Traditionally Real Estate purchases have been considered primarily only for personal use. However, buying a house, a shop, or an office, generally, it is related to a sign of settling down in life. Millennials today are more and more turning to the allure of real estate as an investment opportunity. On the other hand, irrespective the volatility, online stock investing is proving to be one of the lucrative investment medium as it has shown potential to beat inflation. Many of you would already be investing in stocks. Let us compare stocks vs real estate and how they fit in your overall investment strategy.
How to choose between Stocks and Real Estate?
Before choosing between stocks vs real estate, you need to chart out your financial goals and the time frame, along with the quantum of money you will need.
Some life goals that individuals need to plan for are –
• Higher Education 📚
• Marriage Expenses 👰
• Vacations 🏖️
• Family Expenses 👪
• Children’s Welfare 🧒
• Medical Emergencies 🏥
• Retirement Planning 👴👵
So once you have sorted out your life goals, you can plan the amount to invest periodically and the medium in which to invest in this case either stocks or real-estate.
Stocks vs Real Estate – The Difference of Investing
1. In stocks, you can keep investing gradually and even with small sums. Real estate generally requires a more significant investment unless you invest in REITs.
2. Stock prices can be highly volatile. In contrast, real estate prices do not fluctuate too wildly.
3. Stocks can be high risk. Real estate is a relatively low-risk investment.
4. You can liquidate your stock holdings quickly and comfortably. Real estate investments are generally illiquid.
5. Picking the right long term stocks can result in a steady dividend income. Similarly, a suitable real estate property yields regular returns in rent payments.
6. Stocks can be added regularly to your portfolio, especially in this age of online investing. Real estate requires physical attention to details and payment modes.
7. Getting loans against stocks is a simple process. For loans against property, the process is more tedious.
8. Stocks, once bought, do not require any additional amount towards their continuance in holding, except for nominal DP charges. Real estate needs regular expenses towards repairs and maintenance.
9. With stocks, you own a part of a company managed and run by someone else. Real estate properties are mostly under your control.
10. Transaction cost while buying or selling stocks is reasonable. Real estate dealings entail a higher transaction cost.
A pivotal point to consider is that real estate prices have just managed to beat inflation in the economy throughout history. Whereas traditionally, the stock market has seen more cyclic ups and downs, although it has also delivered better overall returns in the long run.
There are plenty of opportunities available while investing in stocks or real estate. You should thoroughly analyse your needs and invest while keeping the above factors in mind.
You can also read – Renting vs Buying – Buy or Rent a House in India?
Here are some more helpful reads from investing to personal finance lessons, these small pieces of financial wisdom will help you with managing your finances.
Use our financial calculators to chart your life goals like marriage, buying a new house, education, retirement planning and more.
Happy Investing 😇