Share the love when it comes to investment

A READER took issue with my claim in a recent column that investment property has performed on par with shares over the past 25 years.

Look at the figures, he said. Australian shares have climbed 1000 per cent while property is only up 700 per cent since 1980.
Am I a stooge for the real estate industry? he asked.

Unlike that great man, The Fonz, I am not too proud to admit: "I was wrrrrrronnng."

I was simply repeating a comment I made last year, back when Aussie shares were experiencing one of their mini slumps.

Since then, the All Ordinaries index of the top 500 companies has surged 20 per cent while there has been no update on SA's median property price.

This illustrates how quickly things change. Some people love shares and hate property. Others hate shares and love property. I personally like to share the love between both.

Who wouldn't have a soft spot for BHP Billiton, which has delivered its shareholders a return of 21 per cent in just over a month? Both shares and property have their distinctive advantages and disadvantages.

Property sits on land and they're not making any more land, unless you live in Singapore, Dubai or Macau.

Property is tangible. You can drive past your investment house and touch it (okay, you can also hug a Woolworths trolley if you wish).

Investment property gives you a wide range of tax deductions for things such as interest on loans, depreciation, management costs and maintenance.

When you borrow against property to invest, it's usually at lower home-loan interest rates.

On the downside, property can be a pain to buy and sell, agent fees can run into the thousands and stamp duty costs are an outrageous waste of money. If you're really unlucky, tenants can trash your house.

As well, property has been known to experience long periods of little or no growth.

Australian shares, based on the latest figures, have vastly outperformed property in the past 25 years. They are easy to buy and sell and you can usually get your money back within a couple of days.

Shares spread your risk, stamp duty was abolished on share transactions years ago and you can claim a tax deduction for interest paid on a loan to borrow shares.

Income from shares is also better than property income, because dividends usually come with attached tax benefits.

But individual stocks can swing wildly in value, and there is the risk of losing everything - just ask HIH investors.

Interest rates are also higher on loans secured against shares.

However, a portfolio of quality companies has proven to deliver great gains over the long term.

Much better than property, I should add.