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Monday, November 5, 2007

Wealth creation: Equities or real estate?

The stock market or property? That was the question Phillip Capital Management's Ang Kok Heng asked during The Edge Investment Forum on Real Estate 2007.

"Shares and properties are both excellent assets for wealth creation. Many make their first million from them," says Ang. But which is better?

The difference between the two is that equity investment could be stock specific, while real estate investment could be location specific. And despite the fairly good returns from both investments, equities are more volatile whereas real estate investments are more stable.

Ang tells of several benefits of equity and property investments [see table]. He says equities are good for beginners as they can start with a small amount. Those looking at equities should take note of growth stocks as they provide excellent capital gain. Share prices of growth stocks appreciate over time due to expanding business, says Ang.

If one were to look at property investment, it is important to invest in properties in growth areas. "Well-located properties appreciate more as they have better amenities and accessibility. Furthermore, supply of land in good location is limited," says Ang. Increased economic activities will also enhance demand.

"Both stocks and property have good and bad points... to say that one has a higher risk than the other is not right as the nature of investment is different.

"If we define risk as volatility, then equity investment has higher risk. In the case of value at risk, property investment could be riskier if bank financing is taken into consideration."

Ang suggests that those who are younger may want to look at equities as properties require a larger amount of investment and are more suited to those who have accumulated some wealth. Start with equities before venturing into properties, he says.

At the end of the day, he says both equities and properties are good investments. The only way to make money is to equip yourself with adequate knowledge — you must know what and when to buy and which investment to shun. Knowledge allows us to manage our risk and avoid bad investment.

Ang himself was a late starter in property investment, having only started 10 years ago and now he feels that it is good to invest in both. "If you can, a 50/50 breakdown would be ideal. But this again boils down to the amount of knowledge a person has."

Ang: A 50/50 breakdown is ideal

A word of advice from Ang: "If you are a staunch believer of the stock market, do take a look at properties too. If you are a 'property man', you need to spice up your investment by adding equities into your portfolio."


1 comment:

Anonymous said...

Stock markets may suit the short term investor, but have no leverage as no one will loan to buy stocks, however property has the element of weighting and loans, so better for loan term investors