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Why I prefer ASX shares to investing in property

It’s the eternal investing debate: shares vs property. There’s no doubt that both investment classes have advantages and disadvantages and both have made many people ridiculously wealthy.

I’m sure that people will be arguing over which is superior until Judgement Day.

But I’m here to tell you why I think ASX shares are my preferred avenue for building wealth.

Why I love ASX shares

We have some of the best businesses around on the ASX in my opinion. From CSL Limited (ASX: CSL) and Woolworths Group Ltd (ASX: WOW) to Afterpay Ltd (ASX: APT) and JB Hi-Fi Limited (ASX: JBH) – there’s no shortage of companies that have made investors lots of money over the years.

And sure, hating on our ASX banks like Westpac Banking Corp (ASX: WBC) is something of a national sport. But in, reality we have one of the most well-regulated banking sectors in the world and all four of the big banks survived the GFC relatively unscathed. That’s something that the US, UK and Europe couldn’t claim and our economy is miles better for it.

Unlike buying a property, you can get started with ASX shares for as little as $500. That means that unlocking dividend income, franking credits and all the other benefits of shares is within reach of almost every Australian.

Franking in particular is a great way to earn income. A dollar of franked dividends is worth more than a dollar of any other kind of income (rent included), which is something pretty special.

There’s no ongoing maintenance costs with shares either – no land tax, stamp duty, leaky pipes or worn-out carpet to be replaced.

Many people feel nervous about the share market because of its volatile nature, but I think corrections or crashes are just a golden opportunity to buy something that’s worth a dollar for 70 or even 50 cents.

Disadvantages of ASX shares

Property does have some advantages over ASX shares though. Many people feel more comfortable owning land because its tangible and not able to go broke like a company can.

Using leverage (or borrowed money) is a lot more lucrative in the property market as well. You can borrow to invest in shares, but it’s a lot riskier and more expensive – and comes with the risk of margin calls. Banks are far happier to lend against a house and at a higher loan-to-value ratio, which gives you the opportunity to rapidly grow a property portfolio.

Foolish Takeaway

Whilst property and shares both have advantages and disadvantages, I’m very happy to stick with ASX shares as my primary investing strategy. The liquidity, benefits of franked dividend income and low capital requirements and maintenance costs are benefits I can’t walk past. But a different strategy might work better for you. To each their own!

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Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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