Cash, Shares or Property

[william.woon]

Hey guys, I just would like to start a discussion on this topic. What are the benefits and risks in investing property, shares and cash?

[thushan]

I'd like to know about this too, actually!

[Reckoner]

Cash
Risks:Theft, inflation, collapsing government, bank going bankrupt. Very minimal overall.
Benefits: minimal risk, more liquid than other assets (cash is easier to spend than gold). You get no return on your investment either, unless you're investing in foreign currencies which in itself is much more risky than just keeping a stack of cash under your bed. Even if you put it in a saving account at a bank, you'll only get at most 4% or so, which is only just above the rate of inflation, which is currently 2.7%.

Shares
Risks: Company going bankrupt, no guaranteed return (company's do not have to pay dividends to shareholders if they don't want)
Benefits: Generally higher rate of return to accommodate for the extra risk. Also the chance of a capital gain - buying low, selling high and pocketing the difference. But the price of the share can go down just as easily as it goes up. The main value of a share comes from its dividends though.

Property
Risks: physical damage, as well as decrease in price (hear about a little thing called the GFC?)
Benefits: umm, you have property that you can either use yourself or rent out to others. I don't know much about property. Also capital gains. 

You'll find a positive correlation between the risk of an investment and its return.

I've probably left out a whole bunch of stuff, but there's the basics.

[abcdqdxD]

Moved topic to OGD, not really relevant to Accounting

[MJRomeo81]

Benefits: $$$

Risks: Lose $$$

Property is inflated through the roof at the moment since the scene is dominated by investors. The question is when will the bubble burst?

Even if you put it in a saving account at a bank, you'll only get at most 4% or so, which is only just above the rate of inflation, which is currently 2.7%.

Don't forget that you are taxed on the interest you make! Yes that's right. You're taxed on your income (salary) and then taxed again on your savings.

[appianway]

Idk personally, I'd be a bit skeptical about investing in the Australian property market right now (as there's a lot of speculation at a bubble is going on). If you take bonds, cash and shares, generally cash is the safest, followed by bonds and followed by shares. They all work differently, but the biggest risks are that the value of what you're buying will decrease or that the firm's profit decreases and they default on payments. There are also other things to invest in, such as commodities, different sorts of fixed income (or even equity) products and so on.

[chasej]

Hey guys, I just would like to start a discussion on this topic. What are the benefits and risks in investing property, shares and cash?

I have no idea about property as I'm no where near wealthy enough to think about dabbling into that market.

I assume by cash you mean long term savings accounts and/or normal savings accounts.

Obviously when it comes down to shares vs. cash it's about risk vs. reward. Savings accounts is very low risk, if you keep your money in a big4 bank, I highly doubt your money would ever come to any harm, the drawback with this though is that the money you make via interest is very low relative to other places to put cash. I'm on 4%p.a. and I only get that if I deposit >50$ a month (you actually can't withdraw from the account either without losing interest, so only for serious savers). For a savings account which has no minimum monthly deposit and unlimited withdrawels you're looking at no more than 3% if you're lucky atm, 2.5% is the going rate.

Shares though are higher risk i.e. there's no guaranteed return, not even dividend's are guaranteed until like a week before they are payable. Shares can make you way more than 4%p.a. though, I'm sure on every given workday there are some shares in the ASX that will double in value, pretty obscure though and you'll be lucky to find them before they go up. If you do your research though shares can be very rewarding, I heard a tip that a share was going to double in value over 3 months about a month ago, and sure enough since then the share has gone up 30%. This isn't financial advice, but in my personal opinion I would take a 50/50 chance of a 30% loss or 30% gain /month over a 100% chance of 4% each year.

It's always good though to keep a portfolio diverse to ensure you don't loss everything if one specific asset crashes etc. A lot of serious investors I know tend to go 25% share, 25% bank, 25% property, 25% precious metals e.g. gold. I normally am (with my really low value portfolio) at 33% shares, 66% bank, very rarely physical metals -almost always mining companies which mine any given precious metal you are interested in will be more secure than the physical metal (as if market prices go up, company profits go up, hence share value up/ while if gold prices go down, profits may go down and share value down, but once you take out the commission every time you buy and sell phsyical metals you won't loss as much selling shares).

Tip: It's way easier to keep you're income (interest, dividents etc.) below the tax free threshold while you are starting out.

Also cryptocurrency is an interesting thing that has been emerging if you want to take a big risk. Some currency's can triple really quick and then drop just as fast so it's all a matter of speed and being in the right place at the right time in those, especially newer cryptos which are still being heavily mined and can be gained easily through faucet's (which randomly give out coins).

Sorry if I've confused

[spectroscopy]

it really depends on what you want to do ! i have a few financiers in my family who invest so i know about property/shares/money/bonds

cash - having money in the bank accumulating interest is the safest way to invest, especially in australia with a very steady big 4. you can get around the 4% and some term deposits are 5% (some are just over 5). with banking your money, people usually do it for the long haul - youre earning a decent wage, or you save alot, and you dont want to risk, so you keep letting the little 4% grow and grow until its alot of money, also good for trust funds for your kids etc.

shares - people really play up the dividends in shares but alot of the main shares people buy have low dividend yields !! bhp is like 3.3% and telstra 5.5 or so? people mainly invest in shares in the hopes of capital gains, not dividend yields/cashflow. economic or political changes or a bad quarter or something changes the value of a companys stock as im sure youre aware, so people do not put their money in shares unless they are hiring an advisor or doing a decent amount of research theirself ! however if you find good shares, your 10k can become 20k in a year or so. but it gets harder to make more money when you invest more money and to be making serious money at the millions of dollars mark you need to start getting creative ! but pre-2008, everyone was thinking "yay shares are going up buy all the shares" then suddenly the boom crashed and ordinary guys who put their 30k savings in shares now had like 7k worth of shares.. so do your research !!

property - putting money in property is ok because you have many more opportunities to flip it for a profit or renovate and rent it out, but in melbourne house prices are ridiculously inflated ! which means houses are really really expensive. you can buy property but these days it is so expensive it would be hard to get a positive cashflow out of it + if the market softens which it should eventually you have capital gains LOSS and you lost money... but at least you own something physical

LOL good luck !!

TL;DR banks=safe slow growth, shares=good if well researched, a gamble if not, property= meh depends on the market of the day !!

[cute]

Shares and property are more risky as there is no guarantee with how much money you will gain/lose. This also means there's an opportunity to earn much more than just investing cash.
Cash only rises in value with inflation, which is how your bank will give you 5% interest on your invested money. They're not really 'giving' you anything, they're just adjusting the value of your wealth over time.

[chasej]

Cash only rises in value with inflation, which is how your bank will give you 5% interest on your invested money. They're not really 'giving' you anything, they're just adjusting the value of your wealth over time.

Not necessarily. Most bank accounts should increase in real value marginally.

[Greatness]

however if you find good shares, your 10k can become 20k in a year or so.

That is one mighty good investment!!! Would be very rare if your portfolio is only $10k. You have to consider transaction costs too. If you invest in more speculative stocks then there is more potential for profits, however you also take in more risk.

As others have stated it's dependent on how risk averse you how i.e. how much expected return you are willing to receive for a unit of risk.
If you're highly risk averse then you can consider term deposits. You lock in your money for a certain time period for a certain interest rate. This rate is normally higher than a savings account.

[chasej]

As others have stated it's dependent on how risk averse you how i.e. how much expected return you are willing to receive for a unit of risk.
If you're highly risk averse then you can consider term deposits. You lock in your money for a certain time period for a certain interest rate. This rate is normally higher than a savings account.

reward savers accounts with minimum deposits per month almost always earn more interest than term deposits and you have access to the cash quickly should you ever need it urgently as opposed to term deposits.