Certified Financial Planner professional, Matt Hern has three times been awarded as one of Australia's Top 50 Financial Planners by The Australian Financial Review Smart Investor. He is passionate about guiding you on the right financial choices to achieve what you really want. Matt Hern is an Authorised Representative of Charter Financial Planning Limited AFSL 234665. All information is general advice only.

8 responses to “Residential property vs shares since 1926”

  1. Gihan Perera

    Matt, I don’t think this is a fair comparison.

    Yes, somebody investing $100 in shares in 1926 would probably buy $100 worth of shares. But NOBODY would use their $100 to buy just $100 worth of property!

    They would take their $100 to a bank, and borrow $400 (even with a conservative bank, who insists on a 20% deposit), so they actually get $500 worth of property.

    That $500 property is growing at 11%, remember, so after 5 years it’s worth $842. Let’s say they pay 10% interest on their $400 loan each year, which is $40 per year. Over 5 years, that’s $200. So that reduces the $842 to $642.

    Now contrast that with the share investor, who puts in $100 in 1926, and makes 11% each year. After 5 years, that’s only $169. In fact, it takes 18 YEARS to reach the $642 that the property investor gets in 5 years.

    That’s a HUGE difference, and it only gets bigger each year.

    I’m not saying this alone means property is better than shares. But I *am* suggesting this is what happens in practice, whereas the comparison in the graph bears no relation at all to real life..

    1. Gihan Perera

      Oh, and I also meant to add …

      So why don’t more financial planners recommend investing in property? I don’t know, but I suspect it’s because most of them only get a commission for recommending shares!

      That’s why I prefer to work with an adviser like you, Matt, who offers truly independent advice. Is it true the entire industry is being forced by the government to change to this practice? If so, it can’t happen soon enough!

  2. Paul Hodson

    Well said Matt.

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    I read this post fully regarding the difference of most up-to-date and previous technologies, it’s remarkable article.

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