We are now in a new financial year with negative news everywhere, so it’s probably appropriate to remind ourselves that there are three basic areas where we can invest our money – cash, property and shares.

Now, it’s a good feeling to have plenty of cash in the bank, especially when you can get a safe 8% as you can right now, but the problem with cash is that it has no tax benefits, gives you no chance of any capital gain and is eroded by inflation.

A return of $8,000 on a deposit of $100,000 sounds attractive, but tax could take $3,200 leaving you with a net return of $4,800 or 4.8% - take off 3.0% for inflation and you are left with a net return of just 1.8%.

This is why holding cash over the long-term is one of the worst investment strategies of all.

In any event, there is a strong feeling that we are now at the top of the interest rate cycle, so in 12 months time you will be more likely to get 7.0% instead of 8.0%.

This leaves us with the good old faithfuls – property and shares.

It’s important to have an interest in both these camps, but it’s just as important to understand that they behave in very different ways.

It’s highly unlikely that your property will lose 30% of its value in a downturn, but there are ongoing costs such as maintenance, rates and land tax and it can be a long drawn out process if you ever try to sell it.

Furthermore, if you opt for non residential property, you can find yourself stuck with vacancies of a year or longer.

Shares will give you a much more exciting ride because their values will bounce around, but the big advantage of them is that you can buy and sell in small parcels, they provide tax advantaged income by way of franked dividends and over the long term, have been the best performing asset class of all – an average of 11% per annum over the last 10 years even after taking the present slump into account.

That’s hard to beat.