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COMMENT
Shares Thrash House Prices In 2005

By Ed Bowsher (TMFArkle)
January 4, 2006

Did you know that the UK stock market has soared 65% in the last three years?

2005 was an especially strong year for shares and the stock market thrashed property. Nationwide Building Society tells us that house prices rose by only 3% last year, down from a 12.7% rise in 2004.

The FTSE All-Share total return index, by contrast, soared 22% last year. This index takes dividends into account as well as rising share prices. So if you weren't in shares in 2005, you missed out!

Shares have also beaten property in the very long-term. If your grandparents had invested £100 in (commercial) property in 1920, it would now be worth £170,000. If they had put £100 into the stock market, you would now have £1.2m. Don't get me wrong, shares don't win every year. In fact, if you compare the two markets since 1993, property is ahead of shares. Property prices also tend to be less volatile than shares.

Still, shares have done really well since 2003, and the sad truth is that many private investors had lost interest in the stock market just as it was about to take off.

I think there's a good chance that shares will outperform property once again in 2006, so it's still a good time to invest in the stock market. And many Fools agree with me, as the result of our poll this week shows!

Even if the property market does better than I expect, it still makes sense to diversify your assets between property and shares. And don't forget that shares have beaten property in the very long-term.

If you're tempted to buy shares, one approach is to buy a tracker fund. These are simple, low-cost funds that track the movement of the stock market. Visit our tracker centre to find out more.

If you'd like to beat the stock market instead of tracking it, then you should consider our new investment service, Champion Shares, which we launched last September.

Each month, we recommend at least one share, and they all have market beating potential. We can't guarantee out-performance, but the Champion Shares portfolio did beat the market during the period from launch to the end of 2005.

Sign up for a FREE 30-day trial to Champion Shares and you can see the out-performance for yourself.