The pros and cons of real estate, shares and bonds as a wealth building strategy for mum and dad...

In a low interest rate environment it makes sense for

mum and dad investors to assess the performance of

their investment portfolios to ensure their money is

generating wealth.

More info on:

http://www.chaseedwards.com.au/

Implementing the correct mix of traditional

investment products requires an appreciation for the

inherent pros and cons of each asset class. Real estate,

shares and bonds all represent proven strategies for

increasing your wealth but each come with their own

pitfalls.

More info on:

http://www.chaseedwards.com.au/

Property versus sharesBoth shares and property provide

recurring income in the form of

dividends or rental payments and

depending upon market

conditions, each can deliver

capital growth. Blue chip share

portfolios geared towards high-

yielding dividend paying stocks

have emerged as a favored

investment strategy.More info on:

http://www.chaseedwards.com.au/

To date, this strategy has provided significantly

higher returns compared to government bonds or

fixed interest term deposits. There is also

considerable tax benefits associated with franking

credits for dividends. More info on:

http://www.chaseedwards.com.au/

However this strategy is

not without risk, given a

raft of financial conditions

can reduce your dividend

receipts to zero. This

offers an interesting

counterpoint to rental

income derived from an

investment property.

More info on:

http://www.chaseedwards.com.au/

Liquidity concerns

Liquidity should also remain

front of mind when it comes to

generating wealth through

property investment. Recent

spikes in capital city house

prices and associated high

clearance rates have improved

the perceived value of residential

property.More info on:

http://www.chaseedwards.com.au/

Recovery after collapse

Astute investors and analysts

are quick to point out that

shares will rebound much

faster than property following a

widespread collapse in either

of these markets. Take the

example of the ASX 200 in the

wake of the global financial

crisis.

More info on:

http://www.chaseedwards.com.au/

Although the market has yet to regain all of its lost

ground, individual stocks such as Commonwealth

Bank of Australia dipped below $30 per share

during the GFC and are now trading at more than

$75. More info on:

http://www.chaseedwards.com.au/

It is important to remember that this counter-cyclical

trend is not applicable to all property classes, but

rather it will have a more pronounced impact on top

end and inner-city house prices.

More info on:

http://www.chaseedwards.com.au/

Government BondsGovernment bonds are the ultimate "defensive"

investment in they provide little to no risk but also

deliver small returns. The very structure of

government bonds guarantees far less volatility when

compared to shares or property whilst providing

greater interest rate certainty.

More info on:

http://www.chaseedwards.com.au/

Government bonds are a

relatively affordable investment

when compared to property.

Northern Territory bonds, for

example impose a minimum

investment of $2000 with the

option to increase your holding

at $100 intervals after that.

Bonds also provide a relative

safe haven to diversity away

from the stock market.More info on:

http://www.chaseedwards.com.au/

But government bonds are

renowned for being “slow as

opposed to sexy” particularly

in comparison with other

investment classes. Bonds

guarantee a steady income

stream over a long period of

time but have traditionally

failed to yield anywhere near

the returns provided by shares

or property.More info on:

http://www.chaseedwards.com.au/

Summing up

For mum and dad investors gaining a better

understanding of the pros of cons associated with

shares, property and bonds will ultimately assist in

deciding what mix of assets best fits into your wealth-

focused investment portfolio.

More info on:

http://www.chaseedwards.com.au/