It was interesting to note for the 12 months ending March 31, the Australian property market achieved a return of 9.7%, with the highest returning capital city being Darwin, at 19.9%.
Compare this to the Australian share market, which has returned 38.46% and Afterpay was one of the best performing shares, earning approximately 1200%.
However, if you had invested in Australian shares just one month earlier i.e. February 2020, the return for Australian shares would have only been 2.05%.
Two very different results based on timing. The problem with this is the fact that investors may think timing is the most critical part of investing. And in this case, over the short term that was the reality. However, this belief creates poor behaviors and ultimately we approach investing in shares as a form of gambling.
Over the longer term, timing becomes less and less important. To put it simply, time in the market, not timing the market, is the most critical part of investing.
Over the last 5 years the Australian share market has had an average return of 10.20%. Although I do not have figures to give you a national average return for the property market over the last 5 years, I can give you a comparison to one of the best performing suburbs in the Illawarra – Thirroul. The average median house in 2016 in Thirroul was worth $987,500. Today this has grown to $1,387,500 (this does ignore rent and costs).
If we compare this to Australian shares, $987,500 invested at the start of 2016 would now be worth around $1,600,000.
Property is a very good investment: it is deemed more stable, and in most cases we will hold property over the long term due to significant transaction costs. If we approached shares the same way we approach property, i.e. hold for a long time and not worry about the price until we sell, you are more likely to have a successful result, rather than being held back from investing by worrying about timing.