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Stocks vs Real Estate: Where Should You Invest?

Above image credit to Pixabay

There are several factors to consider when choosing investments, including your financial circumstances and objectives and the timing of the investment. While successful investing is often all about having as diverse a portfolio as possible, sometimes you’ll be faced with a straight choice as to what to invest in.

If that choice is between stocks and real estate, where should you put your money?

⚖️ What are the pros and cons of investing in stocks?

➕Advantages of investing in stocks

Potentially lucrative returns for doing very little. When you invest in stocks, the only work you need to do is your research into whether it’s a potentially worthwhile investment! Given the volume of apps and services out there to help you these days, even your effort here may be minimal!

They might generate a regular income. If a business pays out dividends, your stocks can give you an additional income while your capital investment also grows. Another factor to consider is that if you choose to reinvest your dividends and the company continues to grow, your investment value will rise significantly.

It’s easy to get started. You don't need a massive truck of cash to get started with investing in stocks. You can even do it yourself via an app these days.

The market has plenty of liquidity. Buying and selling stocks is easily done, often at little more than the click of a button.

History highlights that investing in stocks works. Any long-term analysis of stock markets highlights that long-term investing and reinvesting dividends is the best means of building wealth over an extended period.


➖Potential disadvantages of investing in stocks

Potential volatility. Some classes of stocks, such as small-cap stocks, can be volatile. You need to be prepared to ride out market volatility. It may even be an opportunity for you to profit. Still, you need to know what you're doing.

You might get caught up in emotional investing. Many investors lose money because they emotionally invest in companies they want to invest in rather than making cold decisions based on data. 

Stocks can easily stagnate. Some stocks can easily stagnate and leave your investment standing still. You must keep on top of your portfolio to avoid this happening and maximise your returns.

It might not as emotional as exchanging crypto but it can't be underestimated the toll stocks can have on the psyche.


⚖️ What are the pros and cons of investing in real estate?

➕Advantages of investing in real estate

It can help your cash flow. If you invest in real estate to generate rental income, you will improve your cash flow.

You’re mostly in control. When you buy a property, you control what you buy and how you manage your investment. If you were to use a broker or management firm for your stocks, you wouldn't have this benefit.

Real estate is safe and comfortable. Real estate is traditionally a safe investment. It’s also one with which most of us are comfortable and familiar with. If you already own property, it feels easy to buy more real estate as an investment.

➖Potential disadvantages of investing in real estate

Investing well can be time and resource-demanding. Investing in real estate can be expensive. You also may need to dedicate significant amounts of time to find a suitable investment, not to mention managing it in the long-term.

You can have variable ongoing costs. Your investment returns can be eaten into by things like repair costs, insurance, and any other expenses you need to take care of, even if you have a tenant.

Growth can be limited once adjusted for inflation. Real estate might feel like it delivers healthy monetary growth, but in percentage terms, this can often be limited once adjusted for inflation, thus reducing your returns in real terms.

👉 Choosing the right investment for you

Ultimately, the best investment is the one that you’re comfortable with, that suits your circumstances, objectives, and overall portfolio. Both stocks and real estate have the potential for long-term growth (as well as their potential risks and downsides), so if you have a straight choice between one or the other, opt for the one that works best for you.

Lastly, if your risk appetite can take it then crypto assets are something to consider. Like stocks, cryptos can be obtained from an exchange but doing your own research before is key before any investment.


Comments: (2)

A Finextra member
A Finextra member 28 May, 2021, 15:032 likes 2 likes

Passive investing - instead of active.

So, Indexes, ETFS  & REITs.

Job done.

Adrian Pollard
Adrian Pollard - ISTANEX - Turkey 28 May, 2021, 16:481 like 1 like

To the comment above, that sounds like a typical retirement fund stratagy, just let the passive investment do its thing!

But the pull of active investment and its massive gains is just too attractive.

What about Tesla, tech and especially since crypto, these passive funds invest in the most slow and low yeilding investments.

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