Why investing in Real Estate is better than buying stocks

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Most people use one of two options for excess cash:

1. Invest in the stock market.

2. Invest in real estate.

Which investment is better Real Estate or Stocks? It completely depends on the investor’s pref-erences and choice because it emphasises more on your personality as an individual. Practically no real estate could have beaten the returns you earned if you invested in shares of banking, oil or cement sectors in Karachi Stock Exchange (KSE), especially if you reinvested your dividends. Similarly the risk of losing the value of your shares is equally possible due to economic instabil-ity and when the index loses more than 10% in a day or two, crashes are driven by panic, so the answer, as with many things in life, isn’t as easy as it may seem.

Let us start by keeping an eye on both types of investments

Real Estate:

Investing in Real Estate you are purchasing a physical land or a property. If the property that you possess is a vacant property that you intend to construct some day you will need some capital to invest plus taxes imposed and maintenance cost to hold your property is other additional. Some properties generate cash in the mode of cheques and cash in reflection to properties rented such as apartments, commercial buildings and houses to tenants.

Stock Market:

Investing in stocks is actually buying a part of company, that company of which the shares are bought could be a company of any industry available in stock market if a company floats 1,000,000 shares in the market owning 10,000 shares would make you own 1% of the company. When a company makes profit you are entitled to cut off profit for every share you own.

Pros of investing in Real Estate:

1. Real Estate is comparatively more reliable and feasible investment for many. Real Estate is more acknowledgeable to all classes, home for instance is a necessity and majority of us are taught since the beginning of the importance of owning a house is imperative. The need adds more confidence in buying more property and to further make extra money out of this investment.

2. Investing in Real Estate Is basically investing in something that you can see and you can feel. This is very important psychologically.

3. There is a chance that you can defrauded whilst investing in a Stock Market but once you are investing in Real estate the probability is too low because you can practically go on site and inspect it, check on Tenants and check the building before you buy it.

Cons of Investing in Real Estate market:

1. You may have to pay taxes, Maintenance of the building and insurance of your building

2. Exploding sewage and gas leaks etc…

Pros of Investing in Stock Market:

1. Investing in Stock is basically buying a piece of a certain company. More the shares you own more powerful position you hold to make the decisions for the future of the company as a member of board of director to the company.

2. Highly skilled and professional personal are running the company where you can relax at home and enjoy the fruit of investing shares in the company without any Hassel.

3. Stocks of a reputable company also allow you to increase their cash dividends as well as increase the profits year after year.

4. You can diversify your investment in many companies in less investment compared to Real Estate.

5. Stocks can be liquidated in no time where when you plan to liquidate a property that you own may take some extra time.

Cons of Investing in Stocks:

1. Although undoubtedly stocks have relatively generated wealth over the long run but investors tend to act emotional and undisciplined to benefit they are likely to lose money due to psychological factors.

2. The price of stocks may fluctuate dramatically in short-run. Rate of a share of a certain company may be 100 Rs it can lose its value to 40 Rs in one day and also it can gain 60 Rs in one day.

Why Real Estate Is More Feasible Than Stocks

1. You have a full control on your Investments if you invest in a physical property. One tends to become in charge as a Chief Executive and can gain profits as by renting it out. As the market grows and the economic cycle is in favour, in this period the investor can make excess money.

2. When you invest in Real Estate. You are investing in something that you can see and feel and utilise your investments. During bad economic cycles the value might come down for a small period of time but in long run it always has a trend going upward.

3. Possessing a property gives you a self satisfaction this asset holds the value at the initial cost and grows with the time as the time passes.

4. If the property is attained in a central location and economically developed region the stakes are higher and the chances of losing the value of the property is comparatively lower, even in the slump the prices go down comparatively slower and gain value back doubled.

5. Real Estate is less unpredictable you can trade in Real Estate if you have a basic know how on the developments happening in a certain region you can actually make stable rental income to meet your needs or save for future investments.

My recommendation on investing either in Real Estate or Stocks, I believe Investing in Real Estate would be on a higher side of recommendation as you grow old by investing in a Real Estate the markets tend to mature with time and can add value to it drastically, also the returns such as rental income can stabilise your monthly expenses accordingly. Stocks are more of a gamble and you never know when the crash might happen due to inflation.


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On February 20, 2018

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