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Shares vs Property
Investing in Property from realestate.com.au
http://discover.realestate.com.au/buying/investing/investing-why-invest-in-property
Why invest in property?
by news.com.au
Property or Shares? How many times have we heard this question?
This article highlights some of the advantages of investing in property and shares with you some reasons why investing in real estate can be worth it.
The main advantages gained from investing in property are:
· Capital growth
· Rental income
· Degree of control
· Lower volatility
· Tax benefits
· Hedge against inflation
· Touch and feel it
· Capital growth
· Depositing your money in the bank or investing in fixed interest products does not provide you with any capital growth. If you buy property (or shares), however, you do so expecting that the property will grow in value over time.
Rental income
One of the advantages of owning investment property is that you can start to receive an income almost immediately. Once you have put a tenant into your property, you should receive a couple of weeks’ rent in advance upon signing the lease and then regular payments of rent into the future.
Degree of control
In my role as the Coordinator of the Property and Share Investment at TafeSA, I interact with many share and property investors on a daily basis. Without question, one of the main reasons people decide to invest in property rather than shares is that they have greater control over their asset.
For example, if they want to receive a higher rent, they can upgrade the property. If they want to increase the value of their property, they can renovate, landscape or possibly even sub-divide and create new allotments.
Lower volatility
The other main reason people will buy property instead of shares is that there is less risk in property. They understand that there is also a lower return in purchasing property but they are willing to forsake potential high returns from investing in shares for a stable return from property. They can sleep well at night knowing that the price of their property is very unlikely to plummet overnight, which can happen to the share market.
Tax benefits
Tax is very topical at this time of the financial year (check out our End-of-financial-year investor checklist). There are several tax benefits available to property investors. Using property as security to borrow money to purchase other property allows you to leverage to a greater extent than if you were using a share portfolio as security.
Most lenders will lend up to 90 per cent (and sometimes 97 per cent) of the value of the property being purchased (mortgage insurance may be payable at this level of leveraging). However, if you are interested in buying shares, they will generally lend up to 70 per cent. One of the tax advantages with this greater leveraging is that you can claim a greater tax deduction on the interest charged on the loan.
Any legitimate expense incurred in running your investment property should also be tax deductible. These include travelling to your investment property to collect rent or money paid to a property manager to manage your property on your behalf.
Depreciation of the building may also be claimed as a tax deduction. Buying brand new or a relatively new property allows for the greatest amount of depreciation. Claiming building depreciation is a clever way to increase your cash flow.
You should never buy property (or any asset) just for the tax benefits. Getting a tax benefit should be a bonus, not the sole reason for purchasing.
Hedge against inflation
It has been shown historically in Australia and all over the world that property increases at a greater rate than inflation. Periods of growth can vary but generally speaking in real terms (without inflation) property growth outstrips increases in inflation.
Touch and feel it
I have already mentioned that some of the main reasons people invest in property is that property provides them with a greater degree of control and there is lower volatility in returns and capital growth compared to investing in shares. When you have a chance to speak to property investors at length, somewhere in the conversation they will state that they like to invest in property because they can see it, touch it, feel it and drive past it.
For many people, investing turns out to be an emotional decision rather than one based on pure numbers and these are the sorts of emotions that make people feel better about investing in property rather than shares.
I believe investors should have a diversified investment portfolio, which includes some property, some shares and some cash. The weighting of the portfolio will often be decided by the knowledge (or lack of it) in a particular asset class. If you want to earn more, you need to learn more!
* Written by the Property Professor Peter Koulizos
Why invest in property?
by news.com.au
Property or Shares? How many times have we heard this question?
This article highlights some of the advantages of investing in property and shares with you some reasons why investing in real estate can be worth it.
The main advantages gained from investing in property are:
· Capital growth
· Rental income
· Degree of control
· Lower volatility
· Tax benefits
· Hedge against inflation
· Touch and feel it
· Capital growth
· Depositing your money in the bank or investing in fixed interest products does not provide you with any capital growth. If you buy property (or shares), however, you do so expecting that the property will grow in value over time.
Rental income
One of the advantages of owning investment property is that you can start to receive an income almost immediately. Once you have put a tenant into your property, you should receive a couple of weeks’ rent in advance upon signing the lease and then regular payments of rent into the future.
Degree of control
In my role as the Coordinator of the Property and Share Investment at TafeSA, I interact with many share and property investors on a daily basis. Without question, one of the main reasons people decide to invest in property rather than shares is that they have greater control over their asset.
For example, if they want to receive a higher rent, they can upgrade the property. If they want to increase the value of their property, they can renovate, landscape or possibly even sub-divide and create new allotments.
Lower volatility
The other main reason people will buy property instead of shares is that there is less risk in property. They understand that there is also a lower return in purchasing property but they are willing to forsake potential high returns from investing in shares for a stable return from property. They can sleep well at night knowing that the price of their property is very unlikely to plummet overnight, which can happen to the share market.
Tax benefits
Tax is very topical at this time of the financial year (check out our End-of-financial-year investor checklist). There are several tax benefits available to property investors. Using property as security to borrow money to purchase other property allows you to leverage to a greater extent than if you were using a share portfolio as security.
Most lenders will lend up to 90 per cent (and sometimes 97 per cent) of the value of the property being purchased (mortgage insurance may be payable at this level of leveraging). However, if you are interested in buying shares, they will generally lend up to 70 per cent. One of the tax advantages with this greater leveraging is that you can claim a greater tax deduction on the interest charged on the loan.
Any legitimate expense incurred in running your investment property should also be tax deductible. These include travelling to your investment property to collect rent or money paid to a property manager to manage your property on your behalf.
Depreciation of the building may also be claimed as a tax deduction. Buying brand new or a relatively new property allows for the greatest amount of depreciation. Claiming building depreciation is a clever way to increase your cash flow.
You should never buy property (or any asset) just for the tax benefits. Getting a tax benefit should be a bonus, not the sole reason for purchasing.
Hedge against inflation
It has been shown historically in Australia and all over the world that property increases at a greater rate than inflation. Periods of growth can vary but generally speaking in real terms (without inflation) property growth outstrips increases in inflation.
Touch and feel it
I have already mentioned that some of the main reasons people invest in property is that property provides them with a greater degree of control and there is lower volatility in returns and capital growth compared to investing in shares. When you have a chance to speak to property investors at length, somewhere in the conversation they will state that they like to invest in property because they can see it, touch it, feel it and drive past it.
For many people, investing turns out to be an emotional decision rather than one based on pure numbers and these are the sorts of emotions that make people feel better about investing in property rather than shares.
I believe investors should have a diversified investment portfolio, which includes some property, some shares and some cash. The weighting of the portfolio will often be decided by the knowledge (or lack of it) in a particular asset class. If you want to earn more, you need to learn more!
* Written by the Property Professor Peter Koulizos
Investing in Shares from asx.com.au
http://www.asx.com.au/products/about-shares.htm
What are shares?
When you buy shares in a company, you are buying a part of that company. This means you share in the company's performance in the form of profits which can be given to you as dividends and/or capital growth through the value of your shares increasing. Companies generally list on the stock exchange to raise capital for their company and to create a market in their shares. Companies you invest in benefit by using your money and that of other investors to finance their business or its expansion, without having to borrow money.
Shares are an important part of an investment strategy. Being good at investing in shares is about being informed, monitoring your share’s performance on a regular basis, keeping an eye on your goals and investment strategy and participating in ongoing education as you need it.
Benefits of investing in shares
The Sharemarket provides one of the best opportunities to achieve your long-term goals. It’s straightforward, you don’t need a lot of money to get started, and shares give you flexibility and control. People invest in shares to make money – either through share price growth, or via income paid as dividends.
Potential to outperform other investments over the long-term
Although past performance is no indication of future performance, history suggests that Australian shares have outperformed other types of investment over the longer term. To find out more you can read the Russell report (PDF 726KB) which compares asset classes over the past 10 years.
Capital growth and Dividends
Capital growth occurs when the value of your investment increases. People invest in shares because they offer the possibility that their price will rise. Owning shares in a company with a rising share price is one way to achieve capital growth.
As a shareholder you are entitled to share in the company's profits or earnings. For many investors a key criteria in selecting shares, is whether the company pays dividends and the size of these. Companies pay dividends from their net earnings. Dividend payments vary from company to company and it is not compulsory for a company to pay a dividend. To learn more take the ASX course Risks and benefits of shares and/or view the short Audio Visual presentation on Dividends.
Tax benefits
For Australian investors, dividends are often worth more than the cash payment they receive. This is because where companies have already paid tax on their profits, tax credits known as franking credits may be attached to the dividends the company pays to you. These franking credits can be used to offset tax payable by you on other income. In addition, shares held for more than 12 months qualify for a 50% discount on any capital gains tax payable.
To obtain further information or assistance, you should seek professional advice from your accountant or financial planner tailored to your specific investments. For more information please refer to the Australian Tax Office (ATO) website.
Diversification
Many people know the saying "don't put all your eggs in one basket". The Australian sharemarket helps you to do this by offering a wide choice of companies in which to invest. There are over 2,100 companies listed on ASX. These companies are involved in a wide range of industries covering most sectors of the economy including financial services, industrials and healthcare. By investing in a range of companies you can spread your risk.
Ease of buying and selling
Investing in shares gives you flexibility. You can buy and sell shares quickly. You can sell shares and generally have access to your money in no more than three days. Other investments often take longer to sell and get your money back. This concept is known as liquidity. Remember some shares can be traded quicker than others du e to their increased liquidity. (Liquid investments have the benefit of greater flexibility).
Control over your financial future
You can decide exactly how your money is invested, enabling you to have a lot of control over your finances. You can of course choose to share this responsibility with a stock broker who can advise you on what shares to buy and sell.
Types of Shares
There are different types of Shares available on ASX:
· Industrial & Resources
· Large & Small Capitalisations
· Industry Sectors (GICS)
· Ordinary Shares
How to buy and sell shares
All shares listed on ASX can only be bought or sold through a broker. A stockbroker acts as your agent to buy or sell shares on your behalf, for which a fee is charged. A broker can also provide a range of services including the provision of advice on which shares to buy or sell. Most stockbroking firms require you to provide funds prior to accepting your first order to buy shares. More information onhow to buy and sell shares.
What does it cost?
Trading shares has become much cheaper in recent years as stock brokers have made use of new technology to provide a better service to you. Buying and selling shares can cost as little as $25 for a transaction-only service. You may need to pay more if you want advice and/or access to research on a company. Find out more using find a stock broker.
What risks are there?
Shares present benefits as well as risks. History demonstrates that shares, as a long-term investment have the potential to provide better returns after tax than any other major investment. However, past performance is no guarantee of future returns. It is important to monitor your shares' performance, and to regularly re-evaluate whether they continue to be a good investment for you. You can learn how to do this by completing an online class or by talking to a broker.
The National Guarantee Fund is available to meet valid claims arising from dealings with stockbrokers in the circumstances set out in the Corporations Act 2001 (Cth) and the Corporations Regulations.
Classes
ASX has developed a range of free online courses which cover the essentials of investing in shares.
What are shares?
When you buy shares in a company, you are buying a part of that company. This means you share in the company's performance in the form of profits which can be given to you as dividends and/or capital growth through the value of your shares increasing. Companies generally list on the stock exchange to raise capital for their company and to create a market in their shares. Companies you invest in benefit by using your money and that of other investors to finance their business or its expansion, without having to borrow money.
Shares are an important part of an investment strategy. Being good at investing in shares is about being informed, monitoring your share’s performance on a regular basis, keeping an eye on your goals and investment strategy and participating in ongoing education as you need it.
Benefits of investing in shares
The Sharemarket provides one of the best opportunities to achieve your long-term goals. It’s straightforward, you don’t need a lot of money to get started, and shares give you flexibility and control. People invest in shares to make money – either through share price growth, or via income paid as dividends.
Potential to outperform other investments over the long-term
Although past performance is no indication of future performance, history suggests that Australian shares have outperformed other types of investment over the longer term. To find out more you can read the Russell report (PDF 726KB) which compares asset classes over the past 10 years.
Capital growth and Dividends
Capital growth occurs when the value of your investment increases. People invest in shares because they offer the possibility that their price will rise. Owning shares in a company with a rising share price is one way to achieve capital growth.
As a shareholder you are entitled to share in the company's profits or earnings. For many investors a key criteria in selecting shares, is whether the company pays dividends and the size of these. Companies pay dividends from their net earnings. Dividend payments vary from company to company and it is not compulsory for a company to pay a dividend. To learn more take the ASX course Risks and benefits of shares and/or view the short Audio Visual presentation on Dividends.
Tax benefits
For Australian investors, dividends are often worth more than the cash payment they receive. This is because where companies have already paid tax on their profits, tax credits known as franking credits may be attached to the dividends the company pays to you. These franking credits can be used to offset tax payable by you on other income. In addition, shares held for more than 12 months qualify for a 50% discount on any capital gains tax payable.
To obtain further information or assistance, you should seek professional advice from your accountant or financial planner tailored to your specific investments. For more information please refer to the Australian Tax Office (ATO) website.
Diversification
Many people know the saying "don't put all your eggs in one basket". The Australian sharemarket helps you to do this by offering a wide choice of companies in which to invest. There are over 2,100 companies listed on ASX. These companies are involved in a wide range of industries covering most sectors of the economy including financial services, industrials and healthcare. By investing in a range of companies you can spread your risk.
Ease of buying and selling
Investing in shares gives you flexibility. You can buy and sell shares quickly. You can sell shares and generally have access to your money in no more than three days. Other investments often take longer to sell and get your money back. This concept is known as liquidity. Remember some shares can be traded quicker than others du e to their increased liquidity. (Liquid investments have the benefit of greater flexibility).
Control over your financial future
You can decide exactly how your money is invested, enabling you to have a lot of control over your finances. You can of course choose to share this responsibility with a stock broker who can advise you on what shares to buy and sell.
Types of Shares
There are different types of Shares available on ASX:
· Industrial & Resources
· Large & Small Capitalisations
· Industry Sectors (GICS)
· Ordinary Shares
How to buy and sell shares
All shares listed on ASX can only be bought or sold through a broker. A stockbroker acts as your agent to buy or sell shares on your behalf, for which a fee is charged. A broker can also provide a range of services including the provision of advice on which shares to buy or sell. Most stockbroking firms require you to provide funds prior to accepting your first order to buy shares. More information onhow to buy and sell shares.
What does it cost?
Trading shares has become much cheaper in recent years as stock brokers have made use of new technology to provide a better service to you. Buying and selling shares can cost as little as $25 for a transaction-only service. You may need to pay more if you want advice and/or access to research on a company. Find out more using find a stock broker.
What risks are there?
Shares present benefits as well as risks. History demonstrates that shares, as a long-term investment have the potential to provide better returns after tax than any other major investment. However, past performance is no guarantee of future returns. It is important to monitor your shares' performance, and to regularly re-evaluate whether they continue to be a good investment for you. You can learn how to do this by completing an online class or by talking to a broker.
The National Guarantee Fund is available to meet valid claims arising from dealings with stockbrokers in the circumstances set out in the Corporations Act 2001 (Cth) and the Corporations Regulations.
Classes
ASX has developed a range of free online courses which cover the essentials of investing in shares.