Maybe youre planning ahead for your retirement? The popular choices for funding this important provision are mainly to be found in either the property market, via buy-to-let, or the stock market.
Interestingly enough, if youd invested 100,000 in residential property in 1983 it would have been worth around 555,000 by 2006, commercial property in that time would have risen from 100,000 to 997,000, whilst the same amount invested in a FTSE All Share tracker would have risen to 1.4m. These figures dont take into account any rental income from the property figures, but does assume that all dividends would have been re-invested in the shares fund. Even allowing for these differences, shares have well and truly beaten residential property over the time.
Recent years tell a very different tale. Between 1996 and 2006 residential property has beaten equity performance by 28%. Between 2001 and 2006, the return from shares has only worked out at 11%, whilst the price of the average home has doubled.
This makes a decision on whether youre better off investing in a traditional pension or a buy-to-let property a tricky one.
A worrying factor comes into the...
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