Stock Markets VS Real Estate Investments: What’s Better To Choose For A Beginning Investor?

Have you ever wondered why the property is called real estate? Not only because it’s something you can tangibly palpate with your fingers but also because it has been and still remains one of the asset types, which provide real profitability in most countries.

Real estate at a glance

People may change, epochs may go, empires rise and fall. Even stars may collide to blaze as supernovas. But property built on the land of Earth remains for decades and centuries. Some even for thousands of years! While an array of other assets is prone to fluctuations even if nothing, basically, happens, real estate most probably grows, despite falls and ups of the markets. It also compensates for the inflation, growing on par or even outperforming it.

Speaking about income-generating real estate, like the one you let for rent, the costs of rent also rise as inflation takes its stride. It might leap here and there during a year but when speaking long-term, it usually rises. We don’t know any developed/developing market (that’s not covered with war or international sanctions), which wouldn’t demonstrate growth for a decade and especially through a century. Thus, immovable property of all kinds is exactly an asset that attracts seasoned investors in all generations striving to create lifelong profit centers.

We are comparing the profitability of the stock market vs real estate in this article to give you a better understanding of investing.

Investing in real estate vs stocks: approach

Stocks vs real estate are an often comparison – at least, in those countries and blocs, which have both of them developed well. Such markets are mainly the Americas, Australia, and the EU. In other continents, blocs, and countries, either both markets are underdeveloped or at least one of them is such. So, we’re making the comparison only for those markets, where both provide sheer access and many tools to investors.

Let’s look at the general characteristics of real estate and stocks.

• Using borrowed money.

Buying real estate, people often use bank loans or borrowed capital from other places (including a pooled financing). This is an understandable practice and thus, it bears the same understandable risks of not meeting expected cash flows. Thus, if so, there are various consultants, managers, and expert companies on the market, which could quickly bring you back to rails.

In the market of equities or stocks, the risks of operating with borrowed money as leverage are seriously higher. That’s because of equity market fluctuations – you never know when and if a storm happens. Even professional traders don’t know that (yes, we’re super honest in it). What they do is play with money for luck. Thus, the stock market has seen many gloomy days (mildly speaking), causing billions of dollars of losses. Although there are many brokers, dealers, and other stock trade participants, a very few of them would be able to bring you back to rails (and those who do will not be available for assisting, as they are the birds who fly too high).

• Inflation.

Real estate adjusts for inflation – lagging behind or leading it. Equity trade never gives a damn about inflation if being completely honest. Thus, comparing stocks vs real estate, you find out that even passively owning a property, you earn over years. In the stock trade, however, you only earn if you buy low and sell high.

• Real estate stocks investments.

Although this is a sort of real estate investing, it is still a game with stocks. And you only win on such if a company-developer that released those stocks performs terribly well. Otherwise, there is no ground to presume you’re earning more than by trading regular equities.

• Solidity.

Real estate is a solid thing – it stands for a century or so. Even after completely dilapidated, there is still land, on which it stood. So you could build a new object or sell the land to someone.

Stocks, unlike real estate, are not a solid thing. At all. Companies that release those stocks very rarely live through decades, not even speaking of centuries. Some burn bright but fast, similarly to some people who live fast and die young. Thus, buying a share of a company today, you never know if it exists tomorrow and so your share turns into dust. While you can pass real estate through generations, you will highly doubtfully do so with stocks.

• Workload.

For those people who just can’t sit by a computer all trade sessions long to monitor, buy, and sell, real estate is a much more alluring type of investment. Surely, it naturally dilapidates, weakens from tenants, and gets dirty. But fixing, renovating, or cleaning is something that most people understand on a subconscious level while only a handful of them are the same knowledgeable about equity trade and its pitfalls.

Conclusion on stocks vs real estate

If you’re having doubts or would like to receive further professional consultation or help, contact the team of DGY. The company is ready to facilitate the process for you and will gladly assist with all the chores connected to buying a property, which suits your investment vision. Alternatively, we can offer you various other tools to invest your money into.