Shares v Property: Waltz, Tango or Cha-Cha-Cha?

Written by Mark Thomas

27 August, 2019

The very long term returns suggest that shares and property are well matched. Since 1926 the difference is 0.3 percent per annum, seemingly a small margin in favour of shares.  But if you were to compound this difference over 90 years it is a 30 percent difference.

The analysis does not take into consideration the benefit of franking credits nor the reality that you can leverage property at higher levels than shares.  

It also does not take into consideration the evolution of the market with rising and falling brands. These shifts can create incredible wealth for investors.

Firstly, let’s look at the pragmatic differences between shares and property.

Property versus Shares

Shares versus Property

Other differences include that the residential property market is roughly four times the size of the Australian share market ($6.5 trillion versus $1.6 trillion).

However global shares are a much larger asset group  once again representing $70 trillion or ten times the residential property market. Global shares also include household brands that emerge rapidly providing shareholders with amazing returns. Google started in 2008 and Facebook a few years later. 

Global shares are a dynamic asset class that has reinvented itself almost every decade.  If you were to look at the largest companies of each decade you would be surprised by the shifts in global rankings of the top names.

Reviewing the top five brands in the world today most have been around for at least five if not 20 years.  But the growth rates of the newer companies are far superior. Add to this list Toyota and Mercedes-Benz (flat to down over 5 years) and McDonalds (up 70 percent or so over five years).

Global shares are a dynamic asset class that reinvents itself almost every decade

Google emerged in 2008 and was the largest stock in the world by 2013 – in just five years.  Apple has been around for a while but the iPhone catapulted it from nowhere in 2011 to number one in just two years, and it remains number one valued at over $200 billion today,  some $50 billion more than Google. Then there is Amazon which came from nowhere to number three, valued at $100 billion.  These shifts create tremendous wealth for investors and very quickly.

What this suggests is that the global stock market is very dynamic and should not be ignored as an investment in your portfolio.