Shares offer investors so much more than other assets.
Shares. You gotta love 'em. They offer you so many things that property, cash and bonds can only dream about.
Yes, they can go down as well as up, and they have just endured a lost decade since the FTSE 100 topped 6,900 in December 1999, but here are five reasons why shares still rule.
1. Shares are flexible
Buying and selling property is hell, especially in the UK. And that's only the start of your troubles.
If you rent out your property, you might get troublesome tenants, or a slapdash lettings agency. It can burn down, develop rot, get burgled, or prove unsellable. Frankly, who needs the bother?
Trading shares is a doddle by comparison, particularly if you do it online. They are (mostly) highly liquid, you can buy and sell them whenever you want.
You don't have to leave the house to trade, let alone talk to an estate agent. And a company's annual report or prospectus is far more reliable than any estate agency blurb. Nobody has ever called a stock "compact and bijou".
No estate agents, tenants, no neighbours, no lettings agency, no burglars, no problem. And if you're nimble, you can switch out of, say, cyclicals and into defensives, when you think the time is right. You can't switch out of new-build studio flats and into four-bed executive homes.
2. They're cheap to trade
Trading shares isn't just easy, it is also cheap. For example, you can buy shares for just £10 through The Motley Fool Share Dealing service.
If you buy a property, you may have to pay up to 3% stamp duty, plus legal and mortgage arrangement fees, and estate agency charges when you sell. My last agent charged me 1.5% of the sale price of my £300,000 property, around £4,500.
Buying or selling £300,000 worth of shares can cost just £10. Not that I'm ever likely to make such a big trade.
Owning bricks and mortar takes time, energy and expense. There are utility bills, council tax, a new kitchen, that leaky roof. Have you seen the price of plumbers these days?
True, you have to devote time to adjusting your portfolio, but compared to, say, fixing broken roof tiles in a force 10, it's a cinch.
3. They fight inflation
Inflation isn't a major threat right now, but it might be soon. And when it returns, cash will take a beating.
Shares like inflation. They dance along, one step ahead, as companies boost their turnover and profits faster than prices can rise.
Shares also look to the future, whereas cash is mostly mired in the present, and property has a tendency to look backwards. Stock markets rise ahead of the wider economy, and as we've seen, are first out of the blocks in a recession, while property is held back by real world problems such as rising unemployment and repossessions.
4. Shares travel the world, so you don't have to
Property, cash or bonds have feet of clay, but shares span the world. How else can you invest in South Korean semi-conductors or Brazilian mobile phone companies?
If you buy a property in, say, London, you are buying massive exposure to the London property market.
But as an equity investor, you have the world at their feet. You can spread your risk among Japanese smaller companies, UK blue chips, Singapore financials, Chinese real estate, AIM minnows and global petroleum giants.
Only shares can offer this. This diversification is easy to take for granted, but it is still incredible.
5. They are trendsetters
Shares allow you to tap into new trends, and benefit from change. You can grab a stake in exciting new technologies or global themes such as infrastructure, or cash in on Opportunities in New Energy or a rebound in the oil price.
Whatever you want to invest in, shares put you in control. Whether you want a cutting edge growth company, or reliable dividend payer, the stock is out there.
I'll say it again: Shares, you gotta love 'em.
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