Investment is a great source of income. While people enjoy various benefits, it can become confusing when it comes to deciding which one to go for. There is no one right choice when it comes to investing.
Deciding which one to go for, real estate or stocks can be confusing, this decision is made on individual preferences, lifestyle, willingness to take risks, and more.
Timing is the major deciding factor when it comes to investment. Sometimes a stock can bring more returns than buying a property and vice versa. That is why it can become difficult to predict which investment will be beneficial. Having a thorough knowledge of these two investment options- stock and real estate is also advisable before investing.
Real Estate vs Stock
The stocks are directly related to the position a company holds in the market. As the company share grows the value of stock also grows. Whereas in real estate, you invest through buying a property or piece of land, where you purchase the piece and pay taxes as well. These properties can be later sold off or can be put up for rent.
The benefits and drawbacks of investing in real estate
Let us understand the various benefits and drawbacks of investing in real estate, to make a better decision.
Benefits
- Comfort
Real estate tends to be more comfortable as people tend to feel more connected to it as compared to stocks and bonds. From a very early age, people listen to owning their home as a necessity for living, that is why investing in real estate is a better investment option.
- Easy cash flow
If you put your property on rent, you can receive a steady income every month, or while selling you can get good money in return in the long term.
- Less scam and fraud
It is difficult to commit fraud in real estate as compared to other investment options since you can physically examine the property. While renting you can do a background check on your tenants, sign legal contracts, look for flaws, cross-check papers, check the piece of land. Whereas in stocks you have to rely on the auditors.
- Safety
Real estate tends to be more secure towards the inflation
Drawbacks
- Difficult to maintain
Investing in real estate may sound easy but maintaining it can be difficult. Dealing with tenants, damages, the possibility of getting sued, robbery, and others, can easily make it difficult to manage the real estate.
- The cost factor
Even if the property is unoccupied, as an owner you would require to pay its maintenance cost, utility cost, and various taxes.
- Actual value
The actual value of the real estate does rarely increases with the inflation in the market
The benefits and drawbacks of investing in the stock market
Like real estate, stock markets also share their own set of advantages and disadvantages.
Benefits
- A long period
Research has shown that stocks create a great source of wealth as compared to other investment sources despite their crashing nature. Buying a stock means buying yourself a part in a company business, so basically, you are buying yourself business ownership.
- Less effort and work
Buying a stock does not mean that you have to do any work, all you have to do is research, buy and invest in the stock of a company that seems profitable.
- Increased cash dividends
Stocks increase the profit share as well as cash dividends, this means as company earnings grow so will the wealth invested by you in the company
- The liquidity
Stocks are more liquid than real estate, you can easily sell or buy the stock anytime, anywhere. Whereas with real estate, it can take weeks, months, or even years before you find yourself a property or a buyer for it.
Drawbacks
- Undisciplined
The stocks have proven to generate profit in the long term, but many investors emotionally invest which leads to more losses than profit.
- Stagnant
If you invest in stocks of the company that has shown low growth over time, then you are investing in stagnant stock that is not going to bring you any benefit in any way.
To sum up
Real estate or stock, both bring profit but come with a share of risks as well. Going through these pros and cons can help you choose what suits your need the best. Diversifying as much as possible can help you hedge against the risk in the whole investment process.
