Stocks vs. Real Estate – 4 Ways to Decide Which Investment Type Is Best for You
Not everyone has to be content with working a nine-to-five job, hoping they will one day win the lottery for financial security. Some people decide to branch out and look for investment opportunities to benefit from a form of almost-passive income that can set you up for future success.
However, when you start exploring the different investment options, you may come to realize that it’s tricky to choose between the equally promising avenues of stocks and real estate. If you’re having a hard time deciding which to pursue first, consider the information below:
It can be challenging to compare the returns of residential and commercial real estate to stocks. The two are almost incomparable. Although, it can be worth thinking about the pros and cons of each investment option when you’re trying to decide which will provide the optimal result for you.
It may make more sense for you to invest in the stock market if you get to pair your investment with return-boosting benefits, like a 401K with contributions that your company matches.
No investment is 100% risk-free. Both real estate and stocks can experience highs and lows, both can be affected by economic recessions, and both go through periods of growth and stagnation. For this reason, it can be worth comparing the risks to see which would be more worth your time.
During economic crises and pandemics like the one we are enduring now, both real estate and stocks can be impacted, albeit in different ways. Real estate is a physical asset, which benefits many people who want to invest in something tangible.
However, as it’s physical, it’s not always easy to liquidate when you need fast cash. Property investors with rental properties must also deal with the risks involved with tenants and some of the challenges they may bring.
Although some people prefer those risks over those associated with stocks. Inflationary, economic, and market risks are part and parcel of stock investment opportunities. Prices are subject to market fluctuation, and geopolitical events can lead to volatility.
Timeframe for Gains
Most people understand that when you invest in something, you can’t expect immediate gains. However, the timeframe for appreciation should undoubtedly factor into your decision when you’re trying to determine whether to invest in stocks or real estate.
The stock market’s volatility can see it become a less desirable option for many people with cash to invest. Typically, those less put off by volatility are ready to play the long game, knowing any losses will usually be made up for by the steady progression of time.
Real estate can often produce steady gains over an extended period, sometimes with less volatility. Time the market right, and you may also be able to buy and sell residential and commercial properties with significantly higher returns than those you could earn on the stock market.
Your Investment Limitations
You may be ready to invest some of your hard-earned money, but that doesn’t mean you’ve got enough for property investment just yet. In that case, stocks may be worth your while until you can build up sufficient capital to invest in real estate down the track.
It’s not always easy deciding where to put your money to work, building a nest egg for your future. Both stocks and real estate can be sound options, but before you go ahead with either one, it’s worth weighing up the pros and cons to ensure your final choice is an informed one.