Which is the best investment option? Option 2: Shares. Which is the best investment option?
If you missed the last blog post, we started this exercise to determine which is the best investment option. Let’s continue with option 2:
If I gave you $100,000, what would you do with it?
- Put it into a savings account
- Buy shares
- Buy one property @ 80% mortgage
- Buy two properties @ maximum % mortgage
Your second option is to put your money into shares. The average return in the Australian stock market tends to be about 7% – one year will be a bit more, the next year will be a bit less, but over the 10-year period, it will even out to about 7%.
Let’s work it out: If you put $100,000 into shares for 10 years, increasing at a rate of 7% per year, you’d end up with a portfolio worth about $196,715. So we’ve essentially doubled our investment, which isn’t too bad, but possibly not enough on which to retire!
In Chapter 3 of my book, Wealth Through Property, where I talk about historical house prices, you’ll see that history tends to repeat itself which is why I often refer to this quote:
“I can see far into the future… for I have studied the past.” – Winston Churchill
It’s relevant to look back at the historical data to see that on average property prices double every ten years. This information will prove handy as we go through the next two investment options.
Come back next time when we look at Option 3 – purchasing one property with an 80% mortgage.
~Daimien Patterson