The 2007 ASX/Russell Long-Term Investing Report has found shares have outperformed an investment property over the past 10 years. Will property or shares be the best option for future investment?
Resident finance guru Ross Greenwood gives us some hot investment tips and LJ Hooker CEO Warren McCarthy talks about property investing.
"Predicting whether to invest in shares or property in the next 10 years is very tricky, because who would have been able to predict Coles Myer would have been a risky investment or Telstra would have gone through such turmoil", says Ross.
If investing in shares, select good shares. Diversify when you are selecting your shares so you invest in different businesses, for example a mix of retail, publishing, brewing, says Ross.
"Sell your shares if you think they are too high and take opportunities to invest in shares when they are cheap", he says.
Ross says that Interest rates will fall over the next two or three years so if you are investing in property it is a smart idea to invest in areas with high population growth such as Queensland and South-East Queensland.
Best investments over the 10 years:
1. Listed Property Trusts
2. Australian Shares
3. Residential Property
4. Fixed Interest Investments
5. Cash in bank
"The best investments over the past 10 years are listed property trusts - which are basically property trusts listed on the stock market that invest in offices or retail or whatever it might be, Australian shares, and residential properties. Fixed interest investments - are way behind, and cash at bank - just don't do it. The message here is don't leave to much cash in the bank", says Ross.
Ross explains that although keeping your cash in the bank might seem like a good idea for the older population - people are living longer these days and you need to invest your money to make money for your future.
"The problem is most people get to 60 and just put all their cash in the bank - but your life span might go on until your 90 and that’s the reason why assets need to keep growing", says Ross.
Best investment tips for the future:
Diversify your portfolio and invest in a variety of different businesses
Invest in assets that will grow and that have an income (see below: Ross' 'building blocks' for a diverse investment portfolio)
Buy assets that will last - invest in the share market for the long term you will make more money.
Queensland residential properties are a good investment because of the high population growth in Queensland.
Ross' "building blocks" for a diverse investment portfolio:
"These are four stocks that I've got and I think will be around in 10 years time and bigger than they are today", says Ross.
1. BHP Billiton
Warren McCarthy's advice:
"People are comfortable dealing with bricks and mortar as there is a culture in Australia about buying your own home", says Warren.
Warren says that people feel they have a better knowledge with investing in property than investing in shares and since the value of property doubles every six to seven years - property is a good investment.
"Property is gong to look fantastic for the next few years and there is two main reasons, one is the fact that rent is soaring at present so from an investment view its good to get in now and take advantage of that rise in rental return. The other is supply - at the moment we are having a drastic lack of supply of property to meet the demand right around the continent", says Warren.
Although property prices are increasing, Warren says that the next few years will be a good time to invest in property.
"The rental yields are at an all time high, so now is a good time to take advantage of the high rental price," he said.