Investments can be an integral part of your long term financial plans. Whether you are preparing for your children’s education, saving for retirement, or you have other plans for your money, investing is a great way to increase your financial resources. And so, a common question has emerged about investment and the benefits of real estate versus stocks. Real estate is generally regarded as the best type of investment, but just as you have a personal preference for chocolate or vanilla ice cream, your own personal interests, expectations, and preferences will influence your decision to invest in real estate business or stocks.
Historically, investment in properties has been considered the more stable option. Many investment professionals will probably tell you that this is the least risky investment; yet, despite real estate being the safest investment choice, it is not always the most profitable. Depending on the type of investment, there are potentially huge gains. If you had invested in beach front house in Vancouver’s Kistilano neighbourhood in the 1970s, you certainly scored an excellent investment. Likewise, had you purchased Microsoft or Apple stocks before these companies took off, it may be difficult to find any real estate investments that can compare. So then, how do you choose best investment? Let’s discuss some of the benefits of each type of investment.
Many of us are more comfortable with investment in properties, because it is associated with a physical property that you can inhabit, renovate, and sell as your needs see fit. We also tend to identify with the importance of owning a home; so its type of investment is both a tangible and one associated with measures of success.
Some other benefits of real estate investment include:
- You are less likely to be defrauded in this type of investment because you can evaluate your investment more thoroughly. You know the condition of the property and its current and potential value.
- You can leverage real estate investment against debt more safely than stock market investments, and even if the value of your home or property depreciates, you still own that physical property.
- Real estate investments provide an excellent hedge against inflation as property values increase along with costs of living and the purchasing power of your native currency.
- Land investments can be developed to further increase your return on investment.
- Investments in properties can immediately impact your cash flow through rental or leasing agreements.
While stocks are certainly the riskier of the two investment options, there are still some benefits that make stocks an attractive financial opportunity.
- Stocks are a relatively effort free investment type.
- High quality stocks reliably increase profits from year to year.
- Dividends can be reinvested in your stock portfolio.
However, stocks also bring a number of drawbacks that make them less appealing, especially to more conservative investors. The stock market is tumultuous, especially in our current economic climate, and losses can be significant. Furthermore, stock prices are very difficult to predict, so knowing when to buy or sell stocks can pose a significant challenge. Ultimately, stocks are more suitable to experienced investors who have knowledge of the stock market; but for a stable, long-term investment that is unlikely to lose value, real estate is your best choice.
Derrick is a Memphis native specializing in locating, purchasing, renovating and managing single-family and multi-unit properties and possesses over 8 years of experience in real estate investing and property management in the Memphis and Nashville markets… Learn More…… www.memphisbuyandhold.com