Which are Better Long-Term Investments — Properties or Stocks?

1. Real Estate vs Stocks

Real Estate or stocks, choosing your investment instrument can be a matter of personal choice depending on your investment goals, risk tolerance levels and most importantly your pocketbook. Most of the investors usually invest in stocks because buying stocks is usually an easy and quick process when compared to real estate. Investing in real estate properties requires huge and substantial amount of investment amount and paperwork.

On the other hand, investing in real estate involves owning a physical land or property. Owning real estate involves recurring charges in the form of taxes and maintenance amounts until there is some development. There can be cash-generating properties too which are usually in the form of flats, commercial shops, house which you can lend out to generate income in the form of rental amount.

Both stocks and real estate have drawbacks as well as benefits. Let’s discuss them in detail:

2. Pros of Investing in Real Estate

The investors investing in Real Estate enjoy leverage on their invested capital and are beneficiary of substantial tax benefits. Investing in Realty can be considered as a familiar investment, especially for the lower and middle class because those investors have grown with it.
Real Estate can provide a steady passive income in the form of rent on a month to month basis. Properties which are developed already like commercial shops, flats, homes etc. could be easily rented out to generate a reliable cash flow.

Also, real estate investments provide a super inflation hedge to protect you. Also, using loans and debts in real estate are far safer than buying stocks on margin.

3. Cons of Investing in Real Estate

Investments in real estate are characterized by huge capital requirements and lot of hands on work. It takes lifetime for individuals to finally afford a home. And, for obvious reasons your first home cannot be considered as an investment. Any other property which you own apart from you residential one is your investment.

If you plan to rent out your property, the same can be very hectic. You must search for appropriate tenants, get the background checks, provide appropriate resolution to maintenance problems. Moreover, there will be recurring expenses in the form of maintenance, utilities and taxes. If your property is vacant for a while, all these expenses can lead to loss of money month on month. The liquidity in case of investments in real estate is also on the lower side.

4. Pros of Investing in Stocks

It is a well known fact that nothing beats business ownership in terms of asset class. Buying a share or stock, in other terms is buying a piece of a company. Investing in stocks for long term is one of the greatest wealth creating instruments.

Investing in stocks is pretty easy and does not require huge capital. You can start investing in stocks with minimal amounts. The liquidity in case of stocks is high, as you can sell off your shares within seconds if you ever face a cash crunch. Investing in research based stocks, with a service like Market Neuron, which provides a portfolio of stocks which are selected based on certain strategy or theme, not only increase their profits but also provide passive income in the form of dividends, which means that the growth of the company will provide you monetary benefits. 

5. Cons of Investing in Stocks

The stock markets are highly volatile and there are huge fluctuations in the prices on a daily basis. Undisciplined investors who turn out to be emotional while investing end up loosing money because human emotions conquer the decision-making process.
Investing in stocks requires knowledge and experience. Picking up the wrong stocks for investment can lead to loss of substantial capital. Investing in companies which do not have any space for growth or innovation is one of the prominent factors for limited or no profits in the markets.

Investing in both stock market and real estate can provide you long term financial gains. On the other hand, none of the two can be considered as a risk-free instrument. It is necessary to diversify your investments as much as possible in order to hedge against the incurred risks while benefiting from the long-term financial gains.