When you ask kiwis if they prefer investing in shares or buying a house, the answer is virtually unanimous.
New Zealand is a nation that is much more comfortable investing in real estate than investing in shares. This is demonstrated by the results of a survey done by Sharesies and Smartshares, which found that almost 60% of Kiwis own homes and only 20% own shares.
A few generations ago, home ownership was the logical move. Our parents and grandparents worked and saved hard, bought a house, and paid off the mortgage in their lifetimes.
Unfortunately, this is getting further and further beyond the reach of the average Kiwi.
So, should we be investing in shares instead of buying a house or should we keep striving for the traditional dream of home ownership?
Let’s look at the options…
The Advantages Of Buying A House
When you are putting money aside every week into a savings or investment account, it may be easy to talk yourself out of it now and then.
You might skip a week here and there or put less money in because you want to buy that new car or take that holiday. Mortgages simply don’t allow for this. If you don’t make payments, you are going to suffer pretty serious consequences.
However, every time you make that mortgage payment, you own a fraction more of your house. It is like saving, but you have to be a lot more disciplined!
When you invest in shares, you have virtually no control over the changing value of those shares. You are at the mercy of the market and somebody else makes the decisions about the way they are managed.
Your house and land, however, are in your hands.
You can renovate, subdivide, update, throw a lick of paint on the walls, and have the power to increase the value of your investment.
One of the satisfying advantages of owning a house over shares is the tangible reality of property. There is something ultimately rewarding and comforting about being able to point to a piece of land or a house and know that it is yours, as opposed to numbers on a computer, which are far more ethereal.
The Advantages Of Investing In Shares
As opposed to property, shares provide more flexibility to your financial situation and you can start investing with very minimal cash.
While you need tens of thousands of dollars for a deposit for even a modest house, you can get started in investing shares with as little as $5.
When buying a house, you’ve got all your eggs in one basket. But by investing with programs like Sharesies, you can spread your money throughout different shares to protect yourself.
You can increase your shares every week at the cost of a few coffees, but the same can’t be said for your home.
Any renovations or improvements require further investment, which can be hard to find when you are already struggling to pay a mortgage.
What’s more, if you have an emergency and need to get your investment back, it’s simpler to sell your shares than to sell a house.
Owning shares is simple. You do a little research, buy and sell as you choose, but can leave them alone for years or decades if you like.
Owning a house can be a hassle. There is maintenance, rates, utility bills and more. Try leaving your house unmonitored for a decade and you have lost a whole lot of money!
Along with the low-maintenance aspect of owning shares, comes the ability to live a life free of ties. Owning a house generally ties you down. You can’t easily change jobs, cities or even countries. Investing in shares gives you the freedom to live your life as you please while still building that nest egg.
Can I Do Both?
If you have the money for both, why not!
Smart investing is all about diversification – basically your financial safety net.
If the housing market drops, you have your shares to fall back on, if the stock market falls, you’ve got your house.
Why not explore the available options at Sharesies? With a joining fee of a couple of dollars and a minimum investment of $5, it is the perfect way to test the waters.
Plus, you get your first month free!