If you have found yourself in the puzzle of choosing which type of investment is better for you, stocks, or real estate, the bad news isn’t a simple answer. The good news is that many experts have invested in each of them who came up with the pros and cons of both types of investments. Here is the most compelling information, as well as the benefits and drawbacks of investing in real estate vs. investing in stocks.
Stocks vs. Real estate, or an Overview
When you invest in real estate, you are buying physical property or land. Some of these objects usually cost you money for every month you own it, such as taxes and maintenance, unless you have tenants that can cover the costs. If you have tenants, this means your property is generating cash, and you have a cash flow.
On the other hand, when you invest in stocks, you are buying into a company. How big of a portion you own will depend on the number of shares you buy. If the value of the company’s shares grows, so will the value of your stock, and you will get your cash dividends.
Benefits of Real Estate Investments
Some of the “pros” of investing in real estate are the aforementioned cash flow, fewer chances of being defrauded, and the overall comfort. When we talk about cash flow, it’s worth noting that the rent you collect from real estate can provide steady and reliable cash flow every month. In addition to this, many real estate investments only improve the cash flow in the long run or when you decide to sell them. Another benefit of investing in real estate is that it’s very difficult to be defrauded because you can physically show up to inspect your property and make sure that the building is there before you buy it.
Cons of Real Estate Investments
As with any other investment, real estate investment has some possible downfalls. One of the biggest obstacles is that investing in real estate takes a lot of time and effort. When compared to stock investments, real estate requires a lot of hands-on work. In other words, you have to be physically present to fix any damages to your property. Now you might be thinking that if you hire someone to do this job for you (a property manager), as well as to manage your investments, you will still need to meet with them occasionally and to oversee the property itself.
Benefits of Investing in Stocks
Investing in stocks has many benefits, but it also comes with a few drawbacks. As the experts at TheStockDork.com suggest, investing in stocks has been responsible for the greatest wealth ever created in history. There is nothing in terms of other asset classes that beats owning a business. Additional benefits come from the fact that this kind of investment requires minimal work. As opposed to running your own business, owning a part of another business doesn’t require any work on your behalf. You only have to research each company beforehand to determine if it looks like a promising investment.
Cons of Stock Investments
One of the first cons of stock investments that turns many investors away is the short-term volatility. It’s well established by now that the price of stocks can extremely fluctuate in a very short period. However, this can still be used to your advantage if you know why you own shares of a particular company. You can use the opportunity to buy more shares if you consider the price to be too low or sell them if you think the stocks are too expensive. Another downfall of stock investments is the stagnation period. This means that some companies you invested in don’t have the room for growth, so their value won’t go up any time soon.
Choosing between investing between stocks or real estate can be a daunting task. Each of them comes with many benefits on their own, but also with some serious downfalls. However, both can provide you with some serious long-term financial gain. If you’re deciding how to choose the best investment strategy for yourself, one of the ways you can make this decision easier is to put it all on paper and weigh in which one is the most worth it. See which type of investment has the most advantage of the potential gains while having the least amount of risk you are willing to take at the given time.
Whichever type of investment you decide to go for, either stocks or real estate, be sure to remember all the possible pitfalls each of them has. If you remain undecided, you can slowly start to invest in both to see which type suits you the most.