Deciding whether to invest in stocks or real estate requires being honest about your risk tolerance and lifestyle preferences. Both investment strategies have their advantages and disadvantages, so it really comes down to your financial goals and budget.
Investing in real estate means you acquire a physical piece of property. Regardless of the type of real estate investment you make, most investors make returns on monthly rental income and/or when they sell the property on account of it being an appreciating asset.
Real Estate vs. Stocks
On the other hand, when you buy shares of stock, you purchase a piece of a company. As the company’s value grows, your stock value also grows. You can also receive income in the form of dividends on your shares if you hold onto your stocks over time.
Real Estate vs. Stocks
To buy stocks, you will have to go through a online discount broker, or an entity authorized to buy stocks. You can use a brokerage firm, individual broker, and even online platforms or robo-advisors to learn how to invest money in stocks.
Stocks
- Stocks are liquid. With real estate, your money could be tied up for many years until you decide to sell. In the stock market, however, you can buy and sell public company shares at a moment’s notice. - Proven track record of success. Despite the many stock market crashes, buying stocks, reinvesting the dividends and holding for long periods of time has proven to be the greatest wealth generator in history.
Stock Investing Advantages
- An emotional rollercoaster. Investing in the stock market requires a cool head and discipline. - Short-term volatility. If you’re looking to make money fast, then stock price volatility could work for or against you. - Capital gains taxes. You may have to pay capital gains taxes after you sell your stocks, and your dividends could also be taxed.
Stock Investing Disadvantages
There are numerous ways to invest in real estate, from long-term and short-term rental properties to fixer uppers and house hacking. Understanding your budget, finding the right lender and knowing the amount of work you want to put into your investment ahead of time will help tremendously.
Real Estate
- A hedge against market volatility. Owning property can serve as a hedge against stock market volatility and inflation, as home values and rent prices tend to appreciate with inflation. - Tax advantages. There are a plethora of tax advantages for homeowners and commercial real estate owners.
Real Estate Advantages