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This week on Money and Investing, Mitch Olarenshaw and I break down the age-old debate — stocks vs. property. Together, we discuss the impact of Australian interest rates, inflation, and the long-term performance of both asset classes to help you make informed investment decisions.
1. Stock market performance
Over the past 25 to 30 years, the Australian stock market has delivered an average annual return of 9.6%, while the U.S. market has performed slightly better, at 11.5%. Despite market volatility, long-term investors have seen strong returns.
2. The role of inflation
Inflation affects both stocks and property. While stocks historically outpace inflation over time, property serves as a hedge, increasing in value as the cost of living rises. However, higher interest rates can impact both markets by reducing borrowing power and consumer spending.
3. Property as an investment
Property has seen significant long-term gains, with median house prices in Australia rising from $110,000 to nearly $985,000 over the past three decades. However, affordability remains a challenge, with buyers needing substantial deposits and factoring in additional costs like stamp duty and legal fees.
4. Leverage and cash flow
One key advantage of property investment is leverage — buyers can control a large asset with a relatively small deposit. However, servicing a mortgage during high-interest periods can be costly. Stocks, on the other hand, offer lower transaction costs and the flexibility to buy in with smaller amounts.
5. A balanced approach
Rather than choosing one over the other, investors can benefit from a diversified strategy. Stocks provide liquidity and growth potential, while property offers stability and long-term appreciation. Together, they create a strong wealth-building foundation.
For more info about Money and Investing, you can go to the podcast; read The Wealth Playbook: Your Ultimate Guide to Financial Security and The Wealth Playbook on Audible.
Disclaimer: Wealth Magnet Pty Ltd (ABN 52 618 868 830) trading as Australian Investment Education is a Corporate Authorised Representative (CAR no. 1255231) of Grange Financial Services Pty Ltd (AFSL No. 488609).
The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.
