Property, Shares or Crypto — Where Should You Invest?

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If you are ready to start investing, the question becomes what is the best way to go about it? Is it by investing in residential property? Or should you be considering alternatives like shares or cryptocurrency instead?

If you’re trying to decide where to put your hard-earned cash, doing your research and giving some thought to the pros and cons of each is the best place to start.

Here are a few pointers to get you thinking about what’s the right fit for you.

Evaluating Property

Aussies love property. It’s in our DNA. And because a house is a real thing, made of bricks, that you can see, touch and sleep in — it often feels like a more secure investment. But that doesn’t always make it so.

The investment property pros:

• Australian residential property has grown steadily over time.
• There can be tax advantages to owning investment properties in the form of negative gearing.
• Investment properties are tangible.
• Investment properties offer both capital growth and an income stream (rent).
• You can borrow money with relative ease to invest in property.

The investment property cons:

• Property is not a liquid investment. In other words, it’s not easy to get your cash out when you need it because selling a house takes time (often months). You can’t sell the bathroom if all you need is a little bit of cash, it is all or nothing.
• It takes a large lump sum of money to get into the property market and in most cases, you’ll still need to take out a long-term home loan, so the financial investment is significant up-front.
• There are hefty fees associated with buying and selling property, like stamp duty, legal fees, real estate agents’ fees and in some cases Lenders Mortgage Insurance.
• Due to the costs involved with buying an investment property, it means more of your money is tied to one investment and so it can be difficult to diversify. This means you are more likely to be putting all your eggs in one basket.
• There are costs associated with the upkeep and maintenance of the property, agent fees, as well as risks of tenants causing damage or not paying rent on time.
• Despite popular belief, property can and does go down in value too! Just take a look at how property prices have fluctuated over the years in WA as an example.

Evaluating Shares

When it comes to shares, we hear a lot of bad news. The global financial crisis, share markets crashing, black swan events, the list goes on. The negative media coverage tends to make us think that shares are too volatile and risky and often result in losing money. What we don’t hear of so much about are the big gains and comebacks, because let’s face it, good news stories don’t sell as well. For this reason, it is important to take a balanced and long-term view of all types of investments, shares included.

The share pros:

• Shares are a low-cost way to begin investing and don’t require large sums of cash to get started.
• Costs of entry are quite low ($10 or $20 brokerage fee to purchase a parcel of shares).
• It’s much easier to diversify with shares. You can purchase small parcels of shares in various different companies, countries and sectors to spread your risk. You can also invest in real estate and cryptocurrency by investing through managed funds that invest in those asset classes.
• Shares are relatively quick and easy to buy and sell, so if you needed money in your bank account this week, selling a portion of the shares you own would make that possible. Unlike with owning a property, you can choose to sell only a parcel of shares instead of withdrawing your entire investment.
• Shares can offer both capital growth and income (dividends).
• Unlike property, shares do not come with ongoing maintenance costs.
• Like property, shares are a long-term investment and have also shown to steadily grow over time.

The share cons:

• The share market can be volatile, and prices fluctuate daily.
• It can take months or years to recoup your investment.
• It is possible to lose all your money if the company you invested in goes out of business.
• Being easy to buy and sell can make it easy for investors to make impulsive decisions.
• It can be more risky to borrow to invest in shares.
• Having too many choices and investment options can make it difficult to know where to start.

Evaluating Crypto

Last but not least, let’s not forget the new kid on the block (pun intended). Without getting too technical, blockchain technology is a new type of peer-to-peer electronic ledger. It contains data such as a list of transactions that is replicated across all the computers in a network, rather than being centrally stored. It is the technology that is used to store and transfer digital tokens such as cryptocurrencies and NFTs (non-fungible tokens). These digital tokens can be used as a store of value and can also be traded.

While most experts agree that blockchain technology is here to stay, that does not mean that any type of investment in that space is guaranteed to make you money.

There are a few significant risks associated with cryptocurrencies at the moment, so make sure you weigh these up carefully against the potential for making a lot of money in the short term.

The crypto pros:

• There is potential for high returns.
• There is no minimum investment amount.
• Cost of buying and selling crypto are relatively low (anywhere from 0.05 to 4 per cent).

The crypto cons:

• The space is currently unregulated meaning that you may not be protected if an exchange fails or your account is hacked.
• It is difficult to ascertain if a trading platform or digital token is legitimate and there is a growing number of scams.
• Your investment could be switched off by the token developer, with no way of getting your money back — this is also known as a rug pull.
• If you keep your digital currency online (in what is known as a hot wallet) your account could be hacked or taken offline by the developer.
• If you keep your digital currency offline in a physical drive (known as a cold wallet) you could lose your secure key and be permanently locked out of your wallet.
• The volatility of the market means that you may be a crypto millionaire today, and then have nothing tomorrow. (In fact, the price can fluctuate significantly even during the sale process).

At the end of the day, the key to successful investing is to diversify and have many different types of investments. This will reduce the pressure to find the perfect investment (as there isn’t one!) and give you more choice and control when you decide to cash in on an investment. But remember, with all investment comes some level of risk so getting tax and financial advice before you dive in is a wise move.

Natasha Janssens is a Certified Money Coach (CMC)® and founder of Women with Cents. She is an award winning financial educator with a passion for supporting women to transform their relationship with money. If you don’t know what you don’t know when it comes to money and financial matters, her book Wonder Woman’s Guide to Money is for you. For more of Natasha’s tips follow her on Instagram and take the Money Type Quiz.