There has always been a comparison between real estate investment and stock market investment in terms of profitability. Both are like two sides of a coin with their own advantages and disadvantages. Investors have made millions in the stock market but so have those who invested in real estate. However, at the end of the day, it is the real estate that wins the bout. Real estate is by far a more popular way of making additional income.
They can be compared on the basis of the following:
Liquidity: Real estate investment is a long term investment and converting its value into money is not always quick. It takes time, probably months before the property can be liquefied. On the other hand, stocks can be sold on a single phone call taking as less as a few minutes. In times of rapid changes, it is the stock investment that proves beneficial.
Market Reaction: Stock market has a high reaction time with a high degree of volatility in the graph. However, the same is not true for real estate. It takes growth chart takes its time and requires a good degree of patience from the investor. Because of the slow reaction, it is nearly impossible to judge whether the investment has been done in the right area.
Market Value of the Investment: In the case of the stock market, while the stock prices are variable, at the time of buying or selling, the investor knows the exact price. As far as real estate goes, the price of property has to be decided by both the buyer and the seller. If figures are not calculated properly, the investor may sustain losses. For this reason, it becomes necessary to research the market and discover the right value.
Collateral: Real estate investment works as collateral against which loans can be taken by banks. This benefit has been exploited by many to expand their investment opportunities without having to put a single dime from their pockets. With stocks, it is not possible to do so. In fact, there is limited percentage of the loan that can be used to buy stocks.
Undervalued Investment: To be able to find a stock that is undervalued requires a great deal of understanding of the market. Such complications are not present in the case of real estate where even a layman can find himself investing in an undervalued property provided his search is deep enough.
Globalization: Stocks are fueled by the global market and a change in a far off land would affect the prices back home. However, real estate is localized and is affected only by changes in the locality. A downturn on the stock market would affect everyone who has invested while in the case of real estate, only those who have invested in the affected area would suffer.
It should be understood that both options have an element of risk and anyone who plans to invest should be ready to face loses too. Nevertheless, if careful planning is done, the returns would only be positive.