They are both great in creating wealth but which would be your pick?
Shares/Etfs Or Property?
The way i see it these days property does not make any sense as an investment. High entry,low rent,high upfront outlay,stamp,insurance blah blah
What do you all think? What is the trick these days?
Retiredandsilly - who also posted another thread 'is $2M enough to retire' … hmmm - I'll go with 'silly' …
Only US shares or ETF if you must because the US financial system is geared towards that. Just check out the AUS all ordinaries vs US markets for last 20 years. US is up more than 75% vs AUS when it comes to growth.
Property AUS only because the system is geared towards that. Too many corrupt politicians that skin in the game and would not change the rules to financial give themselves a disadvantage. Always a reason why property is going up in AUS up.
You can buy AUS shares for long term growth and dividends but the market is too small compare to the big boys in the US.
Bit of everything is always good but only if it is quality investments
Buy shares in a property company
I only invest in what gets listed on Ozbargain.
To be honest, I do make a better APY on some of the deals that get listed here than either property or shares would give me in a good year.
Now factor in leveraging and taxes.
You can leverage shares - 2x etfs 3x etfs
2x is low risk
3x is high risk
Both the above pretty much leave property for dead
Now factor in probability of margin calls.
You can leverage property with 80% LVR and no LMI or even up to 90% LVR with LMI.
That's 4x to 10x leverage and no margin calls.
You also can't spend money to improve the resale value of your shares, nor can you then claim that as a tax deduction.
@tenpercent: You can't get margin called on a 2x leveraged etf like QLD and SSO.
You can lose your job or income and lose the house to the "bank" so if you comparing it at least compare it properly
You can sell 10% of your share portfolio and buy something else with it in 2-3 days. Can you sell 1 bedroom from your house without selling entire house in 2-3 days?
@Retiredandsilly: You losing your job doesn't stop the tenant paying rent. Banks tend to work with you when you have some sort of temporary financial hardship like losing your job and you can most often get a new one (maybe not if you suffered from TPD and didn't get a payout). It's more expensive for the bank to reposess and sell up than to make accommodations to keep you going if it's just temporary.
@tenpercent: You want to tell me rent covers a mortgage with no more top up from my end ?
Mortgage
Repairs
Council
Insurance
Water
@Retiredandsilly: Councils also have temporar financial hardship policies. Ditto water rates.
Some insurance providers may have financial hardship policies. You should have a pot of money set aside for repairs anyway.
Again, most times someone losing their job is temporary. They can also sell up if need be and will probably still be ahead because of the magnifying effects of 4x to 10x leverage vs 2x to 3x leverage with shares.
@Retiredandsilly: I did. Thanks for bringing those etfs to my attention btw. I will be looking into them further.
Comparing if invested 30yrs ago. Sydney property vs IOO ETF
| Scenario | Investment | Starting Amount | Assumed Growth Rate | Current Value (approx.) | Net Worth Today |
|---|---|---|---|---|---|
| 1 – Property | Sydney house | \$100,000 | \~10× over 30 years | \$1,000,000 | \$1,000,000 |
| 2A – IOO (8%) | Global ETF | \$100,000 | 8% CAGR | \$1,006,000 | \$1,006,000 |
| 2B – IOO (10%) | Global ETF | \$100,000 | 10% CAGR | \$1,745,000 | \$1,745,000 |
Calculations for Scenario 1
Purchase Price (1995): $100,000
Deposit (20%): $20,000
Mortgage Principal: $80,000 at ~10% average over 30 years → paid off.
Current Property Value:
$100,000 × 10 = $1,000,000
Equity (net worth):
Current value ($1M) minus remaining mortgage (assumed fully paid):
$1,000,000
If instead you’d invested all the $100,000 in the IOO ETF 30 years ago (assuming it existed or picking a comparable equity return of a global large-cap ETF):
The iShares Global 100 ETF (IOO) has a Total Return CAGR (trailing) around 18.5%
FinanceCharts
. That’s a strong recent rate—but over a full 30-year span, the long-term average might be more like 8–10%.
Let’s assume two return scenarios:
Conservative CAGR: 8%
Optimistic CAGR: 10%
Applying these to $100,000 over 30 years using the future value formula:
Scenario 2A – 8% CAGR
Final value = 100,000 × (1.08)³⁰ ≈ 100,000 × 10.06 ≈ $1,006,000
Scenario 2B – 10% CAGR
Final value = 100,000 × (1.10)³⁰ ≈ 100,000 × 17.45 ≈ $1,745,000
Thus, the IOO investment would now be worth roughly $1.0M–$1.75M, depending on the assumed long-term CAGR.
Normal etf beats it.
Add in 2x leverage and you complete destroy a standard buy and hold house in Sydney.
Just to clarify in your etf scenario one has to put in $100k staight up but in prperty they only need $20k thanks to leverage? In that case we are not comparing apples to apples rather apple to oranges
yeah.. and in theory you can get 5x property to make 100k and that would be $5mil? of course serviceability need to be factor in but 100k vs 20k initial capital is not the same
Scenario 1 ignored rental income and tax deductions.
All scenarios ignored leverage and margin calls over the 30 years.
Doesnt rental income and tax deductions gets offset by interest paid for mortgage?
Rental income gets offset by interest paid and other expenses including costs to directly improve the value of the property in excess of the general rise in property values. At some point the property will become positively geared as well.
Leverage is the main elephant ignored.
@tenpercent: yeah leverage is the main key difference… i play both scenario with property and etf.. and found out if i had dump everything into prop by now it is probably retired
Without leverage this has NEVER been a comparison. Shares win 100% of the time, no question……BUT leverage. You cannot leverage shares the way you can property and until we enter the imaginary world of house prices falling, houses (not apartments) will always come out on top as an investment.
That said, as you get on in life your priorities might change and the returns may become less important. For example in my situation, I did not want to spend my retirement having my balls broken by property managers and tennants so I liquidated everything and I'm in shares, they won't call me at 3am on the other side of the world to tell me the oven is broken or they would like me to instal air con.
Definitely shares, especially safe options like A200
Residential property – a ‘sure bet’ investment?
Somewhat ironically, the Australian Securities Exchange (ASX), that bastion of Australian capitalism, has inadvertently provided the key insight.
In a series of ‘Long-Term Investing Reports,’ the ASX (together with global asset firm Russell Investments) calculated the 10 and 20-year returns for some of the most popular investing strategies, including cash, Australian shares, managed funds, and, yes, residential investment property.
The endeavour was, presumably, to highlight the superiority of Australian shares (its own ‘product’) as a creator of long-term investment wealth.
Rather than functioning as a content marketing campaign for shares, the reports backfired spectacularly by consistently pointing to the same outcome: the final report (to the best of the author’s knowledge) somewhat exasperatedly concluded,
The top line results from the 2018 Russell Investments/ASX Long-term Investing report are: Australian residential property outperformed all asset classes for the 10 and 20 years to 31 December 2017.
https://michaelwest.com.au/housing-hunger-games-negative-gea…
That said, property investment makes sense when you do leverage as it provides outsized cash on cash returns. Some people can't do that, for example if they are no longer employed or just can't get credit. So they can invest in shares and get somewhat similar returns as property cash buyers. But in any case, a leveraged property investor will always be ahead. And even if times are tough, like we saw in the current rate tightening cycle, one could always rely on negative gearing to cushion the blow.
As we know, shares are a long-term investment. Can anyone recommend a good platform to begin my investment journey and stay consistent with it?
IBKR
Simple, invest in property that you live in, your home. The tax advantages are unmatched. You also get tax free imputed rent and tax free capital gains.
Too many fees and charges to invest in property, land tax is a killer. Management fees, maintenance costs, bad tenants. Plus now you are increasingly regarded as a pariah for having the audacity of want to make money on housing, the youth of today think it’s a human right.
I don’t get the investment logic sometimes given of renting a place to live and investing in property to rent to others. You pay rent in after tax dollars.
Invest your spare dollars in Shares, the flexibility is unmatched. Ignore almost all the advice from the USA. Dividend imputation is a game changer.
Townsville.
Has slowed down but still growing.