Property, Shares, or Super: Choosing the Right Investment Mix for Your Future

Written by Brad Laird

In a previous article, I explored the comparative qualities of investing in property versus shares. This week, we are expanding our focus to include a third major investment avenue: Superannuation.

Investment strategies are not one-size-fits-all, often the optimal approach involves a diversified blend. Your ideal strategy will ultimately depend on your personal financial goals, investment horizon, risk tolerance, and overall financial situation.

Superannuation stands out as one of the most tax-effective methods of building retirement wealth. Contributions into your super fund are typically taxed at just 15%, significantly lower than the marginal tax rates for most individuals. Additionally, investment earnings within super are taxed concessionally. The primary trade-off with superannuation is limited access—your funds are usually inaccessible until you reach your preservation age, commonly around 60.

For the accumulation phase (ages 25-50), shares often offer significant advantages due to their liquidity and flexibility. Unlike superannuation, shares provide accessible funds to cover expenses, such as children's education, holidays, or unexpected financial needs.

Property investment also remains appealing for the accumulation phase, largely driven by the potential for opportunity to use leverage and amply returns. However, it typically requires significant upfront capital and has lower liquidity than shares.

Pre-retirees (ages 50-65), however, typically benefit from prioritising superannuation contributions. Maximising super balances during this period leverages substantial tax advantages and prepares you to transition smoothly into retirement, benefiting from tax-free pension payments.

As retirement approaches, your tolerance for risk often diminishes. Entering retirement burdened by high levels of property debt can be problematic due to limited liquidity. Unlike property, which can only be sold entirely, shares provide flexibility as they can be partially liquidated when needed. Additionally, Australian shares are known for their generous dividend yields, which can effectively support your retirement income. Holding shares within a superannuation fund further enhances their appeal due to concessional tax mentioned before.

It's crucial to recognise that individual circumstances vary significantly. While some may prefer shares for flexibility and dividends, others might gravitate towards property for tangible asset security. Likewise, certain individuals start contributing to superannuation early, fully capitalising on long-term compound growth. Ultimately, your comfort level, financial objectives, and risk tolerance will guide the investment choices that best suit your unique situation.

If you're unsure about which investment strategy is right for you or would like personalised guidance, please contact us at Salt Financial Group.