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Property investing vs stock investing

09 Sep 2021

Property Investing vs Stock Investing | Pauline Teo | VI
(c) Sadie Xiao

About a week ago while on my way to grab some lunch, I overheard two “aunties” (middle-aged women) discussing property investing versus stock investing. They were sharing thoughts on which of the two is the better option.

Well, I would say there’s no right or wrong. In fact, we all know the wealthy always spread their assets among different investment options.

But what really caught my attention was when one of the aunties remarked that Singapore property investments are 'guaranteed wins’ whereas ‘stocks are risky.’ Now, this comparison definitely begs some deeper analysis.

Is property investing a definite win?

They say if you wanted to get rich in Singapore, or any Asian country, you have to own a property. And property investments are highly popular in Singapore as the country is land-scarce, and this fact might actually lead most of us to believe that investing in properties is a ‘sure win.’

But if you take a look around, you’d know that there are people who have lost money in properties. Some of them even lost millions. Some haven’t made profits or made back their capital because of a poor choice in property investments.

Now, is it true that Singapore property investments are less risky than stocks? I wouldn’t say so.

But this is one thing I know: Investing, whether in properties or any other investment options, always has risks; there are no ‘sure wins’ but there are ways to ‘do it safely.’

I invest in stocks, and I know it has risks. But I also know how to do it properly, which is why I continue doing it with the rest of the VI Community. We use a method called value investing -- a method we believe to provide us with a safer net in investing in the stock market. And I’d say the principles underlying the value investing method approximate those used by profitable property investors.

See also: Is Disney a good stock to buy?

Value investing applied in properties

Why choose when you can invest in both properties and stocks anyway? Property and stock investors both can benefit from value investing.

Here are three reasons why:

1. Looking at quality

Successful property investors typically do their homework looking at the location, amenities, and track record of the developer before asking for the price and deciding to buy any property. This is akin to value investors’ strategy of looking at business quality in stocks rather than focusing on the share price.

2. Value first, then price

Property investors do their valuation by looking at the price per square foot and haggling it down. This is exactly what value investors would do when buying stocks. They look at the fairest value to buy shares at and do not readily accept the price listed in the market.

3. Long-term outlook

Property investors have no way of looking at daily market prices and dumping their property because of lower liquidity than stocks.

To sell a piece of property, you need to have buyers and loads of administrative transactions in place. Because of this, Singapore property investments are done using a buy-and-hold mentality, rather than short-term punting.

Similarly, value investors are not concerned about day-to-day stock market volatility, but instead, look at the bigger picture when it comes to their stock investments.

See also: Should you invest in US or China stocks?

By applying the same principles that make property investing profitable to the stock market and vice versa, it is possible to make real profits in the property space as well as in the stock market.

You can be a property investor in the stock market by investing in REITs (real estate investment trusts). You can consider this option if you want to invest in properties but don’t want the pains of owning and maintaining physical properties. Or if you have limited capital but wish to invest in properties, explore investing in REITs or ETFs.

As always, please learn how to do investing properly.

Join our free investing bootcamp.

~ Pauline Teo


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