Shares vs Property

The great Australian dream is to own property. That is all any baby boomer goes on about. While it has been a great vehicle for wealth in the last thirty years, the soaring prices have only made it more and more difficult for first home buyers. Buying in capital cities is borderline impossible for young people, meaning we have to resort to buying in less than ideal places, or regional towns. Another option would be to invest elsewhere, perhaps through shares. However, investing in shares can sound complicated, and is seen as a complex, often risky investment choice. I’ll explore more below to see what option may suit your out of the two.


  1. You can see it and feel it.
    The best part about property in my opinion is that you can see it and feel it. Before you buy a house, you can drive past it, walk through it and see how it feels. Property also has multiple uses, you can live in it, rent it out, or a combination of both. I own my home and I do love knowing I can change what I like, it doesn’t matter if my dog digs a hole, and just knowing it is mine brings a certain feeling with it.
How can I stay mad at this face? It also helps that I don’t have to tell the landlord my dog dug a massive hole in the lawn as I am the landlord.

2. You can use leverage to increase your gains.
Leverage basically means using a loan to signficantly increase your gains. For example, if you invested $5k into an investment and it gained 10%, your total gain would be $500. If you invested $5k and got a loan of $15k to make your total investment $20k, and that gained 10%, your total return would be $2000. Thats a 40% return on your initial $5k deposit.

Lets say you buy a $500,000 home with a 20% deposit. Your deposit would be 100,000 so you would have a $400,000 loan. If your house went up by 5% each year for the 5 years you owned it, your house would now be worth $642,000 (the wonder of compound interest- if it just went up by 25% it would be worth $625,000). Thats a return of 142% on your initial investment of $100,000 (honestly wtf).

Just a comparison of the example above (buying a $500k house with a $400k loan) vs an example of buying a $100k house outright.

It is important to keep in mind that leveraging can also work against you as well. While it can magnify your gains, it can also magnify your losses. For this reason, leveraging does increase your overall risk and it is important to only borrow what you can afford.

As you can see in the graph, the losses are much larger in the leveraged column.

3. If you live in it you dont have to pay capital gains tax (CGT).
If you choose to make your property your primary place of residence (PPOR), if you do decide to sell, you will not need to pay any CGT on any profits you make. Lets say you decide to sell the property I used as an example above. The $142,000 you made in 5 years would be tax free. Absolutely insane!!

4. Low volatility
The other great thing about property is that it’s value isn’t shown to you every day like shares. The only way to actually know if your property has gone up in value is if you get it revalued. This can give you much more peace of mind compared to shares, and is also more likely to decrease the risk of you making an emotional decision to sell based on the value of the house.


1. Low barriers to entry
The low barriers to entry are arguably the best pro of shares. These days, it has never been easier or cheaper to get started investing. While property often requires a large amount of capital to get invested, you can invest in shares for as little as $5. Micro-investing platforms like Raiz and Spaceship allow you to invest small dollar amounts into a portfolio of your choice. Raiz also has the option to allow you to round up purchases and invest the spare amounts. Other platforms allow you to invest with a minimum of $500 at a time, still much cheaper than property. New online platforms like Pearler make it simple and super easy to get started, meaning its never been easier to become an investor.

2. High liquidity & cheap purchasing costs
Another benefit of shares is that they are highly liquid. This means you can buy and sell them quite quickly. Generally there is a 2 day settlement period when buying and selling shares. This means that you can sell quickly if you need to and receive your money in two business days. Compare this to property which is highly illiquid, as it can often takes months to sell and settlement is at a minimum often 30 days.

Transaction costs are also much cheaper than property. Brokerage (buying and selling once off cost) generally ranges anywhere from $5 to $19.95 per trade. I use pearler, which is $9.50 per trade, with no other fees and is one on the most cost effective platforms.

3. Ability to diversify
My favourite part about shares is the ability to diversify in one single transaction. Buying one Exchange Traded Fund (ETF) can expose me to the best companies in the world. For example, buying an S&P 500 (top 500 US companies) ETF like the iShares S&P ETF (code IVV) lets me buy companies like Amazon, Apple, Microsoft, Google, Tesla and 495 other great companies in one transaction. I invest in only three different ETF’s which allows me to invest in the best companies accross the globe.

4. No ongoing fees
Another great benefit of shares is that there are no ongoing fees to pay- no mortgage, no rates, no maintenance costs. You may have to pay some management fees but these are often very low (less than 0.5%) and will be taken out of any gains you make. In other words, once you buy those shares, there will be no costs to maintain them until you pay the brokerage fee at the end to sell them.



1. Highly Illiquid
As I mentioned earlier, property is highly illiquid. This means that is takes time to buy and sell. If you need the money quickly, you can’t just sell off some of the property to make some money, and you can’t even sell the whole house quickly to find the money. Buying and selling property is something that takes time and also involves high transaction costs, so it isn’t something that can be done spur of the moment. If you are someone that isn’t great at saving or you are an emotional spender, this may actually be a benefit for you.

2. Expensive
The other massive con that makes it so hard for people to buy is just how expensive property is. In South Australia we are luckier than those on the East Coast and generally have lower prices, however property still isn’t cheap. A deposit alone can be in the six figures and therefore very hard to save for. Add on top the ongoing expenses of paying a mortgage and no wonder people can’t get into the market!

3. Ongoing expenses
Another disadvantage to property is the ongoing expenses. Unlike shares, property will continue to cost you money on a month to month basis. This can include expenses like mortgage repayments, council rates, land tax (if an investment property), insurance, bills & general maintenance. Then if something were to break down you could be looking at even larger bills! Shares you buy and forget about, property requires constant attention and often money even after you buy.


1. Daily Price Movements/Volatility
One thing that really gets people when it comes to shares is that you can see how much they are worth every second. When the market is open, the price is fluctuating constantly and that can often cause a strong emotional reaction in people. Shares are volatile which means their prices move up and down frequently. You need to have a strong gut to handle these movements and not sell at the first sign of panic. Being sure of why your investing and your investment strategy is key to avoid making emotional decisions.

2. Difficult to leverage
Another negative for shares is that it can be difficult and quite risky to leverage into them. There are a few products out there that can allow you to borrow to invest in shares, but they often come with “margin calls” which will force sell your shares if they drop below a certain point. Due to the volatility of shares, they may well drop to that certain point, but may easily rise again soon after. Therefore, the worst possible thing to happen would be to sell at a low and this would only magnify your losses. NAB have a product called the Equity Builder, which works similar to a home loan where you pay a principle and interest loan each month. There are no margin calls, as long as you make your repayments they won’t sell off any of your shares. This seems like the best product by far, however they are not accepting new applications at the moment and are only accepting expressions of interest.

3. Jargon ++++
The last con to shares is how difficult they seem! It really isn’t difficult to invest in shares however the finance bro’s have made it sound so hard and scary that people don’t want to give it a go. There are plenty of resources out there to get started and plenty of platforms that make it so easy to understand. I promise it isn’t as confusing as it seems, start having a look, get started and learn as you go!


For full disclosure, I own both property and shares, however I would have to say I prefer shares over property. The reason why I love shares is that I can automate my investing, I put away a set amount a week and pearler invests it for me. I don’t have to pay any bills, there is no maintenance or any ongoing work required of me. I just let them sit there and make me money in the background. Property is also great though as it does provide a roof over my head and it is a great feeling to know I own the property and can do what I like with it. Hopefully this post has helped you work out what may suit your better. In all honesty, I think a combination of both is always best. Keeping your eggs in different baskets is always a good idea in my opinion!


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