Investment Property or Shares?

Its all well and good reading a site about shares, but what if you’re against the idea of risking your money on the roulette wheel of the FTSE. After all, isn’t investing just glorified gambling?

roulette-wheel

Well its not, but it does come with risks. So if you want to invest your money safely you would have probably considered buying a second property instead of shares. That is until April this year when the Government changed the rules on stamp duty for second homes and investment properties. In early 2016 there was a rush for investors to conclude transactions before the changes hit, and the market then lulled off for a couple of months…well, until about now actually, as appetite for property actually subsided. The market is now more level between a buyers and sellers market than it has been for some time.

So, I thought it would be a good idea to draw a comparison for someone who has, say, £50,000.00 available to invest – whether it be shares or property.

 

First, a Buy to Let Property over 5 years.

btl-table

 

So, for your £50,000.00 investment you can see a return on capital of almost 32% even after taking into account the significant extra stamp duty costs. But wait, there’s more! With property values on a seemingly perpetual upward trend, barring a few blips here and there, the humble buy to let investor also receives capital gains.

 

A couple of caveats of course:-

  1. You may be liable to pay income tax. You could lose between 20%-40% of income to income tax.
  2. You will pay capital gains on any increase in value of the property when the time comes to sell.

So a 20% knock on the income side would decrease your overall return to around 24%.

Seeing as the average investor grows their portfolio by 3.7% per annum when investing in shares, which when compounded yearly would equate to 19.9% after 5 years, investing in property looks to still come out on top on income alone, let alone the capital gains that could be made.

Having said the above, what if you could make 50% or more over 5 years. That’s how things could look with shares like:

All three of these shares have demonstrated volatility following the UK’s referendum to leave the EU, but arguable have solid business models moving forward into 2017 and beyond.

Property or shares? You decide

 

 

 

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