Shares vs property: Which investment suits you best?

When it comes to building wealth, two frontrunners tend to dominate the conversation: shares and property. Both come with their own perks, pitfalls and paperwork – and choosing between them isn’t always straightforward and will depend on your personal goals, risk tolerance and time horizon.

But whether you’re new to investing or looking to round out your portfolio, understanding how each option stacks up on potential returns flexibility, and risk profile may help you decide which path feels right for your goals. The tax implications may also play a part in your decision-making.

Growth potential

Shares can offer long-term returns, with the potential added benefit of dividends providing income along the way. Historically, the Australian sharemarket has returned close to 10 per cent annually over the long term. Better still, you don’t need a huge upfront investment – just a trading account and a strategy.

Compared to share trading, investing in property typically requires a larger capital outlay. However, your capital gains can be amplified over time with leverage (like, a mortgage). Plus, property often feels more tangible – literally something to show for your money.

Tax talk

Tax is another consideration when it comes to your investments and assets, as there may be potential tax consequences when buying, while owning and upon selling your assets.

Looking at shares, you need to declare all your dividend income on your tax return but may be able to claim a tax deduction for expenses associated with owning your shares such as management fees or interest if you borrowed to buy the shares. If the dividends you received are “franked”, you may be entitled to reduce the tax you pay on the dividend as some tax has already been paid by the company paying you the dividend.

For an investment property, you will also need to declare all your rental income on your tax return, but you may be able to claim a tax deduction for expenses associated with owning your rental property such as maintenance costs or interest paid on your loan.

It’s important to remember that tax rules are complex and can change often, and their impact will depend on your personal circumstances. We recommend seeking professional advice from your adviser. For general tax information, you can refer to the ATO website on investments and assets.

Flexibility and risk

Shares are more liquid, meaning you can buy or sell quickly if the market changes – or your plans do. Property, on the other hand, requires time, paperwork and costs (think stamp duty, legal fees, agents). It’s not something you can offload overnight, and it often takes months to access your money once you decide to sell.

Of course, both carry risk. Property values can fall, and share markets can swing – sometimes dramatically. While shares might feel more volatile day-to-day, they also offer the ability to diversify across sectors and geographies. Property on the other hand can be hit by local market downturns or unexpected costs like repairs or rental vacancies.

Ultimately, the better fit comes down to your personal goals, risk tolerance and time horizon. Are you after long-term growth with a hands-on project, or do you prefer a more flexible, low-maintenance approach? There’s no one-size-fits-all answer – just what suits you best.