Question

what are the determinants for an average investor when facing a choice of investing in either properties or shares

Answer 1

The determinants for choice of investor are as follows:

1. Tangibility: Property is a tangible investments and hence immovable. Shares are intangible.

2. Intrinsic Value: Being a real physical asset, property carries an intrinsic value, which means it is a hard asset. However, shares being intangible have no intrinsic value and could become zero in value overnight.

3. Safety: Property is relative safer investment, given it holds intrinsic value. Property is also regarded as a safe investment due to a significant shortfall of property in relation to a growing population. The supply of property is lower than the demand for property, which further affirms property as a safe investment class.

4. Quantum of Investment: Generally, investment in property required higher capital investment. Use of leverage can magnify the returns in this case.

5. Liquidity: Property is relatively illiquid. Shares are relatively more liquid and be quicky turned into cash on requirement.

6. Transparency: Market for shares is much more transparent, efficient and involves proper flow of information than market for property. Also, legal and regulatory constraints are higher in case of investment in property.