Stocks Versus Properties – Part II

When it comes to investing, one of the longest-running debates is whether we should invest in property or stocks. Some investors swear by property, while others, like Warren Buffet, put most of their wealth in stocks or real estate investment trusts.

So, are stocks or properties the better investment over the long-term? In this series of articles, I will attempt to iron out the key advantages of both these assets, and take a look at which asset has outperformed in the past.

This is the second part of my series, which will focus on the advantages stocks have over real estate. The first part can be found here.

Singapore Stock Market

The Singapore stock market consists of more than 750 stocks and covers a wide array of companies, ranging from commodity stocks to healthcare stocks. The Straits Times Index (SGX: ^STI) is Singapore’s benchmark index and consists of 30 blue chip stocks that represent some of the biggest and most recognised companies.

Despite the fact that the STI is still some way short of its peak in 2007, it has still managed to return 195% to investors over a 15-year period (with dividends reinvested), outpacing other leading benchmarks of Asia.

Key advantages of stocks over properties

  • Lower starting capital requirement

Investors only need a small amount to start investing in stocks. Now with low-cost internet brokerages, investing in the stock market is even more accessible to anyone who is just starting out.

  • More liquid than properties

Stocks are extremely liquid investments. Investors can cash out their investments at any time. However, the price that investors pay for this liquidity is the volatility of the stock price.

  • Ability to diversify one’s portfolio

Because investors need not put a significant investment in each counter, it enables them to diversify their portfolio over many stocks quickly. The Singapore stock market also consists of a multitude of companies that can allow investors exposure to different industries.

  • Less tax than properties

Unlike properties, investing in stocks does not involve any tax payments. Property investors, however, need to contend with buyer and seller stamp duty and are bound by lock-up periods for public housing investments.

The Foolish bottom line

Stocks offer Singaporeans a great alternative to properties. Not only are stocks more accessible to the lay investor, they also allow diversification and have historically given good returns over a long-term. In the next article, I will compare historical returns between stocks and properties, and find out which make a better investment.

Meanwhile, for more (free!) investing insights, sign up here for your FREE subscription to The Motley Fool's investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.