Property is best asset class for retirement

p40cWhen compared with other instruments, property provides a level of consistency that far exceeds the rest.

Screen Shot 2016-08-08 at 4.42.52 PMThere are very few truly proven investment instruments that can deliver consistent performance over a long period of time – something absolutely crucial to growing a retirement asset portfolio. Building a retirement plan on high volatility instruments is akin to building your house on shifting sand. Eventually a storm will collapse it. These instruments are better suited to speculative strategies than long term hold. Such volatile instruments will also require a significant amount of attention which many investors don’t have the time for.

Hence, most would delegate the responsibility to advisers and planners. In our experience, the results of such delegation have been mixed at best and more often than not, less than desirable, not due to a lack of competency, but more because of the increased volatility seen in today’s market.

The volatility of the instruments also leads to another major concern – inability to support significant leveraging. Without leveraging, the returns on investment will be too weak to build towards a significant portfolio over a reasonable period of time.

Suppose an annual income of $60,000 (inflation taken into consideration) is required in 20 years’ time for retirement, representing a 3% yield on a $2 mil portfolio. If you were to start with $200,000, a 5% consistent growth over 20 years will only get you to about $530,000. To achieve $2 mil, investors would have to take on higher risk/return instruments, put in a lot more money at the start or stretch the investment tenure – all of which are risky and unappealing options. While you may argue that 3% yield and 5% growth are low, remember we are talking about consistency, stability, low risks and over a 20-year period.

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