Real Estate vs Stocks : What's the Difference?
The debate between real estate and stocks goes a long way, but a lot of your success depends on how you view life in general. Investing in the stock market and real estate is fundamentally different, but your performance depends largely on your strategy and timing.
Real estate investing is the actual purchase of land or property, not just a financial transaction. Investing in stocks is another matter entirely. When you buy stock in a company, you acquire ownership of a portion of the company itself.
Each type of investment has different risks. Owning real estate comes with monthly expenses such as repairs, maintenance and even development. On the other hand, hard assets lose less value than stocks.
What is it like to invest in stocks?
Aside from doing basic research to choose stocks to buy, stock trading doesn't require much effort on your part. Stocks are basically nothing more than abstract legal names that serve as a claim on a company's future profits (and possible dividends).
As a non-employee, you have no say in the day-to-day running of the company (shareholders vote on management, such as voting members of the board of directors). Investing in stocks, on the other hand, is easier, but you're still free to listen to other people's business knowledge.
On the other hand, real estate is a long-term investment. Stocks can be bought and sold faster than real estate can be listed and sold. You can borrow for both investments, but it is more convenient to borrow against stocks.
What is it like to invest in real estate?
Real estate investments are more attractive to many investors because they are tangible. They can inspect and touch your property in person. Also, as a property owner, you have complete control over the value and purpose of your investment compared to a typical stock trader.
Real estate investments are divided into two basic types, commercial and residential. All single-family homes, one to four-family homes, include care in homeownership. Real estate development, real estate transactions, and land leasing are all common investment strategies.
Investing in commercial real estate is for profit, so its initial cost is usually higher than residential real estate. Commercial real estate includes rental properties with five or more family units. For the vast majority of commercial real estate owners, leasing of office and retail space is the main source of income.
The Bottom Line
Investing in stocks is widely regarded as the most acceptable long-term wealth-building strategy. However, real estate tends to be less subject to unpredictable movements than the stock market. Ultimately, when it comes to the real estate vs. stocks debate, it's limited to everyone choosing based on their own interests.