Managing risk in a Brexit and Frexit world

As we all wait to see how the global markets line up after the Brexit result, it’s timely to consider the age old argument about the benefits of shares over property – including risk mitigation and dealing with unforeseen changes.

Where to put it

I’m sure there’s been an argument since the beginning of time (or at least since the beginning of the stock market) about the best place to invest your savings.  For many of today’s current investors, we usually think of two key markets – the share market vs the property market, although of course there’s plenty of other ways to invest.

It seems financial planners with retro views stay wedded to the stock market, while property pundits will always push the points for property as the best bet.  But what a growing majority of people with a decent savings or super account want to know is ‘where can I invest my money in a place where it will grow in a reasonable risk environment’?

Up front

Let me say up front that I am a total believer in property and not trying to provide ‘financial advice’, just opinion.  As an experienced investor, I have seen results from both sides and my experience with the share market has been horrendous.  I do understand some ‘experienced’ investors (hello Warren Buffett) can generate good returns but – while I will always try to stay open to different views – I simply cannot see how the share market is really good value.  Particularly for those who abide by the blue chips approach advised as ‘low risk’ by most run of the mill financial advisors.

For many years I did what I was ‘advised’ to do with my super funds – invest them in a balanced portfolio managed by a ‘good’ fund manager.  You know, one of those fund managers employed by the big banks.  Ha.  Bet you know where I am going with this, so will aim to get there quickly.  Basically, for a while things went okay but not great.  I had been investing in property outside of super so had solid comparables.

Finally, both my husband and I decided to act on our own knowledge.  After the GFC, we waited until our super balances recovered and then established our own SMSF.  We considered investing 25% of the funds in the share market but luckily decided against it.  For us, acting on our own knowledge has paid off.

Frexit?

I do understand there are plenty of people making money out of the current market turmoil, but you can bet they won’t be the vast numbers of investors taking general advice.  It seems there will be a few more bumps ahead in the share market and currency trading road, particularly with fresh talk of Frexit (France) and Nexit (Netherlands) – terms borrowed from investment guru, George Soros.

From my perspective, I prefer to take a more tangible investing pathway that will provide me with a level of control over risks.  I like to purchase property that can be improved or developed over time, with a focus on manufacturing wealth.  Using this approach, capital gain is a bonus although we always aim for the best possible outcome in this area as well.  By activating this strategy correctly, our LVR is minimized and each property starts to pay us.  Then you have the double whammy of a tangible asset paying solid returns.

More than risk v reward

Annoyingly, the share market volatility has the potential to destabilize the broader economy and this is the risk component none of us will ever control.

Each person will need to make up their own mind about the best investment vehicle for them, and the decision should be based on a range of factors other than just risk over reward.  After traversing the decision making process myself, I would advise speaking to experienced professionals on both sides before you make your decision.

Money can be made on the stock market by trading currencies, ETFs, selecting the right shares, getting great advice, starting small and learning as you go.  On the flipside, investing in property provides a tangible investment and you can add value just by painting a room.  There is also the added benefit of manufacturing wealth through structural renovations or mini developments – once again it’s important to ensure you either know what you’re doing or appoint the right team.

The one key similarity between shares and property is that if you know what you are doing you can make money out of both markets.  My personal belief is that you should follow your strengths, skills, interests as well as your financial position.

Not about a shares v property argument

At Crave, we are not in the business of persuading people to choose the share market over the property market.  If you do believe property is for you, we can help you find a property that meets your needs and goals.  We do not take a ‘one size fits all’ approach.  As an independent buyers agency, we work with our clients to choose property that will match each individual’s strategy and maximize returns.  After all, isn’t that what you’re supposed to achieve when you invest?

 

Buy smarter = limitless ways to build lifetime income

Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property.  A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income. 

Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. A licensed real estate agent, Debra also holds a Bachelor of Commerce and Master of Business.

Follow us on facebook.com/CravePropertyAdvisory for regular updates, or book in for a strategy session to discuss your property questions.

Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.

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