Real Estate vs Stock Market vs Equity: Which investment is better?

Real Estate vs Stock Market vs Equity: Which investment is better?

Both real estate and stock investments are known to provide high returns to investors. However,

choosing stocks against real estate is like choosing between chocolate and ice cream. But we want to get both chocolate and ice cream at the same time and sometimes we have to choose between the two.

Real estate investments and stock investments are selected based on various factors such as investors' investment prospects, risk profile, costs and maintenance costs. There is no doubt that both are one of the best investment options. So, through this article, we will give you information about the advantages and disadvantages of both options, which will help you choose one of the two.



The benefits of investing in real estate

Investing in real estate is a solid investment. Here you invest to buy physical land or property. Most traditional investors are more familiar with the process of buying physical assets such as land than a stock.

Moreover, for some people investing in physical wealth is more satisfying mentally. You can feel it and use it like any other object.

For many people investing in real estate is the most preferred option, as they always consider investing in a building or land as the best investment.

You can use it to raise funds as well as for other purposes. Most of the average Indian citizen lacks the necessary skills and strategies to invest in the stock market, which is why they prefer real estate investing.

Most Indians believe that investing in real estate is very straightforward and easy and is known to protect investors in times of inflation.

Apart from this, once the property is registered in your name, you can inspect your property and also earn income by looking at the rent. But in the case of stocks, you have to rely on fund managers.

Disadvantages of real estate investing

Buying real estate requires a lot more time and effort than investing in stocks. You will have to go through detailed documents and legal work to register the property in your name.

In addition, you sometimes have to visit your property for inspection and renovation.

More money is needed to invest in real estate. You have to spend a lot of money to buy a property.

Moreover, the cost of buying properties in metros is higher than others, resulting in huge investment costs.

Investing in real estate can be expensive if your property is vacant or inactive.

In addition, you have to pay property taxes, maintenance charges and insurance when you own any property. Sometimes you have to renovate the property, which puts a financial burden on you.

The benefits of investing in stocks

Stocks have proven to be the best investment option due to their performance and the possibility of making money. Investing in stocks for a long time proves to be beneficial for investors.

When you invest in stocks, you buy a part of the business and become a part of it. If the business is doing well, you can make a quick profit. No asset class option can give you as much return as stock.

Unlike asset investing, you do not need to actively manage stock investments. You can trust the fund manager and get a good return on your investment.

You only need to pay a fee to the fund managers to manage your portfolio.

Also, stocks are much more liquid than real estate. You can sell your stock online without much hassle, while selling real estate requires more time and extensive paperwork.

Stock investing helps save a lot of money.

You can start investing in mutual funds through SIPs as per your budget, while investing in real estate requires a large amount.

Disadvantages of stock investment

It is true that stocks consistently perform well and investors can achieve high returns by investing in the long run, but investors often lack discipline or leave investments early.

If investors do this, it hurts them.

Along with this, there is even more risk in investing in stocks. The return on its investment depends on the market. If you invest in stocks for a short period of time, you may face more volatility in the market.

Real Estate vs Equity

Over the past decade wealth has emerged as an investment option. Previously, the creation of real estate was limited to the aristocracy and the wealthy. For middle class people, wealth was not a means of investment, but a way to build a roof over their heads. But it has become a popular investment vehicle due to the ease of getting a loan for the property, tax exemption and the sharp rise in property prices over the years.

People often ignore certain things before investing in property, even if they know them well.

Here are some things to keep in mind if you are going to invest in a property:

1. Large amount required

Investing in assets often requires a large amount of money. Even after making a down payment, if you take a loan, you have to pay a large portion of your income every month in the EMI of that loan.

2. The risk is not low

It is a misconception that investing in property is risk free. There is no guarantee that your investment will only make your money. Looking at the property market over the last 4-5 years, it will become clear that most people feel trapped after investing here.

3. Lack of Liquidity

The easier it is to buy a property, the harder it is to sell it. And it is not necessary that when you have to sell the property for the money you need, the buyer can get it at the price you want.

4. Marginal Rental Income

Generally, the annual rent of any residential property does not exceed 2.5-3% of your investment amount. And you can get more returns from this savings bank account. Unless you buy a property at a much lower price than the market rate, your rental income will never give a good return. And also remember that you have to spend some money every year to take care of your property.

Returns from the property market have dropped significantly over the last few years. According to a study by international real estate consulting firm Knight Frank, property prices fell in January-June 2018 in most cities of the country compared to January-June 2018.

Let’s now consider investing in equities instead of investing in assets. Equity here does not mean direct trading of shares. Investing in equity oriented mutual funds is better for retail investors to build wealth in the long run. First of all, we will present you the returns of equity mutual fund schemes that have been in the market for a long time.

None of these fund schemes are those that have paid less than 20 per cent annually and are at least 16 years old. If an investor had invested Rs 1 lakh in any of these schemes 16 years ago, today that amount has increased to Rs 18.48 lakh, an increase of more than 18 times in 16 years. Such high returns cannot be expected in any property market in the country. And, investing in equities gives you many other benefits that wealth does not provide.

The benefits of investing in equities

1. Easy to invest

You do not need to take out a loan to invest in equity. You can start with a small amount and keep increasing it as per your convenience. Not only that, if you are investing through SIP, you can stop it even if there is a financial crunch.

2. Liquidity

You can withdraw your investment in equity whenever you want, you don't have to wait any longer.

3. Risk Recovery

If you have invested money in the wrong mutual fund scheme, then you can easily get out of it and move on to another scheme. But in real estate, if you invest money in the wrong project, it is very difficult to recover money from there.

But we are not saying that you must not buy property. Definitely buy property, but not for investment, but for your needs.

Also, when buying a property, remember that your home loan EMI should not exceed one-third of your family's income under any circumstances. And of course, you decide to buy a home only after you have made an economic plan for yourself with other financial goals in mind.