Real estate and stocks both are established and lucrative investment options. Each of them offer stupendous returns and profitability with a string of risks and rewards attached to it. However, deciding on what the right investing avenue is, can feel like a tough call. Though, both options can generate cash flow and can largely multiply capital gains; many factors must influence your decision-making.

Your financial goals, lifestyle, objective, commitment, responsibility, income and various other elements should be the deciding factor of whether you should invest in real estate or stocks; or both. Though real estate investment is a sense of high authority and ownership, many traditional investors have turned towards stock markets. 

Both have their advantages and disadvantages; and it’s important to explore the area completely before making any conclusion.

Real Estate Investment

Investing in real estate can be broken down into residential and commercial space. Today, owning a piece of land that’s bankable and safe at the same time is impossible without a property management company. Let’s look into the pros and cons of a real estate investment.

  1.  Tangible asset

To begin with, infusing money in real estate is directly procuring a tangible asset while generating a sureshot revenue source. Unlike many other investment options, real estate helps in deriving a large tangible asset value which incorporates a sense of security amongst investors.

  1. Hedge against inflation 

Real estate ownership is a great protection from inflation. With every passing year, cost of living, power of dollar and basic charges of services and products are increasing. Keeping cash in the account is the most incorrect way of dealing with inflation. Investing in real estate leads to an advantage of growing property prices.

  1. Tax benefits

The greatest advantage of investing in real estate is availing tax benefits. A real estate tax deduction is of great help in order to balance the over tax structure with the income gains. Also, property expenditures in reference to ownership, management and operation are deductible.

  1. No risk element

In terms of deriving value, a real estate investment is absolutely safe. The property worth is likely to release with time and appreciate significantly. And therefore, an investor can gain solid returns at the time of selling. Similarly, a tendency of rise in rentals can also generate substantial cash flow. Even in the most difficult times, a real estate investment is a secure option. 

  1. Expensive 

Investing in real estate is remunerative but an expensive affair. It is associated with high transaction costs, upfront amounts and many more money-related claims (insurance, loan fees, commissions) which are steep. Also, getting returns out of a real estate investment requires a lot of work.

Stock Investment

Traditionally, stock market investments are sensitive and subject to receiving an ownership of a company.

  1. Liquidity

A real estate investment can lock up your money for years, but that’s not the case with stock investment. The sale or purchase of any stock can be done the moment you act upon it. This makes the whole process relatively easy for the investors.  

  1. A diversified portfolio

One of the most evident advantages of a stock investment is a diversified portfolio. Any investor can buy stocks in multiple companies and widen their portfolio as much as desired. This provides a dominance of making profit even in case any stock takes a hit. A wide-ranging portfolio can visibly reduce the associated risk.

  1. Flexible & Ease

A stock investment process is essentially flexible and is anchored with an ease of operations. This means an investor has the option of starting small and build up an extensive portfolio eventually. And therefore, you have the option of investing a comfortable amount with more room for growth. 

So yes, you don’t need to have a huge amount of available cash to begin investing in the stock market. Additionally, a stock investment is also easy to manage.

  1. A digital asset

Unlike real estate, a stock investment is a digital asset and therefore requires no physical monitoring. Also, unlike properties, stock investments do not invite monthly management costs. Though you may pay a certain amount of brokerage fees, it is remarkably less compared to real estate damages.

  1. Highly volatile

In contrast to real estate being an inflation hedge, stock investments are subject to being highly volatile. On a short-term basis, stock investments are prone to terrific fluctuations which can largely work against investors. However, lows and highs are evened out in the long-run with respect to well-valued stocks.

Real Estate Investment vs Stock Investment: Which one is better?

  • In terms of price appreciation, a real estate investment is hands down a better option.
  • The liquidity capacity of stock investments is greater than real estate.
  • Property prices are prone to credit facilities, which is not the case with stock markets.
  • Stock market operations directly influence consumer behavior.
  • With respect to initial investment, real estate requires a large amount of capital. Whereas, you can start small in stock investments.
  • Stock investments can trigger emotional decision-making, but the same is not the case with real estate investments.
  • Real estate can benefit you with tangible property and stock investments allow great accessibility.

The Bottom Line

Real estate and stocks both are subject to a myriad of winnings and uncertainties. Investing in both will give you an edge of benefitting from both. However, if you have to choose between the two, you can probably place ‘capital’ as your deciding factor. 

If you are capital-constrained you can start small with stock investments. Furthermore, real estate investment is a great option in the case of free-flowing cash. Conclusively, we would recommend to diversify as much by investing in both, in order to minimize risk.

About the Contributor: I’m Sid Denver— a free-spirit with a passion for reading, writing, blogging, and photography. I am a content and affiliate marketer, and have been working in this industry since 2017. 

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By Ameena Rey-Franc

Recognized as one of the Top Finance Blogs in the PH. Ameena Rey-Franc (founder of TTP) is a former Banker and BS Accountancy graduate turned Blogger, Keynote Speaker, and entrepreneur. Currently an RFP delegate, she is also the Author of a book about Financial Resilience and has held seminars for reputable companies like GrabFoodPH, Pru Life UK, VISA, JPMorgan Chase& Co., Paypal, Fundline, Moneymax, and many more. The Thrifty Pinay's mission is to empower women to LEARN, EARN, and be FINANCIALLY-INDEPENDENT no matter what life stage they are in.