Invest in shares or property?

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Personal financial expert and author Noel Whittaker has written a new book, 10 Simple Steps to Financial Freedom. In this extract, he tells whether shares or property are the best way to build wealth.


One common reason people don’t invest in shares is that they don’t know where to start. Fortunately, that problem has now been solved.

If you have only a small amount of money and a long-enough timeframe, a great way to get an idea of how share investing works is to open a micro-investing account, such as Raiz or Sharesies.

All transactions are online, and they have great apps you can use on your phone. They offer a wide range of investment choices such as local and international shares, property and government bonds.

You can tailor a portfolio to suit your goals and run scenarios on screen to show how the different mixes of asset classes work. It’s a fantastic learning experience, and very easy to use.

Read: How to achieve financial freedom

Another great way to learn about shares is to participate in the Australian Securities Exchange (ASX) share market game. There is no age limit, and you start off with a virtual sum of $50,000, which you can invest in over 300 companies listed on the ASX. It even includes seven video tutorials, which will really help you understand the share market.

It would be great to do as a family or with friends – you could play as a team or against each other.

Even if you have played the ASX game and used Raiz or a similar product, it is still extremely difficult for a novice investor to research the market and decide what specific shares to buy. At the start of your investing career, a better option would be to invest in quality managed funds, where the decisions are made by full-time professional fund managers, or just buy an index fund through an online broker. 

An index fund is an investment fund that invests in a category of assets, rather than trying to pick winners out of the whole range. It’s a bit like having a bet on every horse in a race. But because you are backing every horse, your returns will tend to be lower than if you picked a long-shot winner. 

Two well-known index funds have the ASX codes of VAS and STW. The former invests in the top 300 shares in the Australian share market, the latter invests in the top 200 shares.

As a long-term investor, I think shares are a much better investment than property, even though I know many people disagree. Provided you don’t get spooked when the market goes through one of its normal gyrations, shares are the simplest investment of all to manage. If the Australian market continues to do what it has done for the past 100 years, you can reasonably expect an average return of 9 per cent a year, long term.

A major challenge for inexperienced investors is the way the media reports on the share market.

There is a general perception in the community that shares are a bit of a gamble, and the media feed this. Whenever the share market has one of its normal downturns, you see headlines with words like ‘crash’, ‘plunge’ and ‘meltdown’ – yet when the market goes up, the news will be lucky if it makes the back page.

Shares have better potential for capital gain, because an increase in a particular share’s price should be in line with increases in the company’s profits. A growing company has the potential to increase its profits by 20 per cent, 40 per cent, or even 100 per cent in a year, with its share price following suit. 

Property almost never does this.

Read: Noel Whittaker on the economic downturn

Trading is not investing

Investing in shares has traditionally been the province of financially literate people with surplus funds. Let’s be very clear – investing means you buy for the long haul and only buy assets that you scrutinise carefully and believe will grow in value over time.

Share traders, however, spend their days trading the various share markets seven days a week in the hope of making a living by buying low and selling high.

The trading space changed dramatically in late 2020 when many televised sporting events were cancelled due to COVID-19, and, in America in particular, millions of people found themselves at home, bored, with nothing to do and nothing to bet on. Enter an app called Robinhood, which allows anybody to trade shares and cryptocurrency from their phone 24/7 with zero transaction costs.

Thanks to social media, share trading exploded and there were many reports of unscrupulous people talking up a share on social media just to drive its price up so they could sell and make a quick profit.

You can jump onto one of the trading programs offered online and have a $50 flutter on the share or crypto of your choice with no transaction cost whatsoever. This is not investing – it is gambling.

It is no different to putting money on a horse race or a football game. What you do with your money is your choice, but gambling is high risk, both financially and psychologically.

Because trading is essentially gambling, it’s highly addictive. Psychologists claim the hit you get from a successful share trade is remarkably similar to the hit from injecting drugs. Investment guru Charlie Munger summed it up perfectly when he said: “In the modern world, people are trying to teach you to come in and trade actively in stocks. Well, I regard that as roughly equivalent to trying to induce a bunch of young people to start off on heroin.”

Understand that retail trading platforms are designed to encourage addiction. Just like poker machines, every aspect of their design – the hardware, the software, the algorithms, even the so-called rewards – is carefully designed to keep traders at their computer, playing game after game.

It is simple and amazingly fast – trades take only three to four seconds – to encourage traders to continue. They induce players to gamble quickly and repeatedly, developing a sort of rhythmic flow that can sweep them away.


To make matters worse, this rush into trading by novices just happened to coincide with the growing popularity of two new ways to gamble. The first was cryptocurrencies, such as Bitcoin and Ethereum, which are based on blockchain technology and created by computer power; the other was NFTs, which stands for Non-Fungible Tokens.

Cryptocurrencies and NFTs are highly speculative investments. I think it’s fair to say that no-one really knows their true worth. And they offer no consumer protection. If you lose your Bitcoin password, you have lost your Bitcoin – there is no head office you can ring to recover your password. 

If you sign up with a dud website and lose all your money, no-one will come to your aid. Buying Bitcoin is caveat emptor: there’s no protection, no safety net, no recourse.

If you are still determined to go ahead, your first port of call should be the ASIC Moneysmart website, where a search on ‘cryptocurrency’ will provide you with loads of information, as well as an analysis of the types of cryptocurrencies that are available. I don’t put my money in speculative investments such as these blockchain-based cryptos and NFTs, and I don’t think it’s a good idea for you to either. But if you do, please invest only the money you can afford to lose.

Let’s end this section by repeating some share market basics. When you invest in shares you are acquiring a share in a business, and if that business goes well, you should do well too. This is why experienced investors look for a strong business, with good management, relatively small debt, and a history of performing well. The rewards for the investor are regular dividends, and capital growth over time. It is the opposite of share trading.

Prosper with property

Property offers some unique benefits as an investment. Money invested in a specific share can vanish overnight if the company goes down the gurgler, but a good block of land will last forever. That’s why it is called real estate, and it is why lenders ask for a much lower deposit if you can offer property as security for a loan.

Property also gives you the opportunity to add value by refurbishing or renovating – this is impossible with shares, where you are reliant on the skills of the company’s management.

Bear in mind that the key to success in property investment is to find a property to which you can add value, or that you are confident will become more valuable because of rezoning, new infrastructure, or the like. This can take a great deal of research.

A major goal for every Australian who wants to achieve prosperity is to buy their own home if at all possible. Owning your home gives you irreplaceable financial benefits because of its special treatment in our tax and social security systems.

Your own home also gives you irreplaceable psychological benefits in terms of security and control.

When you are looking at property, it’s important to ignore the barrage of rubbish from the media about house prices. Over the past few years, I’ve seen ridiculous headlines such as ‘House prices crashing’ and ‘Property owners making $1000 a week without lifting a finger’. Such reports ignore the key fact that there is no such thing as ‘the’ property market – Australia has many different property markets, and they don’t all behave alike.

Each capital city is its own market, and within each city there are segments of the market behaving quite differently from each other.

Furthermore, capital gain is never something that ‘is happening’; it is always something that ‘has happened’.

Read: How super changes could affect you

Contrasting shares and property

I prefer shares for their simplicity and liquidity, but I know many people believe buying a house is always the best way to go. In truth, both property and shares have the potential to give you great returns over the long term, and a mature investment portfolio should include both. Just be aware that they are very different creatures, and understand the advantages and disadvantages of each when you are thinking about where to invest your hard-earned money.


Volatility is a fancy way of saying that the value of the investment rises and falls regularly. In this context shares are regarded as a risky asset as their values rise and fall by up to 35 per cent or more a year.

You already know that capital growth is spasmodic.

The pattern, however, is consistent: the value of shares moves much more often and much faster than the value of properties. Investing in managed funds, especially index funds, tends to smooth volatility compared to individual shares.

Many people fear volatility, but it should only concern you if you are forced to sell when the value of an asset is down. In fact, experienced investors usually buy more shares when a quality stock has temporarily dropped in value: that’s bargain buying.

Think of it like buying a computer. Suppose the one you want usually sells for $990 but in the Black Friday sales its price drops to $650. Wouldn’t you rather buy it then?


Liquidity is the ability to cash in your investment quickly. Shares are liquid: you can sell some or all of your shares simply by logging into your online broker and placing a sell order. The proceeds will be in your bank account in a few days.

Property is much less liquid: property sales are a slow, involved process, and usually an all-or-nothing affair – you can’t just sell the back bedroom!

You’ll need to contact various agents, receive a range of sales price estimates that may vary widely, engage one agent, pay for marketing, then wait till you find a willing and able buyer. Once the sale is agreed, you’ll still have to wait to receive the funds.

If you are selling in a hurry, you will probably find that you don’t get as much as you hoped for the property. At best – if you are lucky enough to find a buyer quickly and the contract doesn’t crash – you may have the money in your bank account within three months.

Suppose you have $100,000 worth of shares, and your friend has a property worth $400,000 with a mortgage of $300,000. If you need $20,000 in a hurry you could go online and get the money quickly – your friend can’t do that. Their only options would be to borrow against the property or sell the entire building.


Once you become a shareholder you are a part owner of the company in which you own shares.

This means you will receive regular reports on what the company is doing and will even be given the opportunity to vote at annual general meetings. If the company is paying dividends, you will receive regular dividend investment statements, and usually an annual tax statement. Shares don’t require any other maintenance, and you don’t even have to vote or keep an eye on the company.

As a property investor, however, at a minimum you will have to approve your property manager’s recommendations. If you self-manage, you may be called out of bed in the middle of the night to attend a burglary or have to go to court to evict bad tenants. In either case, you may find your budget shattered by unexpectedly large bills for land tax, rates or repairs. If you neglect maintenance on the property, you will quickly find that the rents decline, and if the quality of your tenants falls too, then problems and maintenance will quickly increase.

Have it all

In short, investors should aim to have all three asset classes in their portfolio, and make the effort to use the unique benefits of each. The rewards over the long term will astound you. But until you have enough money for both property and shares, my tip is to focus on shares, with the exception only of buying your own home.

Top tips

• Start investing young to get all the benefits of compounding.

• Your first investment is probably going to be cash, in the form of savings in a bank account.

• You should always keep a minimum of six months’ expenses in cash in the bank.

• Invest the rest of your money in capital growth assets: shares and property.

• Every investment has advantages and disadvantages – make sure you understand them before you invest.

• Shares are the simplest investment to make. You can start with just $500, and you can withdraw funds in small amounts too.

• Share trading and blockchain investments are volatile, high risk, and cryptos are unregulated. Consider these a gamble, rather than an investment.

• Property is more complex, needs larger sums, and often involves taking on debt, but offers unique benefits: particularly buying your own home.

• Over the long term, the best investment to choose from cash, shares and property, is all of them. 

You can buy 10 Simple Steps to Financial Freedom from Noel Whittaker’s website for $19.95. 

Have you dabbled in shares? What’s your view on micro-investing apps? Why not share your thoughts in the comments section below?

Written by Noel Whittaker

International bestselling author, finance and investment expert, radio broadcaster, newspaper columnist and public speaker, Noel Whittaker is one of the world’s foremost authorities on personal finance.
He is currently an Adjunct Professor and Executive-in-Residence with the Queensland University of Technology, as well as a committee member advising the Australian Securities and Investment Commission.

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