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Real Estate vs. Stocks investments: Which is a Better Option? Research Team | Posted On Thursday, December 05,2019, 05:57 PM

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Real Estate vs. Stocks investments: Which is a Better Option?



Both real estate and stocks investments are known to fetch high returns to investors. However, pitting stocks against real estate is like choosing between chocolate and ice-cream. Though we would like to have both chocolate and ice-cream at the same time, sometimes we need to make a choice between the two.

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Real Estate vs. Stocks investments: Which is a Better Option?

Similarly, real estate investments and stock investments are chosen based on various factors like investment capacity of investors, risk-appetite, cost and maintenance charges, etc. While both are among the best asset types for investments, we would discuss some pros and cons of each of these investments to help you make the right choice:

Pros of Investing in Real Estate:

Since real estate is a tangible investment, you are investing to purchase physical land or property. Most traditional investors are acquainted with the process of buying physical assets such as land, unlike stocks. For some people investing in physical assets is more satisfying psychologically. You can feel it and use it just like other commodities.

See Also: Types Of Investment Plans

Real estate investments are the most preferred choice among several people as they often grow up exposed to the concept of buying a home or a piece of land at the best investment. Mostly the average Indians citizens lack skills and tactics required for stock market investments and thus lack of knowledge results in more investment in real estates.

For most of the Indian populace, real estate investment is pretty straight-forward and are known to safeguard investors during inflation. Moreover, once a property is registered in your name you can inspect your property and also earn a rental income from it. But with stocks, you have to depend on the fund managers for the performance of your investments.

Cons of Investing in Real Estate:

Some of the cons of real estate investments are listed below:

  • When compared to stock investments, real estate purchase requires a lot of time and effort. You have to go through extensive documentation and legal work to get a property registered in your name. Also, you need to occasionally visit your property for inspection and conduct renovation.
  • Real estate investment also comes at a high cost. You have to invest money in large denomination to purchase a property. Property in metropolitan cities can cost up to a crore thus resulting in a huge investment cost.
  • Investment in real estate can cost you if your property remains unoccupied. Additionally, you have to pay taxes, maintenance charges and insurance for owning a property. You have to also consider renovating the property all of which significantly adds up as financial burden.

See Also: Best Investment Plans for 2019

Pros of Investing in Stocks:

Stocks have proved to be the best investments due to its performance and capacity to create wealth. Time and again buying stocks and investing in dividends have proven beneficial for investors when held for a long tenure.

When you invest in stocks, you actually own a part of a business. If the business fares well, you are likely to make exponential returns. So none of the asset class can give you as high returns as stocks.

Unlike property investment, you do not need to actively manage your investments; you can rely on a fund manager and get good returns on your investments. You only have to pay a fee to the fund managers to look after your portfolio. You can enjoy the profits and dividend payments without having to work aggressively towards your stock investments.

Also, stocks are far more liquid than real estate. You can sell your stocks online without any hassle during the regular market hours whereas real-estate selling requires lengthy time and extensive paperwork.

Stock investments also help you save a considerable sum of money which otherwise you have to pay as taxes, maintenance and insurance on real estate investments. Also, you can start share market investments as per your budget through the mutual fund SIP route. On the other hand, you may have to invest a huge sum of money to own a real estate or property.

See Also: Best Investment Plan For 3 years

Cons of Investing in Stocks

  • Despite the fact that stocks have consistently performed well and helped investors generate more wealth in the long-run, investors often lack discipline or withdraw investments early. This results in the loss of money because of psychological factors.
  • If you want to invest for a short tenure, you may have to experience extreme share market fluctuations. Most investors panic at such events and tend to sell their stocks to avoid loss. However, a smart investor will use this opportunity to purchase more stocks and remain invested for the long-term to gain significant benefits.

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