own a property, which has gone up significantly in value, I’m happy to balance things out by investing in more shares. And that is the crucial point behind investing. It is important not to put all your money into the property basket but, instead, to ensure that you have a balanced portfolio.