Which is better - Investing in Real Estate vs. Stocks?

Short Answer

Real estate is great if you’re looking to lease out the building to have a steady income. No doubt, in the long run, the land also could be sold to make a huge profit.

Stocks are quite liquid, but you can keep adding to them whenever there is a dip in the market. The selection of stocks to invest in is quite important. Both the investment criteria are feasible, but then the risk is there in both, and you should choose the ones that you understand better.

Detailed Answer

There is a common battle between real estate and equity where people believe that real estate might be better, while others believe that investing in equity seems viable. With whatever said and done, both of them go hand in hand in terms of investment required, the returns gained, and to a certain degree of tax exemptions as well. But then which one is better? Let’s find out.

Advantages of Investing in Real Estate

• Investing in real estate gives you passive income. Wherein you tend to get rent from buildings and even through other channels associated with real estate.

• There are tax advantages that come with real estate, provided there are some criteria that are fulfilled.

• The prices tend not to deviate extensively even though inflation might be on the rise. With the economy booming, you can see the prices increasing and suit the level of inflation and economic growth.

• You can use real estate as leverage in getting loans or any other trade in the market. It’s a physical asset that is completely yours.

Disadvantages of Investing in Real Estate

• The initial cost of even having a proper real estate value is quite high. You need to invest considerably and then lease it or rent it out to get any returns whatsoever.

• It gets expensive to a certain degree where you need an overhead cost, and you need to take out loans even to get the property finished getting any returns whatsoever.

• The transaction costs are high and could set you back a couple of crore of rupees to even have a sizeable piece of land.

• Appreciation of the property isn’t guaranteed. You never know when it might depreciate and yet cause a loss to the buyer.

• Land grabbing cases are quite high when you deal with prime properties. Moreover, even maintaining the land and building is on another level of maintenance.

Advantages of Investing in Stocks

• Buying stocks is quite easy and straightforward.

• It’s a liquid asset that you don’t need to have on you at all times. Its stored in your demat account throughout the holding of the stock.

• The transaction fees of selling shares is quite low and minimalistic. Its somewhere capped around 0.05% of the transaction amount.

• You do get dividends annually based on the investment. Though it might be low, it still gives you returns.

• The gains from these stocks are massively provided these are companies that have the potential to grow.

Disadvantages of Investing in Stocks

• Highly volatile. You never really know when they might depreciate, and it depends on several factors for the depreciation to kick into effect.

• Taxes are raised based on the number of shares you sell and the profits you reap from the transaction.

• It’s quite an emotional rollercoaster to invest in stocks as you see the gains and losses. Thus, your psychological instinct might arise and enable you to take drastic steps.

• Sideways movement of stocks is quite the possibility.

Investment in Real estate vs. Stocks

Real estate and stocks go hand-in-hand when it comes to investment opportunities. No doubt both of them, in the long run, provide considerable returns, but you never know when they might depreciate. Real estate does cost a lot, but in the long run, it all pays off, and you could recoup that money to pay off loans and other debts. Stocks is highly liquid, and trading it can reap you profits.

But keep in mind that the market never stays in a bull trend forever, and there are going to be losses to be made before you can make any profits.

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