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Insights for Entrepreneurs

Should you invest in property or shares?

Investing is a popular financial pastime, and it isn’t difficult to see why. Not only can it be an exciting project, but it can also offer the opportunity to make a significant profit in the long term. But simply choosing to invest our money is not enough. We also need to decide which avenue we will invest our finances into. For many people, this is a choice between investing in shares and investing in property.

Both of these options have a number of potential benefits, but they also have various factors that you will need to consider before making a final decision. Let’s take a look at both investment options in more detail.

Property

Investment in property has continued to be an extremely popular option in recent years, and many people choose to buy flats or houses in order to rent them out as an investment strategy which will stand them in good stead for years to come.

However, it is safe to say that things have changed for buy-to-let landlords in recent years, so before committing to a property investment you need to get to grips with the state of the market at the time you are looking. As of April 2016, an additional 3 per cent of stamp duty was added onto second home purchases, and as of April 20017 landlords cannot claim full tax relief on mortgage interest payments. This change will continue to be phased in gradually until 2020, when it will be fully implemented.

Because of these changes, studies show that landlords are more likely to decrease their property portfolio over the next twelve months than increase them. However, this can create an opportunity for potential investors, as there will likely be less competition. Experts advise that one of the best ways to manage a property portfolio is to make sure it is diverse.

If you do your research thoroughly enough, there is no reason why property investment can’t work for you. This research should include looking into your area of choice, any extra costs you will have to pay, the market overall, the state of your specific property of interest and checking any tenants before they sign a lease. You should also explore ways to get help financially so that you definitely have the funds to make your investment. Look at options like residential bridging loans, which are provided by companies like Glenhawk as a way of handling any gaps between the sale and purchase of a property.

Shares

It is safe to say that investing in shares is generally a riskier move than investing in property, as the value of your investment can rise or fall depending on the state of the company and on the wider economic climate. In the ongoing aftermath of big changes like Brexit, shares are even more tumultuous.

Shares do have the potential to produce high investment returns and can be expected to outperform most other asset classes like cash and fixed interest in the long term. However, it isn’t usually suitable for those hoping to access their money within five years, and the success of your investments depends largely on outside factors which you cannot control.

The best way to give yourself the best chance of share investment success is to diversify your shareholdings both geographically and by sector and size. You should also try to avoid unnecessary charges and make the most of tax-efficient ways to invest like wrappers such as pensions and ISAs.

However you choose to invest your money, the most important step to take is doing your homework. By gaining as much knowledge as possible, you maximise your chances of finding success.