When looking to make an investment, most people are faced with two options: either invest in the stock market or in real estate. Both options have the potential to give you high returns on your investment and prove valuable in the future. But the best choice out of the two depends on a variety of factors. If you’re caught in a dilemma, trying to decide between buying real estate and investing in stocks, here are a few points to make your decision easier.
Advantages of Investing in Real Estate
- Tangibility of Investment
When you buy a house, you can actually see your investment materialise. The feeling of ownership when you see your property is something that cannot be matched by intangible assets like stocks. Houses are also something many people associate with security, since it represents a place they can always live in. Most people are more comfortable with buying a house because they are familiar with the process, having grown up learning about the importance of owning a house. Investing in stocks can be a more complicated process for those uninitiated in the stock market.
- Easier to Prevent Fraud
Even for first-time home buyers, it is very difficult to make a bad property investment if they have done their research. Because houses are tangible, people can inspect the home for themselves to check the quality of construction. Price trends in the area are also publicly available and ensures buyers have all the information required to make an informed decision. Choosing a property developer with a good track record also goes a long way in preventing any hassles. When investing in stocks, most people need to depend on information provided by auditors, so they could make a bad investment.
- Can Provide a Second Income
When you buy a house, you always have the option of renting it out. This way, you can earn a second income through rent. The monthly rent can also be used towards paying back your home loan. Stocks, on the other hand, don’t provide a regular flow of income. While dividends do provide periodic payoffs, they aren’t as reliable as a rental income.
- Low-Risk Investment
One of the biggest plus points of investing in real estate is that it comes with a very low risk. The current property market is growing very quickly, so the value of your real estate is almost certain to appreciate. This is one of the reasons to never delay a property investment. Even if it doesn’t look like it will increase in value, you can sell your property at the soonest. By contrast, stocks are very risky because the stock market is constantly fluctuating.
Drawbacks in Real Estate
- More Commitment Required
Compared to investing in stocks, real estate requires more hands-on work. It requires you to visit your property, go through a lot of paperwork and sometimes even hire a lawyer. After the construction is over, you might need to search for tenants as well. However, despite the extra work, the pay-off for real estate investments in the long run often makes it worth it.
- Can Require More Funds
Investing in real estate often costs more than investing in stocks. Very few people have the funds to pay the entire amount upfront, leading most to apply for home loans. This means you will have to pay monthly instalments until your loan tenure is completed. However, if you choose to rent out your house, the rental income is often sufficient to cover the EMI amount. The profit from real estate investments are also significantly higher than other forms of investment. By choosing a credible builder like Lancor, you can find beautiful apartments with a high price appreciation.
Advantages of Investing in Stocks
- More Investment Options
The stock market allows you a variety of options to choose from, spread across almost every sector in the economy. This means that if you buy stocks wisely in a variety of sectors, then you can be assured of the others performing well even if one fails. In the case of real estate, however, you are restricted to only two types of investment: residential and commercial.
- Easy Liquidity
Converting stocks into liquid assets is very simple and involves no major hassles. In general, you can receive the money back into your account within just three working days. Real estate, on the other hand, can take a lot more time to liquify. First, you need to find a buyer who is interested in your property at the price you want to sell it. After that, you need to go through a long process to transfer the property and receive the total value in cash.
- Requires Less Funds
Stocks are available at a much lower cost than real estate. Often you can buy stocks for a few thousand rupees. The value of the stocks you invest in depends upon your personal finances. Real estate is a lot more expensive, putting it out of the reach of some people. Even with a home loan, you are required to pay 20% of the total property value out of your own pocket.
Drawbacks of Investing in Stocks
- The Market is Prone to Fluctuations
Few things are more volatile than the stock market. The panic which comes when there’s a stock market crash can also push investors to make faulty decisions. Many times, stockholders pull out their stocks when the market is down, making it fall even further. In fact, this is the exact opposite of what they should be doing. Real estate is largely safe from these unpredictable fluctuations.
- Requires Expert Economic Insight
Individuals who are investing in the stock market require insightful knowledge of economic principles in order to succeed. Only with a good knowledge base can they understand market fluctuations and know when it is the best time to invest or pull out.
These factors will help you decide if investing in real estate or the stock market is the most appropriate decision for you. For people who are looking for a stable investment with almost guaranteed returns, real estate is often the best option. If you plan on investing in a home, visit Lancor for the best homes in your city. Our projects are situated in prime localities, ensuring you a high return on your investment.