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The $100,000 question -€“ where to invest?

I have received an inheritance of $100,000 and don’t know whether I should invest it in shares or property? What do you think?

I can’t give you advice without knowing your circumstances, but I can give you some rules to think about before you decide.

One of the best and richest investors ever, Warren Buffet, says there should be no difference in your approach, whether you’re buying shares or planning to buy a business outright. Like buying anything, do your homework, and ask what is the right price? Is it good value? Will it be good value in the future? The more work you do, the more likely you will avoid a dumb decision.

If you aren’t a share buying type, you could do your homework on super or investment funds. See websites such as www.morningstar.com.au and others like it for comparison tables and make sure the entry and exit fees aren’t too high. If you have a dud fund, it’s nice to be able to wave it goodbye without a big slug.

One appeal of shares over real estate is that you can buy smaller parcels of shares. However, an advantage of real estate over shares is that if the market turns against you, you can always live in your investment.

As a buying guide, when it comes to property, the old recommendation to buy the worst house in the best street is advice that has stood the test of time.

Finally, some studies have shown that people who rent can do better than those who buy, but it involves a number of ‘ifs and buts’. For starters, you need to lock in a rent for at least five or 10 years. That’s not easy. Also you need to invest the money you have left over wisely, comparing rents with what you would pay to be in a house you own. You might even need to borrow to buy shares to beat those who own property. It’s not a straightforward comparison of buying versus renting.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Related articles

Read ten tips for buying property at auction.

And ten share-trading tips for beginners.

Published on: Friday, November 05, 2010

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