the pros and cons of real estate, shares and bonds as a wealth building strategy for mum and dad...
TRANSCRIPT
In a low interest rate environment it makes sense for
mum and dad investors to assess the performance of
their investment portfolios to ensure their money is
generating wealth.
More info on:
http://www.chaseedwards.com.au/
Implementing the correct mix of traditional
investment products requires an appreciation for the
inherent pros and cons of each asset class. Real estate,
shares and bonds all represent proven strategies for
increasing your wealth but each come with their own
pitfalls.
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http://www.chaseedwards.com.au/
Property versus sharesBoth shares and property provide
recurring income in the form of
dividends or rental payments and
depending upon market
conditions, each can deliver
capital growth. Blue chip share
portfolios geared towards high-
yielding dividend paying stocks
have emerged as a favored
investment strategy.More info on:
http://www.chaseedwards.com.au/
To date, this strategy has provided significantly
higher returns compared to government bonds or
fixed interest term deposits. There is also
considerable tax benefits associated with franking
credits for dividends. More info on:
http://www.chaseedwards.com.au/
However this strategy is
not without risk, given a
raft of financial conditions
can reduce your dividend
receipts to zero. This
offers an interesting
counterpoint to rental
income derived from an
investment property.
More info on:
http://www.chaseedwards.com.au/
Liquidity concerns
Liquidity should also remain
front of mind when it comes to
generating wealth through
property investment. Recent
spikes in capital city house
prices and associated high
clearance rates have improved
the perceived value of residential
property.More info on:
http://www.chaseedwards.com.au/
Recovery after collapse
Astute investors and analysts
are quick to point out that
shares will rebound much
faster than property following a
widespread collapse in either
of these markets. Take the
example of the ASX 200 in the
wake of the global financial
crisis.
More info on:
http://www.chaseedwards.com.au/
Although the market has yet to regain all of its lost
ground, individual stocks such as Commonwealth
Bank of Australia dipped below $30 per share
during the GFC and are now trading at more than
$75. More info on:
http://www.chaseedwards.com.au/
It is important to remember that this counter-cyclical
trend is not applicable to all property classes, but
rather it will have a more pronounced impact on top
end and inner-city house prices.
More info on:
http://www.chaseedwards.com.au/
Government BondsGovernment bonds are the ultimate "defensive"
investment in they provide little to no risk but also
deliver small returns. The very structure of
government bonds guarantees far less volatility when
compared to shares or property whilst providing
greater interest rate certainty.
More info on:
http://www.chaseedwards.com.au/
Government bonds are a
relatively affordable investment
when compared to property.
Northern Territory bonds, for
example impose a minimum
investment of $2000 with the
option to increase your holding
at $100 intervals after that.
Bonds also provide a relative
safe haven to diversity away
from the stock market.More info on:
http://www.chaseedwards.com.au/
But government bonds are
renowned for being “slow as
opposed to sexy” particularly
in comparison with other
investment classes. Bonds
guarantee a steady income
stream over a long period of
time but have traditionally
failed to yield anywhere near
the returns provided by shares
or property.More info on:
http://www.chaseedwards.com.au/
Summing up
For mum and dad investors gaining a better
understanding of the pros of cons associated with
shares, property and bonds will ultimately assist in
deciding what mix of assets best fits into your wealth-
focused investment portfolio.
More info on:
http://www.chaseedwards.com.au/