No matter if you are new to the world of investing or consider yourself to be a seasoned veteran, you may still be wondering how you can most effectively maximize your returns – or at least see the greatest potential to do so down the line. After all, there are a plethora of investment vehicles at your disposal, which can be both a blessing and a curse – especially since having too many options is known to muddy the selection process.
Regardless, the question that is asked the most frequently is typically which investment vehicle is superior to the other: stock market investing or real estate investing?
Naturally, there are many opinions on the matter. However, the only true answer is entirely dependent on the investor, how much money they have at their disposal, how much they are willing to invest and, finally, their expectations.
Taking that into consideration, let us take a look at the advantages and disadvantages of both stock market and real estate investing.
The advantages and disadvantages of investing in real estate.
There is nothing quite like investing in something tangible, which is precisely why real estate investing has been such a hit with investors over the years. Depending on your local real estate market, you may see sizable returns and long-term appreciation.
Additionally, thanks to mortgage loans, investing in real estate also gives you the opportunity to invest in more than one property at a time with less money down.
However, like all investments, real estate also has its drawbacks. A prime example of this would be the fact that real estate is not a liquid asset. In layman’s terms, real estate cannot be sold or traded quickly like stocks or other smaller assets. Instead, one must go through the arduous process of listing and selling a home before they can effectively remove themselves from the venture and move on to the next.
The advantages and disadvantages of investing in stocks.
Unlike real estate, stocks are considered to be liquid assets, meaning you can buy, sell, and trade your stocks frequently and at your own will. Additionally, stocks have the ability to bring in more revenue in a year than real estate, as their volatility can spark growth rates of 20 to even 50 percent.
With that being said, stocks’ volatility can be just as much a disadvantage as it can be an advantage. In other words, volatility can cause the value of stocks to plummet, especially if the company is facing difficulties.
Evidently, there are great advantages – and, unfortunately, disadvantages – to each of these investment vehicles. To discover which is best for you and your personal financial situation, please be sure to meet with a trusted financial advisor and come up with a long-term plan.