This is a perennial question for those wishing to make the most of their money; property, stocks and shares or the bank?
It is a conundrum that many potential investors struggle with and it’s one that each individual needs to consider when they are deciding on their investment strategy.
Individual need to assess their attitude to risk and what type of return they want, together with the time that they wish to leave the money invested.
Consider access and liquidity
It is really important when thinking about investing your money to understand what access you are going to need.
All the experts agree, if you are thinking about putting your money into equities (stocks and shares) or property then you have to be in it for the medium to long term.
If you buy equities or property and then need your money a couple of months later then you’ll be very lucky indeed to come out level.
If you need ultra-quick access then the logical place is in the bank or building society.
Is the bank really safer?
Banks are required to hold a very high level of liquid cash since the global crash in 2008 and they are insured, so there is virtually no chance of you not getting access to your physical cash but does that really mean it is safe?
The interest available, especially on current accounts is pretty much negligible, for example, the savings rate in a well-known UK bank in October 2019 is 0.25% but inflation (the Consumer Price Index) is 1.7%.
Therefore, by keeping your money in the bank you’ll actually be losing money every month in real terms and when interest rates and inflation rise then the gap becomes even bigger.
This is very important when investing money upon retirement, as the investor could easily find that the true value of their nest-egg reduces each month.
Safety, as we can see really is relative.
Property Vs Equities – which is better?
Investing in shares needs a good level of understanding and a fair amount of research because making the wrong choice can mean losing all of your investment.
This is perhaps the biggest difference between investing in equities and property – risk appetite.
As a topical example let’s think about investing our money into the longest established, best known, high street travel agent in the UK. A global business that had been around for 178 years.
Thomas Cook recently went bust and shareholders who had chosen to invest their money in the group in August would have lost their money by the end of September 2019.
In contrast, property requires no specialist knowledge, it is something that everyone understands and can access and, should the very worst happen such as the global economic crash in 2007, the property still stands and is still saleable.
Property also works for different types of investor.
You can choose a long-term investment which will yield a good monthly rental to provide income or look to buy new-build that will provide an instant capital boost on completion.
It’s also a really good time to invest in property if you want to borrow against the asset. Interest rates, especially on buy to let have reduced sharply recently and this makes developing a portfolio much more affordable.
What about the returns?
Equity returns are pretty variable.
If you get into the market at the right time, and have a well-diversified portfolio and make sure you keep an eye on your investment then you can certainly beat the banks.
Blue Chip stocks are expected to yield something in the region of 4.8% in 2019.
Property fares much better.
In general Yields of around 6% – 8% on buy-to-let properties are achievable in most areas but more can be made where the investor buys off-plan or purchases property to refurbish and rent.
The real value price of a property bought for £98k in 1998 would now be £217k and it is the knowledge that whilst they are making money from the monthly rentals, the capital is also increasing at the same time that is attractive to investors.
Investment is personal
In truth, investment is really a personal choice and you need to decide on what access you want, what risk you are prepared to accept and how much money you’d like to make.
Investing in property is an excellent option for those who want to benefit from both capital growth and income but to whom safety and security are both very important.