Real estate or stocks? Which one provides better returns on investment (ROI)? Is one safer than the other? Regardless of the pressure that everyone is under to earn more and save more money, Investing is something that all of us should be involved in. Fortunately, we are living in an incredibly innovative and exciting time when it comes to investing. There has been a proliferation of new ideas and opportunities never seen before providing investors more options than ever for multiple income streams. Two of the most popular forms of investing that many people choose from: real estate investments and stocks, share some things in common but also have some distinct differences. The choice that you make ultimately depends on what type of investor you are; however, as they say – timing is everything!
Throughout the year 2021, the real estate and stock markets performed admirably. After the global pandemic took its toll on international markets in 2020, they rebounded to post-record highs, providing investors with significant earnings. The most important question to ask when deciding between a stock investment or real estate option is – what do you want? Looking at the long-term financial picture of both will give you an idea of how expensive it might be over time to hold on your assets, but that’s only half the story. If you have the right goals set in place, there are certain elements present with each option that will help you achieve them faster.
What is Real Estate Investment?
Instead of using a property as a principal residence, real estate investing refers to buying a property as an investment to generate a passive income. This can be defined as any land, building, infrastructure, or other tangible property that is usually immovable but transferable. When done right (humble brag – we have helped hundreds of investors avoid expensive mistakes with our step-by-step process saving thousands and generating record returns)
A house, an office building, agricultural land, commercial land, and so on are all examples of real estate. It is widely believed to be a secured investment option.
Investing in real estate can take a variety of forms. You can consciously invest by purchasing and flipping a property, renting out rental properties, and establishing land for residential or commercial purposes. Purchase shares of a real estate investment trust (REIT) or join a joint-venture team to invest passively.
Pros of Real Estate Investing:
There are many reasons why real estate such a great investment is. We may be a bit biased, but when you live and breathe life-changing opportunities every day, it’s hard to ignore the sheer potential of what real estate investments can bring. To begin, you can generate constant passive income with the right investment strategy. Investing in real estate is a great starting point and it comes with several tax advantages.
For many savvy investors the most appealing aspect of real estate investing is that it can be done with little capital. In many cases, a 5% down payment is all that is required to purchase a home.
If you have been watching the real estate markets carefully especially in Ontario, the value appreciation has been phenomenal. Along with positive cash flow the sheer increase in property value has made real estate investing almost a no-brainer.
With Real estate investing there is something for everybody, irrespective of where you find yourself in the spectrum of…
- A lot of investable Money / Little Time to spend / Hands-off Investor
- Not a lot of Money / Little Spare Time / Hands-off Investor
- Lots of investable money / Lots of time / Hands-on Investor
- Not a lot of Money / Lots of Time / Hands-on Investor
As you look at these scenarios, you can see there are many, many ways to get started in real estate investing. The options listed above are so much more than that. If you walk away with nothing else, remember this: no matter where you are in life, how much money you have saved up, or what your interest level is, there is a way for you to get profitable investments with the real estate investing game.
The challenges of Real Estate Investing:
Although there are multiple benefits to investing in real estate, there are some disadvantages you should be made aware of before you decide to pursue such a venture. Since buying property is a big decision that will take more than any one person’s input to decide on how much money to invest which properties and how many properties, it’s imperative that you get as much input as possible on this decision.
Having a mentor or coach is a good first step to save yourself a lot of heart aches and crippling loses. A good mentor can help you avoid landmines and provide the required support to help you springboard to bigger, better real estate investments.
What is Stock Market Investment?
The stock market pertains to a group of exchanges and other venues where shares of publicly traded companies can be bought, sold, and issued. Such financial transactions are carried out on institutionalized formal exchanges (physical or electronic) or over-the-counter (OTC) markets that are governed by a set of rules and regulations.
It is the main market where companies raise capital by selling shares to the public in an initial public offering (IPO). Investing in the stock market enables you to purchase a share of a company. You could indeed invest in a variety of industries due to easy access available to thousands of publicly listed firms.
Pros of Investing in Stocks:
Stocks have the benefit of being strongly liquid assets, which indicates they can be quickly converted into cash without dropping much of their value. It also has growth potential and capital appreciation, which can benefit both short and long-term investors.
Some stocks also pay dividends, which helps with the cash flow.
Challenges of the stock market:
The major drawback of stocks, like most investments, is that market values fluctuate. This means the value of your investment can rise or fall, and economic, political, and environmental events can all have a crucial impact on how your investment performs.
Investing in stocks can expose investors to significant capital gains taxes. Based on how much and for how long your initial investment grew, you may be subject to higher tax rates when you sell your shares.
Final Verdict:
Finally, when it comes to increasing your wealth, both real estate and the stock market offer great opportunities as well as risks to investors. Consider all of the factors when you plan to leverage your hard earned money. Growth prospects, yield, time horizon, and risk levels are some of those factors that affect your choice of investment. Investing in real estate tends to provide greater long-term stability while also lowering risk. While the stock market has the potential to generate huge profits or losses in a matter of seconds.
If you are not sure which one your should pick, a good starting point would be to weigh your financial objectives against your risk tolerance and find a good mentor.
If you’re deciding between stocks and real estate, keep in mind that you can even invest in both. However, if you feel passionate about real estate investing, the team at Expert Investor Academy can assist you in expanding your real estate portfolios. We provide investors and entrepreneurs with tools, resources, and mentoring sessions to help them build long-term businesses and tremendous passive income. Contact us now!