This is a very common doubt among investors. The investors are often found confused in selecting one instrument between the real estate and stocks. Well, both have advantages and disadvantages and some features which make them unique in their own way. To make a better investment decision, you need to know the positives and negatives of both. Let’s understand both the investment instruments well before we take any decision.
Real estate is the most preferred invest instrument of Indians from ages. A real estate is a tangible good, therefore, many investors feel good about investing in real estate. Millions of people are earning a sizable return on real estate investment. If the location of the property is good, the returns are sure to increase. A real estate property can be commercial or residential. If the property is purchased with a property loan, generally in buyer pays 20% of the property price in down payment while the rest is paid in EMIs.
Advantages of Real Estate
Investing in real estate has many advantages which include the appreciation of price over the year. The property loan is one of the cheapest loans. One can enjoy a tax rebate on the property loan. The investor can use the property to avail easy and less expensive loans in future. The sense of security and emotional attachment makes people invest in real estate.
Disadvantages of the Real Estate
There are times when the property price appreciation may not be as much as you were expecting. If your property is a residential property, your property may not get the equal value of a property which is newly constructed. The reason behind is the newly launched designs of the house. The old designed house will not be as high priced as a modern house of the time.
The investment in stocks become your regular source of income. The stock market has an average annual rate of return of 10.31 per cent from 1970 to 2018. When you buy stock, you become a partial owner of a company. As the company will grow, your stocks will see a great increment but at the times of economic challenge, you may find diminishing funds. It means your profit and loss is directly connected to the performance of the company. Though there are chances of raise and fall, studies say that in the long term, your net worth will be greater if you invest in stocks over the real state.
Advantages of Stock
Stocks are liquid. Unlike an investment in real estate, you can withdraw your investment in better terms. The returns take less time to get accumulated. One can even get a good return even within a year which is near to impossible if you invest in real stock. If you invest in small-cap companies, the chances of returns become much higher. Such scenarios are not unusual when companies acquire 20 per cent or even 50 per cent growth in one year.
Disadvantages of Stocks
The volatility of the stocks makes one earn profit in investing in stocks within a short period. But sadly, the same volatility can make your investment get depreciated. If the company where you have invested do not perform well, your hard earned money will not be able to earn any more money. In the worst condition, your investment may get vanished soon. So one has to be very cautious while choosing the company for buying stocks.
The taxation of your return is the next thing to worry while investing in stocks. Though you will have liquidity, at the time of withdrawing your investment, a quite big chunk of your returns will go in paying taxes.
The Last Lines
As we have seen, both real estate and stock investment has pros and cons. Real estate investment gives you a sense of security while the stock investment has the potentiality of giving high profit in less time. The ideal type of investment portfolio will be a mixed bag of investment instruments. When you have both, you will have the potential to earn a good profit while a part of your investment will be secured in real estate investment.