Stocks vs Real Estate Which is a Better Investment
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.
Read on to know all about the stock vs real estate dilemma.
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:
Real estate investment is hard work:
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.
Investment in stocks easy:
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.
Real estate investment involves curring costs:
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.
A trading and demat account can get you going:
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
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
Dependence on market conditions:
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.
Real estate returns scenario:
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.
Dividends and sale of stocks:
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