Mainly, it comes down to how comfortable you are with risk.
In the long term, both shares and property should make you money; there have been spectacular crashes in the world’s stock and property markets in the past, but invariably they have always been followed by even stronger recoveries.
Weigh up the risks
In the shorter term, shares would seem to be the riskier option. The market sets the price you pay for them on that day; equally so on the day you want to sell. This may work in your favour, of course – but higher rewards tend to involve higher risks.
Your capital growth is out of your direct control and is subject to the volatility of the stock exchanges; you could even make a loss.
Property, on the other hand, can be bought for below market value, often with a mortgage (in other words, with somebody else’s money).
If it’s an established property you’ll be earning rental income immediately; if it’s off plan, you’ll generate returns from day 1 of operations. Income from shares can fluctuate and aren’t guaranteed.
Talking of guarantees, good modern property investments come with a 10-year warranty to cover delay, non-completion, repairs and developer bankruptcy.
When you see that historically UK house prices double every ten years, it’s clear that investors in property have every chance of achieving excellent capital growth.
How much work and expense is involved?
Although you don’t have to have a financial background to be a successful investor in shares, they do require regular monitoring and tracking. To the uninitiated, finance can seem rather complicated and appears to have its own language (unlike property, which tends to speak plain English).
If you have a head for business and like to keep an eye on the financial pages, shares might be for you.
But even if you’re comfortable with the world of business and you do handle your share portfolio yourself, you will still be subject to dealing charges and commission when buying and selling.
If you entrust your capital to a professionally-run investment fund, you won’t have to worry about managing your investments, but of course, there will be fees.
You might also need to check if there are any restrictions on access to your cash or penalty clauses for short-notice or premature withdrawal.
Fully-managed property assets
The old model of buy-to-let ownership where you bought a property, did it up to an acceptable standard for as little as possible and then let it out is rapidly falling out of favour. It’s not very profitable and is time-consuming if you run the property yourself, or expensive if you hire third-party management.
However, a new generation of integrated property management systems makes it possible for the most inexperienced property investor to earn an annual NET income of as much as 12% without any operational involvement at all. You won’t need to lift a finger – or pay any extra costs.
How much will you make?
With shares, who knows?
You’d be guessing when it comes to both income and capital growth.
With property, on the other hand, you can find investments which offer an assured NET annual income fixed for a set term.
Long-term income forecasts form a significant component of any property’s due diligence; if you invest in a reputable developer with a proven track record of annual rental revenue growth, you should receive a regular worthwhile monthly, quarterly or biannual income and a handsome profit at resale.
As all investment professionals will tell you, no investment in shares or property can ever be entirely risk-free. But with a little research and some expert advice, you can mitigate your risk dramatically.
Other articles you may find of interest:
- What protection do I have investing in UK property?
- How to earn a passive income from property
- Where can people invest these days – and where does the smart money go?