Property versus stocks is an old debate which is probably never going to be resolved, if only because most investors are likely to benefit from having both in their portfolio, albeit not necessarily an equal split. Here are three points to consider when thinking about how best to allocate your investment funds.
Do You Want Capital Gains Or Income?
Both houses and stocks can produce capital gains, however, even with the sort of house-price inflation we routinely see in the UK, if you’re going all-in on the prospect of capital gains, then the stock market would probably be your best option as you have the chance of discovering a young company which will grow and grow, building your personal wealth as it matures.
Having said that, this approach does entail a relatively high level of risk and therefore tends to be better suited to younger investors who have time to recover from setbacks and even then should probably only account for a small proportion of their investment funds.
As investors get older, especially towards and during retirement, income tends to become more of a priority and this is where UK property investment arguably has the edge, especially if you invest in locations with high yields such as the north of England.
How Much Liquidity Do You Need?
Becoming a buy-to-let landlord can eat up a chunk of your available investment funds - if you let it. While this is somewhat compensated for by the fact that there is generally a high demand for property in the UK, it has to be noted that it can take several weeks to go through the full process for transferring a property from one owner to another.
Although the government is taking steps to shorten this, realistically, it is highly unlikely that the forthcoming years will see landlords able to sell shares at the click of a button as they can with equities. On the other hand, if you look for more affordable properties and/or invest in property through a different route, such as part-ownership of commercial property, then you can improve your liquidity.
Are You Suitably Diversified?
The issue of diversification is similar to the issue of liquidity. Basically, if you allow your portfolio to become overbalanced in favour of property then you may be creating unnecessary risk for yourself.
In this case, as well as looking at the options of buying more affordable property and/or investing in property through different routes, you might also want to remember that the term “buy-to-let” itself covers not many different variations, such as letting to tourists, letting to students, letting to young professionals and letting to families as well as different parts of the UK (and indeed overseas). That being so, you could also diversify within buy-to-let by addressing different market needs.
One Final Point
Traditionally, buy-to-let investment has been portrayed as a “high-maintenance” investment class and there is some truth in this, although hiring a good lettings agent can go a long way to reducing the maintenance burden. It is, however, also worth pointing out that investors in the stock market also need to keep track of economic developments in general and the performance of their investments (and their investments’ competitors) in particular, so stocks are by no means a completely “hands-off” investment class.
I hope you enjoyed this blog post about whether you should invest in UK property or stocks for the greatest return on investment.
Interested in more articles about improving your investments?
Read Related Resources:
• Ways To Boost Your Real Estate Returns On Investment
• How To Start Trading In The Stock Market
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