4 Asset classes
Property
While most of us automatically think of our home when we think of property, in a managed investment the term property generally refers to investments in property securities - property trusts listed on the sharemarket or in property-related companies. Funds which invest in property securities allow you to enjoy the benefits of diversification from investing across a range of different property sectors such as commercial, office, industrial, hotel and retail properties.
Like shares, a property securities fund is considered a 'growth asset' and can provide both capital growth and income. Income refers to that part of the return on the property investment that is paid by the tenant to the owners, usually on a regular basis, for the use of the property - for example, regular rent paid by a business leasing a floor in an office building.
Property securities provide growth and income opportunities
Capital growth occurs when the value of the property rises. This could be due to increases in rents received by tenants, or other factors which improve the outlook for property.
The great New Zealand dream
For many New Zealanders, a major investment priority is either saving for a deposit on a home, paying off an existing mortgage, or buying an investment property.
Traditionally returns from property have closely followed inflation. In past decades, high inflation levels and corresponding rises in property values usually meant that you could achieve a good return when the time came to sell an investment property.
By diversifying into a range of different property investments such as hotels, office blocks and shopping centres, you can benefit from stable income as well as the potential for returns over the longer term that exceed inflation. And, unlike residential property which can be hard to sell quickly (known as 'illiquid'), property securities tend to be much more liquid. Listed property securities are traded on the sharemarket and are easy to buy and sell quickly.