Diversification: Not As Simple As 50% Property And 50% Shares!

Residential property is the nation’s most valuable asset class, with a total estimated value approaching $7 trillion.

To put this figure into context, it is about four times greater than the value of listed equities on the stock exchange, which is around $2 trillion.

I use these numbers to simply illustrate the point that the suggestion that you should have a 50/50 balance of shares and property (or any other type of investment) is vastly oversimplifying the concept of diversification.

I mention this because I have heard this statement uttered many a time.

Ultimately, people who make ‘one size fits all’ investment statements are neglecting the most important element of the equation, YOU! 😊

We are all unique and at different stages of life, with differing goals, risk profiles, preferred asset classes, family circumstances, financial situations and the list goes on.

The appropriate investment balance is not simple for many reasons.

For one, we can diversify across asset classes such as property, shares, bonds, mortgage-backed securities, real estate investment trusts and more.

With property you can diversify within residential real estate based on the property type, state, city, suburb and price range. And that is without even considering commercial property.

The reasons to diversify can be many and varied, such as how many properties do you own in one suburb, city or state? Is land tax eating into your returns? Where are different cities sitting the property cycle? What is your price range and which location does that better suit?

As you can see, when developing your Property Plan and strategy for your next purchase, there are many factors to consider before even getting to the stage of property selection.

Before heading down that path, ask yourself, will your adviser steer you to purchase in particular locations where they buy property or are based, or will they help you to determine the right plan and strategy for you first?

If you get the steps right on your Property Planning journey, you will end up with a property selection strategy that is tailored to you.

Remember, develop a long term Plan, determine the Strategy that is right for your next purchase and then you will be educated and empowered to Select the property in the location that is right for you!

By |2019-04-11T17:20:02+10:00April 11th, 2019|

About the Author:

David Johnston
David is the Founder and Managing Director of Property Planning Australia, author of ‘How to Succeed with Property to Create your Ideal Lifestyle’, co-author of ‘Property for Life – Using Property to Plan Your Financial Future’ and a widely-published media commentator. With more than 20 years of experience, David is passionate about educating others to make informed, and ultimately, more lucrative property investment decisions. David established Property Planning Australia in 2004 – with the vision to educate and empower Australians to make successful property, mortgage strategy and money management decisions.  Property Planning Australia’s operations have earned acclaim and national industry awards for its unique fusion of property planning, education, money management, mortgage strategy and risk management. All supported by multi award winning customer service.