The Pros And Cons Of Investing In Real Estate Vs Stock Investing

Choosing the perfect investment avenue for yourself can be a strenuous experience, if you are not aware of the various options available. According to most investment experts, real estate and stocks are the best bet, when looking for a new investment. While both have their advantages, you cannot overlook the negative aspects as well. Here is a comparative analysis of property investments and stock investments-

Real Estate

The Benefits

1. Middle-Class Friendly

Real estate includes houses, apartments, hospitals, and other tangible things that middle-income and even lower- income groups are familiar with. This is in stark contrast to stocks, as the general population knows minimal about the latter. Hence, they prefer investing in property over stocks.

2. Safer Investment

Compared to stocks, which have a higher risk factor involved, property investments are relatively safer. While both real estate markets and stock markets are quite turbulent, the former has a bigger safety net. The reason being that with property investments, not much is left to chance.

The Drawbacks

1. More Research Involved

Stock investments are pretty straight forward and don’t require excessive research on the investor’s part. However, real estate investments involve a lot of hard work. From deciding on the property type to finalising on the mode of payment, there are a lot of tough calls to make.

2. Eligible For Tax Payment

Property investments are eligible for tax payments, which is not the case with stock investments. So, unless you rent out your property, you will stand to lose due to tax payments.

Stocks

The Benefits

1. Greater Profits

Most market analysts have agreed that stocks provide more profits as compared to property investments. Also, holding a stock for a long period of time has been one of the greatest wealth creators that puts stocks ahead of real estate in terms of the profit earning capacity.

2. Easier To Diversify

When you invest in the real estate market, you can only choose one property type at a time. This is not the case with the stock market, due to the availability of mutual funds. Mutual fund is a type of professionally managed investment fund that pools money from many investors to purchase securities. This gives investors a wide basket of stocks to invest in.

The Drawbacks

1. Ever Changing Price Trends

The biggest challenge for stock investments is that the stock exchange is fickle, as there is no telling when stock prices may soar or fall. While there are constant changes in the property market as well, the effects of the change are not as substantial.

2. Psychological Factor

Stock investments share some attributes with gambling. Like gambling, stocks investment also invites investors to invest more money with every gain that they make. Inevitably, this can be psychologically unhealthy.

Deciding on the type of investment depends upon a lot of factors. So, before investing your money, you must measure the advantages and disadvantages of real estate and stocks very carefully.