Historically, the stock market has been among the most popular places for investors to invest their money as an investment vehicle. However, while stocks are a well-known investment option, few people take advantage of investing in real estate.
It is true that real estate can be a good alternative to stocks. Under the right circumstances, it is a low-risk investment that yields better returns and provides greater diversification than stocks.
The real estate market and the stock market both have their unique strengths and weaknesses and are unique in their own way. Both of these investments carry advantages, disadvantages, and risks. Their key differences complement each other perfectly, making a combined portfolio of stocks and real estate both robust and well-rounded.
Table of Contents
Stocks vs. Real Estate: What’s the Difference?
There is no single best investment style when it comes to investing in real estate or stocks, as each investor’s circumstances, risk tolerance, and investment goals play a role in their decision.
Since buying stocks does not take as much time or money as it did in the past, it’s no surprise that more people are investing in the stock market today. On the other hand, real estate is something that will require a substantial deposit and some form of saving when you decide to buy it.
There is also the benefit of diversification associated with real estate investment trusts (REITs). It is the real estate investors’ responsibility to be accountable for the properties they purchase, as they own something tangible.
When deciding whether to invest in stocks or buy real estate as an investment, there are many factors that an investor should consider before making a decision.
Benefits of Investing in Stocks
In order to make the right decision before buying stock shares, you should be aware of some significant advantages. Before investing, it’s essential to know the difference to make an informed decision.
Historically Strong Returns
Stock returns have usually been around 10% per year in the United States for the past century or so. Especially for a fully passive asset class, that’s not a bad return. It is true that “average” does not necessarily mean “typical.” Stocks have been known to soar 30% one year, crash 25% the next, then rebound 35% the next.
Investors often lose money when they make emotional investing decisions on the stock market because of the wild ride they take. With enough time and patience, you can always beat stock indexes by leaving your stocks alone and practicing dollar-cost averaging.
Stocks Are Highly Liquid
A stock can be converted to cash very quickly since it is extremely liquid. If you wish to access the funds in your brokerage account directly or by transferring the funds from your brokerage account to your checking account, you can do so either way.
It is true that it can often be difficult to secure investment money in real estate for long periods of time, but it is possible to purchase or sell the shares of a public company as soon as you decide it’s not a good time to invest. You also have access to information about the value of your investment at any given time, unlike real estate.
In the real estate market, most people do not have enough time to buy enough properties to cover a sufficiently wide range of locations or industries to be able to say they have diversified their portfolio.
The advantage of stocks is that you can build a wide portfolio of companies and industries without spending much time or money on them.
Unlike traditional advisors, Robo-advisors provide automatic stock investing and automate every step of the investment process for you. Keeping track of your brokerage account’s transactions can be automated using recurring transfers.
Using the appropriate asset mix for you, the Robo-advisor invests your money automatically. You don’t even have to lift a finger – it reinvests your dividends for you automatically.
As a result, you don’t have to worry about your investments after the initial setup, leaving you free to focus on your career and your personal life.
Benefits of Investing in Real Estate
There are two broad categories of traditional real estate investments: residential properties, such as your home, and commercial properties, including apartment and office buildings. In this economy, real estate is one of the most popular investments due to its tangible attributes and the ability to be controlled, but that’s not the only advantage of investing in real estate.
A Solid Passive Income
Inherently, real estate is an income-oriented asset, as opposed to stocks, which usually appreciate over time. A real estate property has intrinsic value, unlike a business, which grows out of nothing to earn profits.
The investment properties can either be rented out to long-term tenants or to holidaymakers on a short-term basis. It is passive income, meaning the asset is used from day one to day one, without any effort on the part of the investors.
The ROI on any given property can be accurately predicted, regardless of whether you are flipping houses or investing in income properties. Knowing what you’re doing is the key. It is possible to forecast expenses with precision if you know the sale price, the after-repair value, and the rental income in the market.
Expense forecasting becomes more accurate with experience. It is possible to avoid making a bad investment once you know how to do it reliably.
Protection Against Inflation
Due to the fact that home values and rents increase with inflation, real estate ownership is generally considered a hedge against inflation. Buying them with any currency, or buying them at any level, has no effect on their value because they have inherent value. Payment will be made in accordance with the currency’s value, which adjusts in accordance with the true value.
Which Investment Is Right For You?
Are REITs a good investment? It might be worthwhile to consider a REIT if you want to invest in real estate but don’t want to manage and own properties yourself.
There are risks and rewards associated with both real estate and stocks. People who regularly contribute to tax-advantaged retirement accounts often focus on investing in the stock market as a retirement investment vehicle.
The best way to reduce investors’ risk is to diversify their portfolios. Stocks and real estate are two popular investments for many investors.
Real estate investments have been popular among investors for decades – now, you can profit from it too. A diversified and consistent portfolio of real estate assets is offered by Saint Investment. Get in touch with us!
President of Saint Investment Group
Nic is a two decade seasoned expert in investing and capital raising, specializing in Real Estate and debt markets. With Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications for investors.