Stocks and real estate are two markets which are preferred by most investors. Both options offer an investor high returns and prove valuable in the future. However, choosing one of the two depends on many factors.
Here are the pros and cons of both investment types.
Pros of Investing in Real Estate
Investing in a property means you can actually see it. You get a sense of ownership which cannot be matched with intangible assets like stocks. A house also gives the owner a sense of security since it represents a place to stay. Most people invest in real estate since they grow up listening to the importance of owning a home and are familiar with the home buying process. However, investing in stocks can be complicated if you have no knowledge about it.
- Fewer chances of fraud
Even with little market research, you can end up with a pretty good investment home. Since homes are tangible, one can look at it and check the quality of the construction. Price trends of the area are available to the public and thus a buyer can ensure an informed decision. Opting for a property which is by a reputed builder goes a long way. As for stocks, the information is provided by the auditors and based on that the decision is made.
- Source of income
Commercial or residential, you can always rent your property and thus earn income from it. The same rent can be used to pay your EMIs. Stocks do not offer regular income, even though dividends offer periodic payoffs, they are not as dependable as rental yields.
- Less Risky
There is a very low risk of property ownership and this is its biggest advantage. The value of real estate if not quick will eventually appreciate. In case you feel the property price would not appreciate, you can sell off the property.
Cons of Investing in Real Estate
Investing in a property means you will have to look and visit various property sites, do the research and the paper, and in some cases, you may need to do hire a lawyer. If you want to give property on rent you will have search for tenants. It is only wise to invest in property if you can commit so much time and effort for eventual gains.
Investing in a property means diverting a lot of funds. Not many people can make the whole payment upfront so most investors depend on loans. Thus, this adds monthly instalments to your expenditure until the loan tenure finishes. Only if you can rent it, then the EMIs can be covered by your rental yield.
Pros of investing in Stocks
- Investment Options
You will find investment opportunities in almost every sector in the economy. Thus if you invest your funds in a variety of sectors, you can be assured to perform well even if one of it fails. In case of real estate, you can only invest in a commercial or residential property.
Stocks offer high liquidity and have no hassles. As the norm goes, you can get money back in your account in 3 working days. However, real estate is not easy to liquefy. You have to find a buyer, who is ready to buy the property at your price, and then you have to go through a long process of transferring the property and receive cash.
It is very easy to buy stocks. Often, you can buy stocks for a few thousand rupees. You can control the amount of your investment in stocks but in real estate, you have to buy property at the set prices and even if you take a loan you will have to pay 20% from your own pocket.
Cons of investing in Stock market
- Prone to fluctuations
You can count the number of things that are more prone to fluctuation than the stock market. The panic that comes with stock market falling can push the investor to make faulty choices. Often stockholders pull out their stocks when the market is down, thus enabling the market to plunge further. There are no such fluctuations in real estate market.
- An expert insight
In order to succeed investors need expert knowledge of economic principles. The better the knowledge, the better their chances of success in the stock market.
People who are looking at stable investment often opt for real estate; on the contrary, people who do not have strong funds, invest little but regularly in the stock market for long-term benefits.
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