I personally reckon the profit of property is actually much higher
than share investing. It is not because property outperforms the share
market but due to 2 major important factors:
1. Leverage
Generally speaking, property investor will borrow 80% fund from the bank. It is quite normal and not perceived as risk strategy. It actually means property investor leverage ratio is 400%!
1. Leverage
Generally speaking, property investor will borrow 80% fund from the bank. It is quite normal and not perceived as risk strategy. It actually means property investor leverage ratio is 400%!
Property market goes up 2.5% each year on the average means your return
on capital is actually 10% return on your initial capital and that is
very powerful.
Share market, generally speaking, produces 5-7% per year which outperforms the property but…with the leverage, property indeed outperform the share market.
Could you apply the leverage to the share market? Yes, you can but you usually end in disaster.
2. Capital base
It is quite common to buy the investment property value from 500-800K in Sydney market and people perceive it is median price range. However, people usually start share investing by $10K
Let’s put into the annual return by dollar:
Property: 500,000 X 2.5% = 12500 per year
Share: 10000 X 7% = 700 per year
Even share investing offer higher return % but its return by the dollar is way much smaller. Coz of majority of people won’t put the same amount of capital into the share investing. It is too much pressure and risk for them to do so.
So what is the purpose to invest in share instead of property?
The answer is depends on what you do want in your investment result?
I let you know next time...The true value of share investing is...xxxx
Share market, generally speaking, produces 5-7% per year which outperforms the property but…with the leverage, property indeed outperform the share market.
Could you apply the leverage to the share market? Yes, you can but you usually end in disaster.
2. Capital base
It is quite common to buy the investment property value from 500-800K in Sydney market and people perceive it is median price range. However, people usually start share investing by $10K
Let’s put into the annual return by dollar:
Property: 500,000 X 2.5% = 12500 per year
Share: 10000 X 7% = 700 per year
Even share investing offer higher return % but its return by the dollar is way much smaller. Coz of majority of people won’t put the same amount of capital into the share investing. It is too much pressure and risk for them to do so.
So what is the purpose to invest in share instead of property?
The answer is depends on what you do want in your investment result?
I let you know next time...The true value of share investing is...xxxx
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