Property vs Shares: What Would We Do Now? | Part 3

The Overlooked Option: Just Pay Down the Mortgage

Damien raises a pattern he's noticed repeatedly in client consultations: people holding a taxable, non-deductible home loan while simultaneously putting smaller amounts into shares or index funds, rather than directing that money into their offset account or paying down the home loan directly. His point: paying down (or offsetting) an owner-occupied loan delivers a risk-free, tax-free return equal to the home loan's interest rate (for example, around 6%), with zero effort and zero market risk, a genuinely compelling option that's often overlooked in favour of taking on share market risk unnecessarily.

Jeremy and Damien note one exception worth watching for: if an offset balance actually exceeds the loan balance, the excess sits earning nothing, effectively "lazy money" that should be redirected elsewhere (such as a genuine savings vehicle or another investment) rather than sitting idle.

Revisiting the $100,000 Comparison

Referencing the modelling from Part 2, Damien notes that even a leveraged VAS (Vanguard's top-300 Australian shares index) position returns an estimated 11.4%, not far off the property example's roughly 12%, but both again stress this locks an investor into something close to the market average, whereas property offers more realistic scope to outperform its own benchmark.

What Would Jeremy Do If Starting Again?

Jeremy's first priority would be learning to recognise genuine insight versus marketing dressed up as insight, something he says took him years of direct experience to get better at. His second point: if starting with little or no capital, he'd focus on shares initially (since property wouldn't yet be within reach), but with a focus on capital preservation rather than growth, keeping savings mostly in a high-interest account rather than risking early capital on shares while working toward a first property deposit. His third point: he'd be considerably less aggressive than he was in his own investing journey, citing his own history of over-leveraging (including a heavily-leveraged vendor-financed property that, in hindsight, would have performed well with even modest 4% growth, but instead went backwards) as a costly lesson. He notes his single most expensive mistake, however, wasn't a specific property, but trusting someone who was, in his words, "an expert at marketing themselves as an expert," an error he estimates cost him around a million dollars in opportunity cost over time.

Why Jeremy Still Leans Toward Property

Jeremy's central argument isn't really about leverage or control, it's about how much easier it is to outperform the relevant benchmark in property compared to shares. He notes that professional fund managers who manage to beat a share index by even 2% a year over five years are considered a standout success in that industry, whereas in property, using a conservative national growth assumption (like the 5.4% figure used earlier in the series) as a baseline, meaningfully outperforming by double digits is genuinely achievable without needing any sophisticated algorithm, often just by following simple, widely available principles like buying an established house rather than a new build or unit.

Personal Share Market Lessons

Damien shares a candid account of his own experience investing a lump sum into shares and crypto just before COVID, after drawing down much of his offset account to do so. When the market fell (an estimated 20–30% decline), he had little spare cash left to reinvest, and found himself checking his portfolio daily, a stressful, time-consuming experience that ultimately convinced him a more automated, "set and forget" approach (like regular dollar-cost-averaged contributions into index funds) suited him far better than active stock-picking.

He also shares a specific performance comparison: since 2017, a portfolio built with a financial planner's guidance in individual managed funds returned around -0.8% per annum, compared to an estimated 12.5% per annum over the same period for a simple Vanguard VAS index investment, illustrating, in his view, that added complexity didn't translate into better results, and that he would have been better off with the simpler index approach from the start.

Why Outperforming Shares Is Genuinely Hard

Jeremy reflects that to outperform an index fund, an investor effectively needs to beat at least half of all other market participants, many of them professional fund managers with far more resources and experience. He frames this as simply a structural reality of share investing, rather than a personal failing, and encourages listeners going through similar setbacks not to be too hard on themselves, comparing it to his own decision to walk away from finishing a CPA qualification once he realised the ongoing time investment wasn't matched by genuine enjoyment or value to him, recognising a sunk cost and choosing to move on rather than continuing simply because of time already invested.

Comparing Recent Property Market Performance

Looking at CoreLogic data (as of around January 2025), Damien and Jeremy note Brisbane, Adelaide, and Perth have all seen substantial post-COVID growth (76%, 73%, and 70% respectively cited as examples), compared to Melbourne's much more modest 8% over the same period. While some commentators question whether markets like Perth are nearing their peak, Jeremy sees nothing in the data suggesting an imminent downturn, though he distinguishes between a shorter-term "get in, get out" opportunity versus where the strongest 3–5 year outlook might lie.

They illustrate the real-dollar impact of this kind of gap using a hypothetical: an investor who bought in a strong-performing market, realised significant growth, paid capital gains tax (benefiting from the 50% discount after 12 months) and reallocated that equity into Melbourne, would end up considerably better capitalised than an investor who had simply bought directly into Melbourne from the outset, directly undermining the common "just hold long term" defence when a specific purchase underperforms relative to available alternatives at the time.

A Look at Market Volatility Over Time

Using a historical volatility chart, Damien and Jeremy point to past periods of sharp share market decline (including the GFC and COVID-era falls) as visual evidence for why they built a conservative buffer (such as the 60% LVR ceiling used in earlier leveraged share examples) into their modelling, rather than maximising leverage right up to a lender's limit. Damien shares that his own experience getting caught out by a market downturn shortly before COVID was the direct catalyst for shifting to a simpler, lower-risk investment approach going forward.

Asset Allocation

Both agree there's no universal asset allocation formula, it depends on personal risk appetite and life stage, and recommend discussing this directly with a financial planner or through independent research. Damien shares that concentrating in individual stocks (rather than diversified index funds) exposed him to company-specific risk during his own more active investing period, including a couple of individual stock picks that failed entirely, a risk he attributes to his own risk-taking at the time rather than to the financial planner's advice itself.

Closing Thoughts: How to Decide for Yourself

Damien lays out a practical framework: establish a cash buffer first (6–12 months of expenses) before considering any investment; assess personal risk tolerance and preference for a hands-on versus passive approach; understand your own cash flow balance point between income and growth needs (noting that chasing very high property yields specifically narrows the pool of markets with strong capital growth potential); decide your comfort level with leverage; and choose an asset mix that suits your actual lifestyle and goals, adjusting over time as circumstances change (for example, moving to part-time work later in life might justify shifting toward more yield-focused assets).

Jeremy's final summary reiterates his core argument: property's real advantage isn't leverage or control on their own, it's the relative ease of outperforming the national growth benchmark, something he considers genuinely difficult to replicate in the share market without extensive specialised experience. Both agree the series won't have universal appeal, some listeners will still prefer shares, and that's a legitimate choice, but hope it's given listeners a clearer, honestly-presented comparison to make their own decision from.

They close the three-part series by thanking listeners, encouraging likes, shares, and subscriptions, and inviting suggestions for future topics via email or the comments section.