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An old debate. What's the best choice when it comes to investing - shares or property? It’s time for some answers. Ultimately, the right decision will come down to an individual's goals, circumstances, risk appetite and other factors. Having said that, it's always interesting to look at how choices made in the past may have impacted you today, particularly when it comes to investing. So let's see what an investment choice made forty years ago may have earned you today...
Since 1983, the median Sydney house price (excluding units) has grown from $83,500 to $1,403,0001. If on 1 April 1983 you had invested in a median Sydney property, you'd probably be feeling pretty happy with this growth….
However, if you had invested the same amount into an all Australian shares portfolio during the same period, that portfolio would be worth an even more impressive $5,962,000 (on 1 April) this year2.
It’s also helpful to break down these results a little further:
Often, investors will put down a 20% deposit on a property and borrow the remaining 80%. In this scenario, the investor would need to contribute $16,700 (20%) in savings to purchase the $83,500 Sydney house. Today that house would be worth $1,403,000. Not a bad result, although the investor would have to repay the loan, with interest.
However, if the same investor, on 1 April 1983, was only willing to contribute $16,700 to a diversified share portfolio (50% Australian shares, 50% US S&P 500 shares) and not borrow to invest, that diversified share portfolio would now be worth an impressive $1,579,000. No loan and interest to pay back either!
This data shows that over the long term (past 40 years), the investor who invested in a diversified shares portfolio enjoyed far stronger returns than those who invested in an average Sydney house.
Of course, returns are only one of many factors to consider when investing. If you'd like to find out more about the power of investing in shares over the long term and want to explore your investing options, make an appointment with 5 Financial today.
1 Vanguard Digital Index Chart
Please note, the above information does not constitute financial advice and does not take into account your current circumstances or goals. Please speak with a financial advisor before acting on any information found here or throughout the 5 Financial website.