Saturday, 30 January 2010

Property - moderate to high risk

Property is often the biggest asset in a person's investment portfolio.

Property can keep up with inflation and can be a very effective way of gearing your investment.

This means that by using external financing you can increase the return on your investment.  Debt in the form of a mortgage bond can help you to acquire an asset - and a return on this asset - you would not otherwise be able to afford.

The risk of property, however, is moderate to high. 

Much depends on
  • the location of the property and
  • the political and economic environment.

One big drawback of this asset class is illiquidity:  the fact that you cannot sell property as quickly as investments in other asset classes. 

For that reason the safest option is to own your own home, but to leave property speculation (a potentially risky business) to the experts.

No comments: