Investing In Real Estate Vs Stocks: Which Is Better?

September 23, 2022 |

Are you wondering which between real estate and stocks is better? You have come to the right place! We have the answer to your pressing question of stock market vs real estate! This blog will discuss investing in real estate vs stocks and help you decide which investment to go with. Read on!

Introduction

When you decide to make an investment, then it is important to explore your options. When you think of investment, it is not uncommon for the mind to go straight to stocks. But if you are willing to look beyond just stocks to build your funds, then you might also find another lucrative investment avenue in real estate. Not many people know that real estate investing offers fruitful returns. Both real estate and stocks have the potential to yield good returns. However, it is important to weigh both the investment types before you go on to make the investment.

In this blog, we will discuss investing in real estate vs stocks and which among the 2 is a better investment. Keep reading!

All About Real Estate And Stocks

Before we discuss the nitty gritties of real estate vs stocks, it is essential for us to know what they are exactly. Let’s define them –

  • Real estate investment: Real estate investment is the practice of purchasing property with the sole intent of renting it out and generating income rather than living there. It is known to be one of the safest types of investing.
  • Stocks: Stocks are nothing more than owning shares in a company. A stock market is a place where stocks are bought and traded. You become a shareholder or a part-owner of a corporation when you purchase or invest in stock in that company.

Real estate investment

Real estate is a long-term investment that has the scope to yield consistent returns. It is an investment that is gaining more popularity today. To invest in real estate, you will need solid capital and a down payment to make the investment in case you plan to take a loan. Acquiring a loan for real estate is also a process – you will need a good credit score and a slightly strong financial standing. But if you are able to get to the stage of successfully making a real estate investment, you are in for a great Return on Investment (RoI).

Let’s take a look at a few features of real estate:

  • Real estate is a tangible asset. This means it has a physical presence, can be seen and touched and takes up space on land.
  • The value of a real estate property is most likely to remain undisturbed, no matter the market condition. This makes it a very valuable investment.
  • A real estate property is also known for its ability to appreciate even during bearish times. This makes it a very secure investment.
  • Real estate is also a durable investment in the sense that it can help the investor build multi-generational wealth. You can re-sell it at a good price even after making the investment.
  • Real estate also has the ability to double up in value. This means that real estate allows the investor to generate steady income while also appreciating in value over time.

These are a few characteristics of real estate. Let us discuss stocks in detail before drawing a comparison between the stock market and real estate.

Stock investment

Stocks, as discussed earlier, are shares of a business issued by the company for the public to invest in.

Companies usually issue stocks to raise capital that will help fund their operations. Stocks also help manage their capital. Stock investment is the second most common type of investment after real estate investment. They are also a long-term investment, though not as long as real estate. You also do not require solid capital to invest, unlike in the case of real estate. All you need is a stock broker, a Demat and trading accounts – both linked to your bank account. This can easily be done online.

A few characteristics of stock investment –

  • Stocks are intangible assets – they do not have a physical form or existence. The investment process can easily be done online.
  • When you invest in a company’s shares, you become part owner of the company. They represent ownership. So, the percentage of the stocks you invest in is the percentage of ownership you hold in the company.
  • You are entitled to receive a dividend when you invest in a company’s stocks. A dividend is the percentage of profits the company distributes to its owners and shareholders. This is one of the features of stocks that attract investors.
  • When you invest in a company’s stocks, you will be able to be an active participant in the company’s decisions – especially when they are taking decisions on dividends, the election of directors, and more. This is mainly because you become a shareholder of the company, and that gives you exclusive voting rights.

These are a few traits of stocks. Now that we have a better understanding of real estate and stocks let us compare both and see which wins the real estate vs stocks battle!

Investing In Real Estate Vs Stocks – Which Is Better?

In the last section, we discussed the characteristics of both real estate and stocks. In this section, we will be drawing a comparison of investing in real estate vs stocks from an investment perspective. For this, we will consider a few factors that play an important role in an investment, including –

  1. Cashflow
  2. Liquidity
  3. Volatility
  4. Management Expenses
  5. Diversification

 

Factor Real Estate Stocks
Cashflow Real estate has great rental returns that offer steady cash flow. Cashflow and returns are yielded in the longer run. However, you will receive a small sum as dividend periodically.
Liquidity Liquidation is usually a time-consuming process, especially given that you need to look for a buyer who is willing to pay the price you put on the property. Both buying and selling stocks in the market are easy.
Volatility Real estate does not give into volatile markets easily. They are assets that can even appreciate during volatile times. Stock markets are highly volatile. The value of stocks fluctuate a lot, depending on the market conditions.
Management Expenses Properties require maintenance, especially when they are vacant. This will cost quite an amount. Stocks do not need maintenance at all. The only expense you will incur besides buying stocks is paying your mutual funds manager.
Diversification Diversification of  your investments in real estate will cost you a lot, while also taking time. It is not an easy feat. Diversifying stocks is very simple. You can keep expanding your stocks portfolio by investing in the shares of multiple companies at one point in time.

The comparison of real estate vs stocks clearly suggests that real estate is a slightly better investment than stocks. There might be pitfalls in real estate investment with regards to managing expenses and time-consuming liquidation, but real estate is still a steady and secure type of investment.

If you are looking to invest in real estate, you might be confused about what real estate to invest in. There are 4 main types of real estate investment you can make –

  • Residential real estate
  • Commercial real estate
  • Industrial real estate
  • Land

Of the above-mentioned types of real estate, land is the best for the following reasons –

  • Higher appreciation value
  • Flexibility to develop any property
  • Fast-moving asset
  • Low maintenance cost
  • Low initial investment
  • Financial security

Why are plots the best investment type? Learn more about it here!

Conclusion
If you are looking to invest in land in prime locations across Chennai, Hosur, and Coimbatore, then look no further than G Square! We are South India’s largest and Tamil Nadu’s no.1 real estate developers, with over a decade of experience in helping established businesses and individuals find the right plot at competitive prices. For more information, get in touch with us here.

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