Shares as an Investment

Mary Holm talks more about shares as an investment option and people's fears of putting their money into them.Mary Holm is continuing her theme of where to invest your money in these times if you're not paying extra off your mortgage.She talks more about shares as an investment option and about people's fears of putting their money into them.Holm tells Jesse Mulligan that it's important listeners realise that interest rates will almost certainly rise."Economists get this stuff wrong all the time. The general feeling seems to be that interest rates won't go down much more from here, they're more likely to go up. People who are borrowing for a home or investment property need to keep that in mind."People should keep being aware that mortgage interest rates are very unusually low at the moment, so that's a very good argument for getting rid of your mortgage and reducing risk by reducing your mortgage as fast as you can."She says that if you have a bit of money aside and want to do something other than paying down the mortgage, it should be something fairly risky."It's not a good idea to instead be putting the money in bank term deposits or something, because the interest you earn on the term deposits will be lower than the interest you're paying on the mortgage. You've got to weigh up those two returns."Shares and property are the basic choices, Holm says.She says people can go into a rental property investment assuming prices will probably go up, but perhaps not at the rate they're rising now. However, by going into a rental when you already own a home means all your money is going into one type of investment, property."And if you're buying just one rental, you're lacking diversification in the rental market and things can happen to just one house - you could suddenly discover it's leaky, there are problems in the neighbourhood. All sorts of things can happen so it's quite risky in that sense."Also, with rental property, you can't sell it off gradually as you can with shares or a share fund. In retirement, or early on if you need the money, you can sell just some of your investment whereas with a rental it's all or nothing and there are quite a few hassles and most people need to borrow to get into rental property."While has been a brilliant investment for a lot of people, I wouldn't continue to count on it being really good... I'm not dumping on rental property, I'm just saying it's not necessarily a great alternative for a lot of people compared with paying extra off the mortgage."…Go to this episode on rnz.co.nz for more details