JLM Blog | Investment Comparison: Real Estate vs StocksReal Estate News, Updates, and Tips
Multifamily Real Estate San Diego
Article published on July 15, 2022.
In this article, we’ll compare the two most popular types of investments: real estate and stocks. While each has its advantages and disadvantages, we’ll attempt to determine which is better for you and your goals.
Why Buy Real Estate?
The answer is simple: Real estate is a tangible asset.
Real estate offers you the ability to build wealth, provide for your family and pass on wealth for generations. In addition, real estate can be a good hedge against inflation and deflation and a stock market crash or currency crisis.
Why Buy Stocks
Buying stocks is an excellent way to diversify.
You’re buying into companies, and if you spread your money across enough different companies in different industries, you can reduce risk by not betting all your chips on one or two industries that might be hit hard by factors beyond their control (like a downturn in the economy). That makes sense—it’s like having a portfolio of stocks instead of just one stock.
Buying good companies through their stocks is also an excellent way to build wealth over time.
Stock prices generally increase over time thanks to companies’ high demand for products and services. The longer you own your shares of ownership, the greater chance you have at building wealth over time as long as no catastrophic events affect any part of the business model or operations of that company—and there aren’t too many of those!
Pros and Cons of Real Estate Investments
If you’re looking to invest, real estate is a wise choice. Here are some of the main pros and cons of investing in real estate:
As a real estate investor, you can build equity. You’ll be able to see your money grow at a much higher rate than it would in any other investment vehicle.
You’ll get tax benefits. Since most people have been taught to avoid debt like the plague regarding their personal finances, many investors still don’t realize that real estate investments can offer tax advantages that other types of investments cannot (e.g., depreciation).
In fact, according to Fidelity Investments’ 2018 report on home affordability and ownership costs across America’s largest cities—which includes New York City; San Francisco; Washington DC; Los Angeles; Chicago; Boston; Philadelphia—the average home costs roughly $300 per square foot while rent averages around $2 per square foot month-to-month (and this doesn’t even include monthly utilities). So if someone were willing/able to pay $2 per month for an apartment worth $300, then why wouldn’t they want instead own something worth ten times as much.
Pros and Cons of Stocks Investments
If you’re looking for a long-term investment, stocks are the way to go.
If you’re willing to invest for the long term and can weather negative returns for a few years, stocks are an option worth considering. Stocks offer higher potential returns than real estate, although they also have a much higher risk profile.
Stocks can be volatile and risky, but they can also be very profitable if you pick the right ones at the right time. Suppose you have some knowledge about investing and financial markets. In that case, it’s possible that buying stocks could end up being a better choice than buying real estate in terms of your net wealth over time (although this will depend on how much risk tolerance you’ve got). In addition to this benefit, however; there are some other benefits associated with owning stocks as opposed to owning property:
You don’t need any money upfront to purchase stock shares; all that’s required of you is paying commission fees which usually cost less than 1% of the total value per transaction (depending on your service provider).
The Real Estate Market Explained
Real estate is one of the most important investments you can make. While stocks and bonds are also great long-term investments, real estate offers something that neither of these other investments does: a tangible asset. You can see, touch, and live in or rent it out for income generation.
Real estate is a long-term investment because you don’t typically sell your home every year like you would with stocks or bonds. Real estate also tends to appreciate over time as land values rise due to inflation and population growth—a trend that’s expected to continue despite economic fluctuations here on
Real estate is a passive investment because once you’ve purchased property (either directly or through a REIT), there’s very little work required after that point unless you need repairs done on your property or wish to rent it out for additional income generation purposes–but even then, those tasks are more straightforward than managing stocks and bonds day-to-day!
Both options are a great way to diversify your investment portfolio. It really depends on your risk management and other factors to decide which option to take.
Do you want to sell or acquire property?
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