Posted On: December 17, 2021

Are you confused about making a decision whether to invest in real estate or stocks? Stop worrying as we are here to help you out. Many investors go for stocks to make money as it’s one of the most reliable investment options available out there. However, real estate is another considerable option in comparison to stocks that many people are not aware of. In terms of low-risk factor and higher return on investment, real estate can be a great option for people looking to invest their saved money.

With the rising inflation, Individuals who have some money in their bank accounts or at home are looking for investment strategies that work well for them in future, and purchasing a property or buying stocks is a good option to kick start. However, both investment options have their advantages and disadvantages that every investor needs to understand before making any decision.

Once things get clear, it’s completely your choice whether you want to start with real estate or stocks, depending on your budget, needs, expectations, and risk tolerance.

Real Estate Vs. Stocks: How It Works

There is no denying that most people start with buying stocks as it doesn’t require much time or money. On the other hand, to get the best out of real estate investment, you need a good amount of money in hand, time, and patience.

Investing in stocks means you buy shares of a company that you think will be beneficial for you and increase your money. So, you make money by selling the company’s stock when its value goes up. However, to get fruitful results, understanding the value of a stock is more important than paying attention to the price.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Philip Fisher

On the other hand, investing in real estate means buying a piece of land or property. With real estate investment, you can make money in two ways; rent out a property or sell it once its value increases. Most people buy and rent out the property, making it a steady source of income.

“Ninety Percent of all millionaires become so through owning real estate.” – Andrew Carnegie

Unlike stocks, the tangible nature of real estate and diverse range of benefits attract investors more as buying a property means you have full control over your investment. However, there are a few significant considerations that you need to understand before choosing in between real estate and stocks.

In this blog post, we will highlight all the necessary factors and pros and cons you must be aware of to make the best investment decision.

Real Estate Vs. Stocks: Return on Investment (ROI)

There is no denying that the stock market offers a lot of perks that boost return on investment but these perks are not available on all stocks you invest in. It’s quite an unpredictable investment and mostly doesn’t provide the expected ROI.

In contrast, real estate investment outpaces inflation as the property value and house rents increase with the increase in petrol price, electricity/water/gas or other utilities. But it takes a lot of time, money, patience, and risk tolerance ability.

In a nutshell, it’s not wrong to say that comparison of real estate and stocks is like comparing apples and oranges as factors that influence values, prices, and ROI in both the investments are way different.

Real Estate Vs. Stocks: Risks

The Covid-19 pandemic has brought a massive change in real estate and stocks investment. However, there is a big difference in risks associated with these investments.

Let’s begin with real estate.

Missing thorough research and lack of patience can cost you a fortune and become the biggest regret of life. In the world of real estate, you need to step in with proper knowledge. Here you can’t expect immediate results or cash in your investment quickly.

Now move to stocks.

Unlike real estate, the risk factor is higher in the stock investment but it offers quick returns. In the stock market, you need to face multiple risks, including economic and inflationary risks. Another major risk is that stocks prices fluctuate frequently, making the stock value volatile.

Real Estate Vs. Stocks: Pros and Cons

Like any other investment, real estate and stocks have their pros and cons.

Real Estate

Pros

  • Value Appreciation — Buying the right property at a right time appreciates over time at a rate that outpaces inflation.
  • Tax Benefits — Government offers striking tax benefits to real estate investors, allowing them to make money successfully.
  • Steady Income — Renting out properties is the most reliable source of steady income during these uncertain times.
  • Use of Leverage — Another significant benefit is the use of leverage, allowing investors to rapidly grow their property holdings and boost wealth-building outcomes.

Cons

  • Expensive — Unlike stocks, you need good money in hand if you want to be a successful real estate investor.
  • Time-Consuming — You need to spend a lot of time understanding the real estate business and research a lot before making any decision.
  • No Quick Liquidation — It’s not for you if you need immediate results. Real estate only works for those who come up with a long-term strategy.
  • Problematic Tenants — If you hand over your property to the wrong tenants, it can become a nightmare for you and cost you a lot of money and time.

Stocks

Pros

  • Grow with Economy — The biggest benefit of stock investment is it grows with the economy. Corporate earnings highly depend on the country’s economy.
  • Keeps You Ahead of Inflation — Investing in stocks always keep investors ahead of inflation.
  • Easy to Purchase — Buying shares is much easier compared to property. You can buy shares online or through brokers.
  • Easy to Sell — Like buying, selling shares is also easy peasy. You can sell your shares in the stock market at any time.

Cons

  • High Risk — Stock investment is highly risky as you can lose your investment if a company you invest in doesn’t perform well.
  • Time-Consuming — Before investing in any company’s stocks, you need to research about the company to determine whether it would be a profitable decision or not.
  • Fluctuation in Prices — Stock price goes up and down in a matter of seconds due to which most individuals end up making wrong buying and selling decisions.

Final Thoughts

Whether it’s real estate or stocks, both have some risks while both offer significant rewards. We hope that this blog post would have enlightened you about real estate and stocks, and will help you to make the right decision.


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