Investing is about balance and diversity

There are three major areas in which you can invest - cash, property and shares.

A well constructed portfolio will have a mix of these assets because they have different characteristics, and one may be performing well when another is performing badly.

Keep in mind that every asset class has advantages as well as disadvantages.

If you invest in cash, that's money in the bank, there should be no entry or exit fees, and you won't lose any of your precious capital if the market has a downturn. However, there is no chance of any capital gain, and no tax concessions.

Shares have the greatest potential for high returns but remember the adage - the higher the return the higher the risk. If you make the mistake of investing in a dud you may well lose all your money. The great thing about shares is that they can be bought and sold in small parcels and there are minimal entry and extra costs.

Residential real estate is a solid investment because you will never lose all your money, unless you borrow too much and are forced to dump your property on a bad market.

The trick is to find an under valued property and add value either by renovating it or changing its use by rezoning.  This is the origin of "buy the worst house in the best street".  Of course you can't go on adding value to the same property year after year or you'll risk over capitalising. Another fundamental is timing - knowing when to consider taking profits and moving on to the next deal.

Topics:  investing noel whittaker opinion property shares

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