Property investors should all consider owning shares. Am I simply biased? Well…yes. But there are things in the minds of property investors that can make them much better shareholders than the average punter. Here are 3 good reasons that all property investors should consider owning shares:
- To benefit from a long-term owner's mindset
Unless they're speculating with interest-only loans, property buyers generally have a much longer time-frame than the average stock market investor. A long-term time frame combined with shares in an attractive business can do wonders for your investment returns.
Just consider if you'd identified these promising companies and held them for the long term:
Woolworths Limited (ASX: WOW) – up 400% before dividends since 1999
CSL Limited (ASX: CSL) – up 865% before dividends since 1999
Commonwealth Bank of Australia (ASX: CBA) – up 224% before dividends since 1999
Comparable with the Sydney housing market, actually, where the median house price has risen 400% since 1999. But if you owned shares, you never spent a cent on repainting, maintenance, insurance, rates, valuing your property, agent fees, and the weeks when there were no tenants. Not to mention that Sydney is an outlier, with the rest of Australia not having performed so well.
- To benefit from your investigative skills
Think about all the work you do before you buy or rent a house. You research the market, value the property, drive around the neighbourhood, hire people to check for termites, and so on. You already know what it takes to make a safe investment decision.
You can apply these skills to stocks by doing a little research into a company's prospects, products, and competitors. You already know what good products are, and more importantly you can identify if the process for doing something (for example, getting a loan) is bafflingly obtuse. This could give you an edge in spotting a company that does it differently, or better.
- Because it's easy
You don't have to take out a loan to buy shares, nor do you have to tip in extra money if interest rates rise or the company is unprofitable. Furthermore, shares don't require maintenance, although like with property, paying for professional advice can be valuable. And, if you buy profitable companies with minimal debt like Flight Centre Travel Group Ltd (ASX: FLT), the businesses are very unlikely to go bankrupt. This doesn't mean that they are a safe investment, but the chance of them going to zero becomes much lower.
I am convinced that the approach employed by property buyers would prove very useful in the stock market.
