Feel Like Chicken Tonight?
August 12, 2011
At breakfast halfway through our family holiday in Tanzania, once again the main decision was how we wanted our eggs cooked. Our youngest commented about the previous night’s (chicken) dinner and we got into a discussion about the farmer’s dilemma; do you look after the chicken and sell an egg each day or sell the chicken to be eaten
? Our eldest joined in, with ‘it depends’; this was the theme for the next few minutes!
Not surprisingly, at seven and nine, the children thought this breakfast discussion a bit odd, but at least did understand the point.
Clearly for the farmer this is a significant investment decision.
I’m not going to pretend to have any knowledge of keeping chickens in Africa, but there are many parallels; the business owner who sells their successful company may receive a lump sum of money.
They go from receiving a regular ‘daily egg’ income to having a pot of cash to decide what to do with.
So too with property investment. Do you hold and receive an income, or sell and have a pot of money – probably to look to use in the next investment? Years ago I remember being told that in property, over the long term you generally receive a better return by holding assets than frequently trading
At Young Group, we are firmly in the ‘egg a day’ camp
Yes, there are investors who call
the peaks and troughs correctly, but not many do, especially not consistently.
In fact, results from the Investment Property Databank (IPD) over the past 10 years in both residential and commercial property show that those who held assets in most periods received a superior return than those who traded.
So does the IPD research hold true for the farmer, should he sit back and sell an egg a day? From the choice
we had on our summer holiday it seems that the farmers in Tanzania think so!