Should You Buy Shares to Save?

For many of us, buying the first property is always the hardest step.

Due to increasing house prices, saving 10% – 20% deposit of the average house price ($905,000) is no easy task. And if that wasn’t already hard enough, the pace of price growth for property has been approx. 7.9% per year. Which means essentially that house prices will move quicker than a person’s ability to save.

For many of us, it can be tempting to try and fast-track the deposit process by investing in shares, cryptocurrency or other assets that have the potential for capital gains. Especially post-COVID, where the share market and crypto market have seen returns of up to 20%. However, one thing needs to be considered when investing your home deposit funds into assets that can change in value. That is, if the market declines, you may be forced to sell and take a loss. Otherwise, be stuck in a situation where you need the investments to recover before you can sell.

Regardless, both situations are less than desirable. As a rule of thumb, if you are planning to invest for the short term, stick to cash, high interest-bearing accounts and term deposits, as your money is more secure.

However, if you want to focus on long-term wealth creation and passive income, shares may be a good investment due to the potential for the value to increase, dividend payments and tax benefits associated with franking credits.

If you would like to learn more, speak to one of our financial planners and financial advisors who service the Yarraville, Seddon, Newport and Williamstown locations.