INVESTING 101 – STOCK MARKET VS REAL ESTATE

Code Property Group weighs in on the ultimate debate between where to invest.

The recent crash in the Australian stock market raises the age-old question, where is better to invest my money – stocks or real estate? Whether it’s future saving and planning or diversifying income, everyone needs an investment strategy that suits their budget and needs.

Determining the best investment strategy for you comes down to your financial situation, risk tolerance, goals and investment style. For some, investing in real estate can be seen as offering lower risk, yielding higher returns and providing greater diversification. When purchasing stocks, your investment can generate wealth in one of two ways: value appreciation as the company’s stock increases and dividends. Alternatively, investing in real estate, wealth accumulates through collecting rents and value appreciation.

What are the risks involved? 

Investing in real estate requires a lot of research. It’s also not an asset that results in immediate returns or can be liquidated easily. Owning an investment property also comes with the risks of handling repairs and managing tenants. Hiring a property manager is the easiest way to eliminate these risks and reduce the time you spend overseeing your investment.

On the other hand, the stock market is subject to several risks including market, economics and inflation. The prices are subject to these fluctuations in the market and therefore can be extremely volatile. This volatility can be caused by geopolitical and company-specific events. Stock investors are also subject to the economic cycle as well as monetary policy, regulations, tax revisions and changes in the interest rates set by a particular country’s central bank.

What are the pros and cons?

Property investors have the ability to build equity and are eligible for substantial tax benefits. The long-term cash flow provides passive income with the promise of appreciation. However, this market is not nearly as liquid as the stock market, and you can’t cash in your investment as quickly.

Stock market investors can get started with a smaller initial investment however it tends to be more “risky” as the market is volatile. Comparatively, stocks are a liquid asset and generally easily bought and sold and as there are so many stocks to choose from, achieving a well-diversified portfolio is easy.

In closing, choosing where to invest money is a personal choice that should be backed by research and professional advice. When it comes to expert advice on investing in real estate, our team is here to help. Whether it’s advice on how to get started or needing a Property Manager, we have the solution to help everyone reach their real estate goals.

Contact our team today.

Sources: Investopedia