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Real Estate Investment Vs. Stocks Market, Which Is The Better Investment?

It is possible to build wealth by trading stocks as it is equally likely to achieve the same by investing in the real estate market. Therefore, the tr

It is possible to build wealth by trading stocks as it is equally likely to achieve the same by investing in the real estate market. Therefore, the truth of the matter is that the specifics of each investment option govern if one is better than the other.

The Real Estate Option

In this kind of investment, you are dealing with land or property. Keep in mind that some real estate investments cost you money in the form of monthly taxes and maintenance costs as is the case with vacant land purchase with the hopes of selling it later for a profit.  Others are cast generating ventures as is the case with the construction of rental structures such as a mall or even residential buildings or also offering real estate management services.

The pros or real estate vs. the cons

  • The bright side, investing in real estate will see you invest in something that is tangible and will a low risk of being defrauded. And leveraging debt to grow the investment is far safer compared to doing the same for the stock investments. Moreover, it presents a remarkable inflation hedge protecting you against the loss associated with the dwindling purchase power of the country’s currency.
  • On the flip side, it is an investment that demands a hand-on approached compared to stocks trading. Moreover, the value increases that many real estate investors eye to profit from is never as high as they expected because it is subject to inflation-adjustment terms.

The Stocks Option

The game here is more or less about buying and selling shares (stocks); that means you are investing in a company (becoming part-owner). Purchasing shares of a company mean that you are buying a piece of the business and thus are entitled to a cut of their profits. That also means that you share in their losses. As a shareholder, you have a say in the decision making and management of the benefits to be paid out as dividends and to be reinvested in the company for expansion of the business.

The pros investing in stocks vs. the cons

  • Stocks trading has, for over a century, been one of the most significant wealth creators in the world. Individuals have bought shares in a small, budding business as well as a “tanking” company and gone to rip huge profits when these ventures become successful entities in the global commerce market. Investment diversification is far easier compared to real estate investment. Moreover, stocks are more liquid, and it is easier to borrow against them than real estate investments.
  • The weight (monetary value) of the stocks (shares) is subject to the growth and success of the company you invest in; if it is growing and being successful, its stocks also gain value-wise, and the opposite is evident if the company tanks. The extreme fluctuations in the prices of shares in the short-term pose an undeniable risk of losses as is for profits hence the need to consider the quality of the stocks before investing.

The Verdict

In both options, you will have trade-offs between risks and returns meaning you can make a lot of money or lose your investment capital. Also, either can be a source of income where you can get money from real estate investment via rental income and from stocks investments in the form of monthly dividends.

So, is one, better than the other? It all boils down to your patience, willingness to have a hands-off or hands-on role in the investment, your appetite for risk and profit, as well as your goals and circumstances.