Investing in stocks and real estate are the two common long term investment options in India. Have you ever analysed which of these investing alternatives (stocks vs real estate) shall make you richer in the years to come? How much wealth you can accumulate by putting your money in these asset classes?
It is generally argued that investing in stocks is far better than real estate investing. Is it so actually? There isn’t really a perfect answer to this query since it depends on individual preferences and financial objectives.
Let’s take a look at some of the merits & demerits of these two popular investment choices: Investing in Stocks vs Real Estate.
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Also Read: Sensex vs Real Estate – How should you place your bet?
Investing in Stocks
Investing in Stocks gives you an ownership in the company. Stock investing has been an all-time favourite of risk taking investors who wish to grab bigger and better returns from the stock market. We all know that stock markets are subject to risks. But, as it’s said “Higher the risk, higher the returns” one can expect.
Earning dividends on shares plus adding profits through selling them at the right time, offers good sources of income.
Investing in Real Estate
Real estate, a tangible asset has generated consistent amount of wealth for the investors since decades. May it be commercial or residential, real estate investing has been favoured by people having excess money.
As an investor, the returns from real estate can vary significantly across different cities and locations in India. Apart from the home where you live, if you plan to rent out any additional property, it can offer you regular rental income with capital appreciation over a period of time.
Investing in Stocks vs Real Estate: Comparison
1. Long term Investment
Investing in stocks as well as real estate both are considered long term investment tools. Experts usually advice to stay invested for fairly longer duration in both these scenarios.
You may get a chance to earn from stocks in a relatively lesser period as compared to real estate. But, you might have to hold your property for longer years to earn its true potential, until the market rises.
2. Quick & convenient
Anybody can guess here, investing in stocks is so quick and convenient, having a small learning curve. You just require to sign up with a reputed stock broker, open demat & trading account, link it to your bank account and you get started.
Real estate investment is a lengthy procedure involving loads of paperwork and thorough analysis before striking the final deal.
3. Liquidity in Stocks vs Real Estate
Investing in stocks or equity offers high liquidity as compared to investment in real estate. You have the option to exit your stock investments online, during market hours. You also have the advantage to liquidate some and not all of your equity investments to meet your present requirements.
But, when you invest your money in real estate, you can’t take it out quickly. It won’t be feasible to sell the property immediately. You’ll have to wait for the market to flourish and look for a suitable buyer to get the desired profits.
4. Market Fluctuations
Investing in Stocks as well as real estate are prone to market fluctuations. Stocks have proven to generate higher wealth in the long run. It’s human nature to overreact in extreme situations thereby leading to impulsive stock buying/selling decisions. So, one has to be disciplined enough to build a sound investment portfolio bearing market risks.
Real estate too is not kept away from market ups and downs. You can grab a bulk of profits, lose big money here or get your money stuck, if the market is slow.
5. Diversification of Investment
Investing in stocks gives you the opportunity to diversify your investments even with smaller amounts. You can invest in stocks of different companies and equity instruments.
Whereas in real estate investment, there’s no scope of diversification and it calls up for a substantial amount of money, that too in lump sum.
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Also Read: Real Estate Investment Trusts (REITs) – Is there a future ?
Investing in Stocks vs Real Estate: A Final Verdict
Investing in stocks and real estate investment have their own set of pros and cons. To make money with either of them, it requires a planned and systematic strategy. Both, investing in stocks and real estate investment can prove to be unique in its own way.
However, when we actively compare the overall benefits and income generating capacity, investing in stocks seems to be an outright winner.
No doubt, Real Estate used to be an attractive version of making huge money till recent. But, the shine and charm it used to have earlier, is getting lost owing to heavy downfall in the market.
Psychologically, people get driven towards stocks or real estate based on their interests. But, practically you need to follow what makes you achieve your long term financial goals. Moreover, owning a property gives a personal satisfaction. But, if you already have one, you can certainly look forward to further growing your money by investing in stocks.
What are your thoughts on investing in stocks vs real estate investing? Which investment option do you prefer? We’ll be happy to know your valuable feedback on the same.
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