Blogs
What's New Trending
-
- July 31, 2021
- Real-estate
- (0)
- 02 mins
Reasons to Invest in Real Estate vs. Stocks
Should you invest in real estate or stocks—or both?
While stocks are a well-known investment option, not everyone knows that buying real estate is also considered an investment. Under the right circumstances, real estate can be an alternative to stocks, offering lower risk, yielding better returns, and providing greater diversification.
Whether it’s planning for retirement, saving for a college fund, or earning residual income, individuals need an investment strategy that fits their budget and needs. Comparing an investment in real estate to buying stocks is a good place to start.
Key Takeaways
- The decision to invest in real estate or stocks is a personal choice that depends on your financial situation, risk tolerance, goals, and investment style.
- Real estate and stocks have different risks and opportunities.
- Real estate is not as liquid as stocks and tends to require more money and time. But it does provide a passive income stream and the potential for substantial appreciation.
- Stocks are subject to market, economic, and inflationary risks, but don’t require a big cash injection, and they generally can be easily bought and sold.
Real Estate vs. Stocks
Investing in real estate or stocks is a personal choice that depends on your financial situation, risk tolerance, goals, and investment style. It’s safe to assume that more people invest in the stock market, perhaps because it doesn’t take as much time or money to buy stocks. If you’re buying real estate, you’re going to have to save and put down a substantial amount of money.
When you buy stocks, you buy a tiny piece of that company. In general, you can make money two ways with stocks: value appreciation as the company’s stock increases and dividends.
When you buy real estate, you acquire physical land or property. Most real estate investors make money by collecting rents (which can provide a steady income stream) and through appreciation, as the property’s value goes up. Also, since real estate can be leveraged, it’s possible to expand your holdings even if you can’t afford to pay cash outright.
For many prospective investors, real estate is appealing because it is a tangible asset that can be controlled, with the added benefit of diversification. Real estate investors who buy property own something concrete for which they can be accountable. Note that real estate investment trusts (REITs) are a way to invest in real estate and are bought and sold like stocks.
There are a number of considerations for investors when choosing between investing in stocks or buying real estate as an investment.
The Bottom Line
Real estate and stocks both present risks and rewards. Investing in the stock market gets a lot of attention as a retirement investment vehicle. However, diversification is important, especially when saving for the long term.
Investors should opt for a variety of asset classes or sectors to reduce their risk. Investing in real estate is an ideal way to diversify your investment portfolio, reduce risks, and maximize returns. Keep in mind that many investors put money into both the stock market and real estate.
