Obviously blogs are about personal opinion / experience, this one is especially just my view. No doubt others differ. I am not a financial advisor, especially not your financial advisor, blah, blah, blah. This advice is worth what you paid for it.
- property and shares are both what economists call "real" assets, which are generally good investment candidates
- everyone understands property, and using a mortgage can amplify gains
- buying your own property is cheaper than renting privately. Landlords do it for profit, not to be nice!
- you need a big deposit to buy your first property, but you can start buying shares with £50 / month or less
- it's hard to buy lots of different properties unless you're really rich, a share fund automatically buy lots of different companies
- shares are easier / cheaper, but many people don't know much about them, so are wary
- buying the ftse 100 index now is a much better idea than in 1999/2000
My conclusion; if you're saving money for a decent length of time (several years+) then buying shares with monthly buys of a tracker fund is a great idea. Buy your own property if at all possible (location, location, location!) and then use shares for extra investment.
Some useful links:
Property and Shares are "Real Assets"
Real assets pay an income and also mostly go up in value with earnings / inflation which makes them good investments. You get the income from rent / not paying rent / dividends, plus the growth in value over the years. Of course this is a generalisation, property in a declining town or shares in a declining industry might not be so good. Or buying shares in your employer might not work out too well if they go bust, you lose your job and your investment.
Let Live In
It's corny, but the three most important things for property really are "location, location, location" - wherever possible go for a good location rather than a bigger / nicer place. It pays off as time goes on. If your budget only gets you a small place, then buy the small place, pay the mortgage down and then move to a bigger place when you can. The property is likely to be easier to sell, and the value more reliable if you own in a better location.
Most people understand property, and using a mortgage can amplify gains since you can buy with "only" 5% or 10% down. But with modern property prices 5% or 10% can still be quite a lot of money :-( Still, buying your own property is almost always cheaper than renting privately. Landlords do it for profit, not to be nice! If you don't have rich relatives / friends who can help you with a deposit, then it can be tricky nowadays, but save what you can, maybe join up with others for your first purchase. Maybe a relative will buy 10% with you and you can pay them rent on that bit? Be creative - once you own, you can start paying the mortgage down and hopefully over time the property value goes up. Once the mortgage is under 90% or 80% of the property value, your mortgage options get better and the payments get cheaper. Remember, location, location, location!
Invest in Shares
But for investment purposes, I'm not so keen on property. I worked with a foreign guy once, and he was like "back home everyone owns property to rent out". I kept quiet, but my thought was, "well, some poor buggers must be doing the renting so it's not everyone!". It doesn't feel quite right to me, buying up properties that other people could be owning and living in. There is risk as well, each property costs a lot of money (unless you're really rich), so you don't get much diversification. If you make a bad choice, you can be stuck with a bad result. Also, maybe you really can't afford to buy your own property, or you don't want to because your job has you moving around. Well, that's where shares come in ...
As you can guess, I'm more keen on shares. When I was a kid I went to a state school in a provincial city, and no-one knew much about shares. There was no Economics class, we didn't have that option at our school. (I'm old, so this was the early 80's and Thatcher's government was still new. Everything seems much more money oriented nowadays so I expect things have changed since then.) But I was lucky with work, earning decent money (and investing some of it badly) and then the internet came along and ordinary people could learn about shares. Nowadays there are cheap (almost free) dealing services* and loads of information out there. I'm a bit out-of-date now, but Monevator is one place to start learning about this stuff.
One view I like is that it's good to own all the big boring companies that you deal with all the time. If the company's going to fleece their employees and you and other customers at least you gain something if you own the shares (could be your bank, bookmakers, brewery, electric / phone / pharmaceutical company, whoever). Essentially, it's insurance. Instead of being stuck on the side of employees and customers, you also get to be an owner (well, a tiny part-owner, at least).
The simplest and cheapest way to buy shares is to buy an index tracker. Generally these buy shares in the largest companies and just sit on them. This is very cheap and easy, and since the funds are huuuge (£billions) the low running costs are spread over many people. Richard Branson introduced this to the UK in the 90's but his fund charged a greedy 1% a year. Modern choices like ISF from iShares or VUKE from Vanguard charge less than a tenth of that. You'd need an account with someone like ii.co.uk or Halifax Sharebuilder to buy those ETFs, or you can use someone like Legal and General who provide the tracker and account all in one.
Shares do go up and down in value, so there is some risk, but they generally go up in the long run. Buying the ftse 100 index now seems like a much better idea than in 1999/2000, the underlying value will have gone up noticeably in that time (nearly double?) whereas the index itself is below where it was in Jan 2000. In other words what you get has gone up in value, but what you pay has stayed level. Most of the companies in the FTSE100 are big global outfits, so they're not only influenced by the UK economy, your investment will reflect the global economy as well.
My conclusion; buy both if you can! Use shares for extra investment as soon as you can - buying a tracker fund every month for a long period of time is the most reliable way to invest in shares. Buy your own property if at all possible, pay the mortgage down to get a better deal on rates, and then invest more in shares.
* Most of my IT career has been in the banking sector, working on the background systems that have increasingly automated the processing of share buys and sells. Processing of share buys and sells used to be a mainly manual process, with lots of people and paperwork involved, resulting in high fees that meant you needed to be pretty rich to even consider the idea. Nowadays anyone can afford to invest in shares and it's nice to think that I did a little bit to help that. Working in "the city" wasn't much help for my knowledge of investing though, most of my investing knowledge has come from discussions at www.fool.co.uk and www.fool.com.