The simplest asset class classification is into shares, fixed interest, property, or cash. Those classifications can be divided into numerous sub-classes such as houses, units, offices, factories (property) or even houses in the United States, Queensland, Perth, etc.
What may surprise many investors is that the actual property you choose is not the most important decision! It is much less important than the decision to take exposure to an asset sector. In other words, whether a fund manager selects an industrial investment in, say, Poland or a retail investment in, say, Sydney or a house in Perth is a much bigger decision than individual properties within that asset sector. Why? Because if the demand for industrial space in Poland falls, none of the properties within that asset sector will increase; if the Perth housing market goes up, they all go up.
The Australian Financial Review reported the opinion of the head of Macquarie Investment Management, who said that “asset allocation, rather than stock selection, is the key to creating sustainable wealth.” It is critical, for the property, to invest only where there is positive population growth.
Because, according to Dr. James Skinner of the University of Queensland’s Applied Population Research Unit, population growth of 50,000 creates a need for about…
* 18,000 new homes,
* 600 new retail stores
* 450 hospital beds,
* 125 new doctors,
* 25,000 additional cars.
Have you ever wondered why the few get rich while the majority struggle? It’s because the rich understand these principles and invest their money (usually borrowed) in assets that increase in value, while the poor invest their money (usually borrowed) in things that make them feel rich, but whose value decreases (like boats). , cars and various fashion products).
This is the essence of wealth creation. Invest in assets in growth areas as soon as you can and don’t borrow for products that lose value. If you want to become a millionaire overnight, then property is not for you. However, if you are prepared to take 10 to 20 years, then ownership is the answer.
The property works even though it will never be perfect. You will never find the perfect home or the perfect financing, but you will find a vehicle that will give you financial security. Don’t get carried away by panic reactions to short-term fluctuations, ignore the exaggerated headlines in the media and hang in there. You will find that long-term investment in properly financed residential property is a “loss proof” investment.
