Stocks Or Real Estate? Which Is The Better Investment?

By: Taro Chellaram /Real Estate Articles/Feb 09, 2022

Stocks Or Real Estate? Which Is The Better Investment?

When people have extra money lying around, the first thing that comes to mind is trying to make more money from it, with investments being the safest bet. Investments are a way for people to improve their finances and set long-term monetary goals for themselves. But how do you know which investment market is the right one for your finances? There is no simple answer to this as there are many options in today’s day and age.  

Traditionally, when one talks about investments, the first few options that pop up in their minds probably include stocks, mutual funds, ETF’s or commodities like metal (gold) or energy (oil). While these are great, a more reliable investment option is real estate. Real estate is not the first thing that comes to one’s mind when thinking about investments, as most people don’t consider it an investment; rather, they think of it as an asset. Under the right circumstances, real estate can prove to be a low-risk option with better returns in the long run. We’re listing out some of the pros and cons of both stocks and real estate, to help make your investment decision easier. Which is a better investment, stocks or real estate? Let’s dive deeper and take a look at an investment market analysis.

The Stock Market

Investing in real estate means that your money is highly liquid. This implies that your invested capital is not locked up for significant periods. Furthermore, stocks are comparatively less time-consuming. One can build their investment portfolio by investing in the stocks of multiple companies at a time without worrying about upkeep of any kind. Investing in stocks allows you to keep a watch on your investment in real-time when other platforms don’t offer that facility. The downside to such a type of investment is that there may be a possibility to pay capital sales tax when selling stocks. This market is also one that is extremely unstable in terms of prices. The stock market goes up and down at a much faster rate than real estate.

The Real Estate Market

The real estate market has two types of investments – residential property and commercial property investments. You could either purchase property at low rates, manage it and increase its value later, ultimately sell it at a profit (through a process called ‘flipping’), or invest in money-making (commercial) property and earn a steady income as rent. It truly is as simple as it reads, and this simplicity is a significant advantage of real estate. Furthermore, real estate investment protects from economic inflation, as land value and rent go up with inflation. The downside of real estate investment is that it involves time and effort from the investor, and once money has been invested, it’s not as easy to move money around as it is with other investment options, say stocks. Moreover, it requires larger amounts of money to be set aside as investments and hence is better suited for a slightly older and more experienced audience.

According to sources, when compared over ten years, returns from stocks are at an average of around 8%, while commercial properties are about 30%.

Still confused? Well, what if we told you that there is a way you can get both these investments in one? That’s where REITs come in. A REIT, or real estate investment trust, enables individual investors to buy shares of the REIT and add to their investment portfolio. 

Whatever be your decision, we would highly suggest that before you make any investment decision, be sure to do your own research and consult with a financial advisor or investment advisor.

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