A question that has been considered for decades is whether it is better to invest in property or stocks. Both markets are increasing in value and have been for many years so where is the wisest place to invest your money? This article will consider the pros and cons of investment property vs. stocks.
The Pros of Real Estate
- Real estate investment is accessible to everyone. Everyone needs a home in which to live and everyone is able to gain access to a loan if they approach it sensibly. Whilst most people are not exposed to stocks and bonds as a child everyone is exposed to a plethora of different properties and buildings. This enables people to build a knowledge base over the years and gain an automatic insight into investing in property.
- It is a tangible investment. Property is something you can physically see and touch whereas stocks and bonds are not.
- It is difficult to defraud someone who is buying real estate. The buyer can turn up and see the property and can run property valuation software from home so they know the true value of the property when they buy it.
- Using debt, you can make a much larger investment than you have the means for. This enables a larger initial investment than could be managed in other forms of investment.
The Cons of Real Estate
- When compared to stocks real estate can take a lot of time to manage. If a water main bursts at midnight then it will be you who gets a phone call and you will have to deal with it straight away.
- If the property is unoccupied for any reason then it will effectively be costing you money each month. Mortgage repayments will be due regardless of whether you were able to find a tenant.
The Pros of the Stock Market
- The greatest wealth creator in the history of finance is that of stock trade. Despite occasional crashes which could see large losses, the investment and reinvestment in stocks is the single greatest creator of wealth in the world.
- Ownership of stocks and shares does not require any input from you. Once you own the stocks you are able to sit back and watch the company improve and grow along with your investment.
- You will receive cash dividends every year. Unlike the housing market which could cost you each month, dividends will provide you with cash every year.
- Stocks enable diversity of investment. Unlike a house which requires huge input all at once, stocks can be bought in small amounts when you are able to and they will still have the same effect.
- Stocks can be sold easily and rapidly. If you need cash or want to get out of your share position then it is easy to sell your stocks rapidly. Those who make the most money from stocks often buy and resell stocks within a single day.
Cons of the Stock Market
- Despite their steady growth over the years, stocks are able to crash without warning. Global financial changes can cause stocks and shares to drop in value dramatically within just a few minutes. This means that your solid investment could crash at any time leaving you without your funds.
- The price of stocks can fluctuate massively in short periods of time even when there is no financial crash. The nature of stocks means that within a day there can be huge fluctuations in the value of stocks, making it a very uncertain place in which to invest.