Property or the Stock Market

Which Investment Would You Choose?

Much of our work involves working with our clients to get the return on their hard earned money that they want or need in order to reach a goal (often retirement, but could be school fees, mortgage repayment etc).  Generally deposit accounts are only appropriate for emergency money or reasonably imminent needs.  Current low deposit interest rates reduce the attractiveness of this area of investment anyway.

So we have to look further afield for investments that have the potential to give the required returns. The merits of investing in property is a regular discussion that we have with clients.  For some this may mean buying a property to let out and others have the view that ‘my house is my pension’.  Property is, after all, a tangible asset that most people feel they understand. What people invest in is partly an emotion-al decision and being able to see and touch your investment certainly does have its attractions.  The point of this article is to highlight that property may not actually be the sound investment that you thought it might be.  In the graph above the green line (B) is the Halifax property index and the red line (A) is a stock market balanced index (the average of a broad selection of shares – similar to a managed fund).

There are many ways to display the above data and much detail behind this subject that could be debated.  Given the length of this article, the intention is simply to highlight that property isn’t necessarily the great investment that many think it is. We believe that it can form part of a diversified portfolio but in isolation it can be volatile and have practical and taxation implications that many overlook.

Please note that this article only considers one aspect of in-vesting in property which in itself is a much wider topic. No advice should be construed from this article.

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Mark Penston BSc, AFPS, MEWI (Partner) – Chartered Financial Planner
Specialist in investment, pensions and financial aspects of divorce.

Mark is a Chartered Financial Planner and has spent over 20 years assisting clients with their financial planning needs. As well as his investment work with clients Mark works closely with lawyers and their divorce clients who need assistance on how pensions and other assets should be divided on divorce.

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