• August 26, 2019

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

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. 


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“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




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