Property vs Other Investments
All investment strategies have their place in a diversified portfolio. But there are benefits to choosing property investment compared to the following options:
Real estate mirrors the stock market through the possibility of earning two kinds of income on your investment. Once you sell, you can realise profits due to the overall value of the asset/stock increasing. You can also maintain a regular income through dividends (in the case of the stock market) and rental income (in the case of real estate).
If both investments produce the same types of outputs, why can property investing be better?
It comes down to the scarcity of the underlying asset. Stocks in a company are subject to fluctuation based on the success of the company, market factors, success of competitors or new market entrants and a host of other factors. The value of real estate is always driven by the fact that people need homes. This makes it easier to forecast a stable return on investment.
Of course, it can be much easier to offload an underproducing stock than it is to dispose of a home in negative equity. However, because of the reliability of UK property price growth over the last 45 years, you’re unlikely to find yourself in this position.
Traditionally a safe place to keep your money, bonds offer little return on investment (ROI). When used as a hedge against riskier or more long-term diversification of investments, bonds can provide some security against market fluctuations, but are often limited in how much you can invest and for how long.
Property can be considered an equally safe investment if you have purchased a well maintained and desirable property. Bonds can offer greater flexibility in terms of accessing your investment, but do not offer the same potential returns as property.
Silver and Gold
Investing in commodities is again a great way to ensure your portfolio is secured for the future. The price of these precious metals often acts inverse to the price of property.
During a recession, property prices will usually decrease, whilst the price of silver and gold will likely experience an increase. This is a general overview, and all market crashes do not follow an exact pattern.
The benefit of investing in property over gold and silver is the ability to make money from the asset while the value of it is appreciating. There is also a lot that you can do to add value to a property that will ultimately increase the value. Making improvements to gold and silver bullion is not so easy.
The crypto market has seen some impressive gains in the last ten years since the inception of Bitcoin. In terms of short-term price increase, it has completely eclipsed the gains possible within the property market.
That isn’t the whole story though.
Those who held bitcoin all through the last decade are more likely to be early enthusiasts or an average investor that has lost access to his crypto wallet! Most regular investors would have cashed out many times before now, due to the extraordinary price shifts and market manipulation.
The volatility in the crypto market makes for an anxiety-filled investment strategy, but for brave investors who don’t get spooked easily, it can provide an impressive ROI.
When considering long-term and efficient investing strategies, however, it is advisable to invest in a safer asset. Property has historical market data from before the 1990s and an underlying use case making it of obvious value to the economy.
The secret to securing a long-term investment portfolio comes through diversification. There are several ways that you can diversify between property and other types of investments. By building a strong portfolio these kinds of investments can complement each other.