Why shares beat property every time

All over the world, people fall into the bricks and mortar trap. Here, Tom Bulford explains why, for his money it has to be shares every time.

We heard Betsy as soon as she stepped onto the boat. She was a big, American lady - a voluble character that had everyone in stitches within minutes of leaving the port. We liked her well enough to invite her for dinner with us one evening last week. But we soon knew all about it.

It turns out that Betsy is in a bit of a mess. And over dinner the next night, we heard all about it. Two hours of unending confessional. And when we parted company after the meal, we returned home with a very valuable lessonlearned.

The holiday dinner from Hell

Betsy seemed to have it all. She had a well-paid job, and travelled the world in style. And the wealth of her personal experience made for interesting company.

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Still we got a fright when she arrived for dinner, squeezed into a frilly frock more suitable for a high school dance. We found a table overlooking the bay and Betsy proceeded to give a performance the like of which I have never experienced before or since.

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For two hours this American dame spoke volubly and without ceasing about a single subject - herself. We heard all about her home in New York, about her responsibility for ATT's sub-sea communication cables and about the inadequacies of her husband Ron.

We heard about the Maldives - 'you'd love the beaches!'; about Tibet - 'there are just no proper toilets - I had to pee into a jar and empty it out of the window!'; and about Malaysia - 'I went white-water rafting! Let me show you some pictures'.

And with this she produced from her bag a tablet otherwise known as an iPod Touch on which we saw displayed images of pristine Maldivian beaches and of muddy Malaysian rivers, but fortunately none of Tibetan sanitary arrangements.

Sensing that we were more intrigued by this impressive item of modern technology than by the pictures themselves Betsy then gave us the benefit of a full exposition of the iPod Touch's various features. These included up to the minute stock prices and news from the New York Times, a currency converter and a warning of any incipient earthquakes, the latter essential for the better preservation of AT & T's precious sub-sea cables.

Yes aside from the deficiencies of Ron, Betsy seemed to have it all. But there was a cloud on her horizon.

How Betsy fell into an awful trap

For Betsy owns a time-share on the Caribbean island of St. Thomas. Five years ago she was talked into paying $35,000 for a week's use of a holiday apartment, a price that to me sounded excessive given that the other 51 weeks were also presumably sold for $35,000 or thereabouts.

Anyway when Betsy visited St. Thomas this Spring she found that the previous occupants had walked off with all the light bulbs, that the oven had broken and not been repaired and that the whole property was looking decidedly the worse for wear. When she took matters up with the managers she found them off-hand and inefficient. And after five years of sitting on the same Caribbean beach she had had enough of it. She had begun to resent paying the annual service charge, and wantedout.

'But are there any buyers?' I asked, finally managing to make the conversation a two-way affair.

'That's the problem' Betsy replied, 'and if there are I don't suppose I would get anything like my $35,000 back.'

'You would have done better,' I suggested, looking at her iPod Touch, 'to have invested that money in Apple.'

For sure she would. While Betsy has watched her time share investment turn sour, shares in Apple have gone up 440% and she certainly would not have any trouble selling them.

All the world over people like Betsy fall into the bricks and mortar trap. For my money it is shares every time.

This article was first published in Tom Bulford's twice-weekly small-cap investment email The Penny Sleuth.

Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.