If you are looking at investment options, and wondering if you should look at real estate or stocks as your choice, a lot depends on your financial goals. Apart from goals, your responsibilities or commitments, your lifestyle, income and investment philosophy also play a key role.
While there are no absolute rights or wrongs when it comes to investments, you could look at what is right for you and proceed with that choice.
Investing in stocks is essentially about investing a percentage in a company. You do your research, look at a company’s past performance, its current position and its growth potential and invest shares in that company; you own a percentage of that company. Some of the key differences between investing in real estate and stocks in India can be categorised under certain factors. They include:
You cannot just research on property from the comfort of your home, even though you may be able to identify a few properties online. Eventually, you may have to make visits, look at the construction quality, look for guidance values and ensure the property titles are legal. The credibility of the developer, the neighbourhood, the time taken to complete construction are all factors you would need to look into while investing in real estate in India. A lot of time and effort, both physical and mental, goes into real estate investments.
On the other hand, investing in stocks is easier. All you need to do is get yourself a demat and trading account in India. The best trading account gives you access to trade in quick time; with some basic research, you can effortlessly pick and invest in stocks from the comfort of your home. Online platforms let you trade on any smart device, seamlessly, as long as you have a demat account and trading account in India.
Investment in real estate would not mean buying once and forgetting all about it. It involves a lot of recurring costs, from maintaining the property, paying taxes, tracking utility costs, etc. If you have borrowed to buy property, it means paying an EMI and an interest so the price you pay for the property is eventually much more than the actual cost, because of the interest accrued. You may rent out your property but there are still some risks involved such as vacancies or unreliable tenants, and a drop in rental values.
When it comes to investing in stocks, you just need a trading account in India, and earmark some funds for your investments. There are certain charges like brokerage charges, but these charges are negligible when compared to recurring costs involved in real estate investment. With the best trading account, you also get access to tools and research that will help make informed choices. What’s more, you can open a trading account for free by uploading a few basic documents and information online.
Real estate investments are not as liquid as stocks. If you wish to sell your property, the processes involved are many, including listing it, waiting for the right buyer, checking market value and registration among others. On the other hand, if you wish to sell your stocks, you could do so in minutes with a trading account. You just need to be agile and online, and you can effortlessly sell stocks many times during trading hours.
Both real estate and stock investments are dependent on market conditions. Although stocks have exposure to volatility in the markets, the longer you stay invested, the returns accrue over time. Long-term stock investments fetch substantial returns. When you invest in real estate, you are still dependent on market condition and would need to wait and hold your investment till market price increases. In both cases, impulsive selling or buying doesn’t work well.
Investment in real estate often cannot beat inflationary tendencies. Estimating returns may be hard because returns depend on factors like location, guidance value and quality. Also, if you have bought property to live in it, then it is not considered an investment because there are no monetary benefits. Investing in real estate is also more expensive than stocks as the former involves making heavy down payments.
Returns in stock investing come in the form of dividends; when companies make profits it is passed on to investors. Also selling your stocks at the right time generates substantial returns.
Investing in stocks needs very little capital. Returns are dependent on the informed choices you make. All you need is a demat account along with a trading account in India. The best trading account also offers tips and research advisories and you can invest online seamlessly. Real estate investments involve heavy down payments unless you are investing in real estate mutual funds. Stock market investing is also more liquid and you can sell many times with your trading account. To sum it up, stock market investing is easy and can be done with the click of a button. Real estate investments involve a lot of time and effort, and to reap any kind of benefits, investments need to be held till market values are favourable.
