Day: November 18, 2018
It is a hot topic, to begin with since over the years several high profile individuals have had heated arguments on this matter. Whether should you invest in real estate or in the stock market is a question that keeps most investors up at night. To level the matter once and for all, it is important to get to know about each sector along with its pros and cons.
The real estate sector
The real estate sector deals with transactions where the transacted item is tangible. It plays a psychological game with the investors who feel more comfortable in investing their hard earned money on something that they can feel, literally. For decades, the real estate sector has been successfully bringing in a lot of wealth in a consistent way for millions of people worldwide. To be fair, the amount of ROI on your real estate investment depends on the location of the same.
With getting a mortgage for a property is now easier more than ever, one can invest in several properties without engaging a lot of their liquid wealth. In this way, you can increase your net worth, and generate sizeable amounts of income coming in the forms of rent from the properties.
Advantages of investing in the real estate sector
The advantages of investing in the real estate sector are many. Some of them are as follows:
depending on the location of your property and the country you live in, you can sell your property without paying taxes on capital gains given you invest the money gained on a similar real estate.
It also has its fair share of disadvantages
The real estate sector has its fair share of cons as well. To start it off, the investment is non-liquid in nature. In lucid terms, one cannot sell their property right away if they are in immediate need of some cash to attend to some emergency situation. One has to be patient enough to hold on to their property for many years to come so that they can fathom the true potential of their property and sell the same for the top dollar.
The Stock market
When you buy a stock, you are buying a small part of a public sector company. In case the company makes a profit, based on the cost and size of your share, you will be rewarded. In case the company loses money in the market, you will lose money as well. It is that simple. What drives people to invest in the stock market is the profit margin and the timeframe within which they can make a lot of money. However, similar to the real estate sector, it is best to take the balanced approach and refrain from taking big risks if you don’t have money to throw away.
Advantages of investing in the stock market
Unlike the real estate sector, the stock market is liquid and the shares you buy are easy to sell
It is flexible/scalable and can be moved to your retirement account without paying any tax till you start to withdraw funds
They are volatile and tend to crash when the market conditions are unstable
People often make emotional/irrational decisions without understanding the market conditions that often lead to losing a lot of money
Since stocks can dissolve in an instance, cases of bankruptcy are common among investors in the stock market
As mentioned at the beginning of the post, the exact answer is a bit too complicated to deliver since the decision totally depends on the investor. If the investor is willing to take a lot of risks and has a lot of liquid funds lying around they can go for stocks. If they are patient and looking for a stress-free investment that is guaranteed to give huge returns in the future, they should invest in real estate.