Should you invest in stocks or real estate? When you pose this question to people, you will most likely get multiple answers. Some people invest in stocks only, while others invest solely in real estate. Some people invest in both. So, the bottom line is there is not a universal answer to this question. Essentially, it boils down to your personal investment preferences.
Investing in Real Estate
Some people invest in real estate because it is tangible. You can reach out and touch real estate. You own the physical property. Stocks, on the other hand, are just a piece of paper stating you own a certain number of shares in a company.
Some investors buy real estate because they have no risk tolerance for stocks. Markets can and do fluctuate wildly while real estate remains pretty consistent. Additionally, real estate investors enjoy better cash flows than what they can get from stocks. Rental properties generate income while stocks typically do not provide a consistent cash flow.
On the flip side, real estate requires lots of work, while stocks are fairly hands off. Real estate also costs more money if a property is not occupied.
Investing in Stocks
Many people invest in stocks to build long-term wealth. Research shows that investing in stocks has been the greatest wealth generator over the past 100 years. Also, many stocks pay investors dividends. For owning shares of a company’s preferred stock, you will receive a cash payment from that company on a quarterly or annual basis depending on the number of shares you own.
Many stock investors like to buy shares of well-known, established companies who increase their profits and their dividend payments every year. As a company increases its earnings, you will receive more money from the company each year. Holding the stock of a well-known company for the long term is a proven wealth building strategy.
Choosing which asset class you should invest in (stocks vs. real estate) depends on your personal preferences. Real estate has a lot of responsibility and requires plenty of effort. If you are ready to take on the responsibility, it can produce generous returns. Stocks do not require as much work as real estate, but there is substantially more risk since markets fluctuate daily. Diversity is always a great asset to portfolios, so if you are feeling up to it, try them both out to see for yourself.