Is property still the best type of investment?
Property has been a favorite of long-term investors ever since the first cave went up for sale. Even people looking for a shorter term profit have fueled a trend of buying at low prices, renovating cheaply, and selling for a profit, otherwise known as flipping. With so many different types of investment now available to the average person, how does property stack up against another popular investment?
The pros and cons of property investment
There are many benefits of property investing. Your investment can be leveraged for greater returns. If you invest £50k in an investment that gives a 10% ROI, you will make £5k. If you use the £50K as a deposit on a £250k house and make the same return, your ROI will be £25k. Long-term property investment has also proved to be stable and can be a great way to fund your retirement.
But it's not all roses for property owners. Some of the more obvious problems include bad tenants and large maintenance costs. Having a property sit empty for any length of time can also place a strain on your cash flow. The entry cost of investing in property is high compared to other investments, and (initially at least) you will be placing all your eggs in one basket. Property management is definitely not always a piece of cake.
The pros and cons of CFDs
Contracts for difference, or CFDs as they are commonly known, are a way of speculating on the difference in price from when a contract opens to when it closes. Your profit or loss is dependent on how accurate your forecast was. One of the attractions is that initially you only have to pay a deposit, a percentage of the total investment. This is wonderful if you make a profit, but if your speculation is wrong, you could lose more than you deposited and have to pay more. This type of product needs a high level of risk management, and some people seek professional help with contracts for difference.
A CFD account can be opened with just a few hundred pounds, and you can start your trading straight away. Some people spend a lot of time studying the markets to decide which way to go, and others take on board the advice of the CFD provider. With access to many thousands of markets and products, and the ability to open and manage your account on a smartphone app, CFD trading has never been easier.
The flexibility of this type of product, the low initial outlay, and the low costs involved are just three of the reasons why CFD trading is so popular.
As with any company that deals with finances in Britain, CFD providers are strictly regulated by the Financial Conduct Authority. This gives some assurance to potential investors that they are only dealing with genuine companies who are experienced and knowledgeable in this area of the trading market.
Overall, property can be a very good investment still, but getting the right property at the right price, and in the right area will increase your ROI considerably, and minimise the associated risks. Therefore, when considering property as an investment, you'd be wise to also think about the alternatives, such as CFD, or even more.
