Property or Equity? Which is the best investment?

Mark Twain said; “Buy land, they’re not making any more of it”

One question I am repeatedly asked is this: “which is a better investment, Property or the Stockmarket”.

As with so many things in life, the answer is “it depends”.
I have to agree with Mark Twain’s observation. Land is a finite resource, and we live on an Island. You don’t need a PHD in stating the obvious to realise that an investment in land or property should, over time, appreciate. Property isn’t a bad investment.

However, when it comes to the question, which is the best investment think of it like this……..

If I am a business making widgets in a factory, I need a building to house that factory. My company can either buy or lease the premises. But the key consideration is this. It makes economic sense for me to use the property to run my business. In other words, I can add more value from the production of the widgets than I can from the property itself.
Now, it doesn’t matter what I choose to do in the building I could be a hairdresser or a Lawyer, the fact remains that after costs (ie rent or loan repayments to the bank) I can make a profit from my business.

Intuitively, a company is sufficiently rewarded from taking the risks of running a business that it can make more money from carrying on in business than it can from simply renting the premises to another business.

Logically, which is the best investment? An investment in Equity of course. Buying companies should reward an investor more than an investment in property in the long run. Numerous studies and empirical evidence has supported this conclusion.

The difference is that an equity investment is typically more volatile. The moves in price up and down are more rapid and therefore we say that the risk is greater. However, property is a relatively illiquid asset. Ask my client who bought a property in Florida as a “sure thing” and still can’t sell it some two years later.

Equally, when it comes to a private investor who may have hundreds of thousands or even millions of Euro tied up in residential property through their main residence, common sense says, that a prudent investor would look to invest in something other than more residential property.

We had a client the other day tell us that they were diversified. They had a property in Ireland and one in Spain and one in France………diversification? I think not.
_________________
Marc Westlake Dip PFS,QFA

INVESTMENT WARNING
The information available through this Website is for your general information and use and is not intended to address your particular requirements. We do not, nor are we authorised to, offer advice on specific investments in the UK.
In particular, the information does not constitute any form of advice or recommendation by Gold Investments and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.
For your information we would also like to draw your attention to the following general investment warnings. The price of shares and investments, and the income derived from them, can go down as well as up. Investors may not get back the amount they invested. Past performance should not be regarded as indicative of future performance.

Mark OByrne

Also on news-goldcore-com

Videos

Chris Vermeulen on Gold: This Is A Super Cycle At Play

Patrick Karim, Charts and Gold’s Next Breakout

Gold Down $100? This Really Shouldn’t Be A Surprise

Blog posts

Chris Vermeulen on Gold: This Is A Super Cycle At Play

When we woke up to see gold had hit an all-time high overnight we knew we needed to take a look at some charts. And who better to do that with than technical analyst Chris Vermuelen of TechnicalTraders.com.  GoldCore CEO, Dave Russell took some time this afternoon to speak with Chris about what took the […]

READ MORE

Gold Hits Record High: Is This A New Era?

Overnight gold stunned markets by obliterating resistance levels and rocketing up to a new all-time high of $2,148.99.  As well as a new level we might also have seen a new standard in volatility being set as the yellow metal experienced $100 intraday swings.  This morning gold has calmed itself down a bit. But make […]

READ MORE

Will The Gold Price Shift As Two Great Titans Leave Us?

For much of November gold has been on a tear and this week investors have sent it way up, punching past $2000. Will these giddy heights of over $2,000 be how gold chooses to see out month-end? At the time of writing we cannot be sure.  Yesterday prices did soften ever so slightly but the […]

READ MORE

Featured

The King and Queen will be Gold and Silver

READ MORE
Newsletter
Category
Archives
Popular

No posts available

Videos

Chris Vermeulen on Gold: This Is A Super Cycle At Play

Patrick Karim, Charts and Gold’s Next Breakout

Gold Down $100? This Really Shouldn’t Be A Surprise

Blog posts

Chris Vermeulen on Gold: This Is A Super Cycle At Play

When we woke up to see gold had hit an all-time high overnight we knew we needed to take a look at some charts. And who better to do that with than technical analyst Chris Vermuelen of TechnicalTraders.com.  GoldCore CEO, Dave Russell took some time this afternoon to speak with Chris about what took the […]

READ MORE

Gold Hits Record High: Is This A New Era?

Overnight gold stunned markets by obliterating resistance levels and rocketing up to a new all-time high of $2,148.99.  As well as a new level we might also have seen a new standard in volatility being set as the yellow metal experienced $100 intraday swings.  This morning gold has calmed itself down a bit. But make […]

READ MORE

Will The Gold Price Shift As Two Great Titans Leave Us?

For much of November gold has been on a tear and this week investors have sent it way up, punching past $2000. Will these giddy heights of over $2,000 be how gold chooses to see out month-end? At the time of writing we cannot be sure.  Yesterday prices did soften ever so slightly but the […]

READ MORE

Featured

The King and Queen will be Gold and Silver

READ MORE