Asset Classes

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• Summary investment asset classes
• Cash and fixed interest investment asset class
• Property investment asset class
• Share investment asset class

Property investment asset class

Introduction

Relative to shares, cash and fixed interest investments, property is a medium risk investment potentially offering medium returns over the longer term.

Property investments can be used to achieve either capital growth or income, or a combination of the two.

If you invest primarily seeking growth, your investment horizon should be greater than five years. But, if you invest primarily seeking income, your investment horizon could be approximately one to two years.

Ways to invest in property

Direct
Direct investment in property is usually made through residential, industrial, commercial or retail property. While there are advantages to this form of investment and potentially useful returns, it also carries disadvantages and risks.

Unit Trusts
Unit trusts and superannuation funds offer a number of advantages over direct investment. While you have to pay someone else to do the work, it allows you to diversify your risk and gain exposure to a larger range of properties of potentially higher quality. Fees are generally higher than those of other managed fund investments, due to the higher cost of buying and managing property.

Listed Shares
There are a number of companies on the stock market which only invest in property. You can choose between retail, commercial, or industrial property, or derivatives thereof.

Syndicates
Syndicates are relatively common, formed to allow the purchase of, for example, a large single building. This form of investment carries a greater risk than other forms of property investment, including potential liquidity problems and lack of diversification. These risks need to be balanced against the potential returns of this form of investment.

Additional information and resources

• Some Rules for a Safe and Successful Investment
• Important Documentation and Information

As with all investments, read as much as you can on the topic.

There are a number of useful "Books on property" in our Resources section you could consider buying or borrowing. In addition, most of the books in the savings and investment section include a few chapters on property investment.