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Investing in Stocks Vs. Real Estate – Which One to Choose

When someone says ‘investment’, some of the things that might come to your mind are numbers, complicated, and money. Yes, it is quite difficult to fund specific fields, especially if you do not know where to begin, and more importantly, into what you can place your money in. It is logical that you might want to spend on stocks, but, that is not your only option.

The two most common types are real estate and stocks. However, if you cannot decide between these two options, this article might be able to help you come to a conclusion. The text below is going to feature both options, including the types, benefits, and drawbacks you might come across. Let’s take a look:

Choosing Stocks

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If you are a beginner, this is, perhaps, one of the best options for you to start your journey. It is convenient, relatively fast, and it is a lot easier to understand and learn the craft than other options. When it comes to purchasing company shares, you can choose from the following types:

  1. Individual – these shares are a bit more complex, which is why you should try it once you completely learn about the markets and how they function. By choosing it, you’ll lower the diversification, but at the same time, you’ll be increasing the risks by placing money in just a few individual assets. The reward is larger, mostly because you become a ‘target’.
  2. ETFs – these are basically a few shares that function as one. You can choose to buy them as you would individual ones, however, it is literally a fund that is connected to other ones. For instance, you can buy one that has Facebook, Instagram, and WhatsApp all in one, which means that you’ll be exposed to all three enterprises.
  3. Mutual – these are usually managed by one individual or a team. The managers will decide on what stocks the fund can hold and how much do they want to invest in it. There are benefits and drawbacks to this, however, more individuals feel comfortable when a person manages their money than an algorithm.

The Benefits

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Naturally, there are various benefits that you can gain. For starter, they are extremely easy to sell and purchase, which means that it is easy to start the entire process by opening a brokerage account. Various platforms such as NAGA offer people a simple way to open these accounts. From there, you can make your first deposit, and start buying the shares.

Additionally, the last century saw an increase in the average gain on shares, which grew over 10%. Over a period of time, you’ll be able to gain a really good return. Last, but equally important, you’ll own a part of a company. Of course, owning one single share of a large company such as “Huawei” won’t mean a lot, but, knowing that you own a small percentage of really feels good.

The Drawbacks

Where there are benefits, there are some drawbacks as well. The share market is quite often unpredictable, which means that the stocks can be increased or decreased in value as soon as you purchase them. This means that you can lose some money until you become more experienced. Besides this, it can be quite stressful to deal with shares, so, if you do not work well under pressure, a different option might be suitable for you.

Choosing Real Estate

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For a lot of people worldwide, placing their hard-earned cash into the property market seems more logical and comfortable. Why you might be wondering? Well, with stocks, you cannot really see them, instead, you just look at endless charts and make decisions based on them.

On the other hand, with buildings, you can physically see the property you have spent your money in. Now, a lot of individuals connect this investment option with high returns, this is not the situation anymore since it will depend on several things such as the location, state of the market, and how well you know the market. There are two options to choose from:

  1. Residential – which means that you’ll invest in residential buildings. You purchase the property as an investment, and then you choose whether you’ll rent it and earn from the rental income or flip it, which means that you’ll purchase it, renovate everything, and then sell it for profit.
  2. Commercial – with this option, you can invest in a wide range of things. For instance, you can choose to buy an office or apartment building. Yes, it is more complicated, it will require a lot of up-front capital, and you’ll need to completely understand how it functions in order to succeed, especially since you’ll need to manage a lot of things including people sometimes.

The Benefits

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Choosing this option will give you a lot of advantages, and one of the most important ones is incredible tax benefits. This means that you can deduct the value of the land as a business expense, which applies to most commercial assets as well. Before you deduct it by yourself, you might want to consider opting for a professional that’ll help you deduct and calculate everything.

Additionally, the entire market is real and can be seen. This means that you can walk on the property, see what you have invested in, as well as make all of the changes you want. However, with stocks, you cannot really walk in a company and demand that some changes are made. So, it provides you with a way to be completely in control.

The Drawbacks

Like with everything else in life, there are drawbacks to investing in real estate as well. To begin with, you should know that you’ll need to prepare a lot of cash for the purchase. Besides the money for the estate, you’ll also be required to pay for all the closing expenses, taxes, fees, as well as various commissions. It is also difficult to predict the future value of the property, especially since the real estate market is versatile. This means that you might end up losing money if you decide to sell the property.

Conclusion

As you can see, both of these investment types are good in some way, however, only you can truly determine what is best for you. So, now that you know what it takes for each of the types mentioned above, and all the benefits and drawbacks you can come across, do not waste any more time. Instead, start researching more about these investments, and determine what might fit your needs.

About Stefania Trtica

Stefania Trtica

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