Over the years, we’ve heard the arguments as to which is the better investment: real estate or stocks. Both have their advantages and disadvantages, and there are several aspects of each that make them unique investments in their own way. To make money with either investment requires that you understand the positives and negatives of both.
Over the years, we've heard the arguments as to which is the better investment: #realestate or #stocks. Both have their advantages and disadvantages. Learn More: @DRGranger #worthitpodcast #Investing Click To Tweet
Real estate is often a more comfortable investment for many people than stocks or mutual funds. When you invest in real estate, you invest in something tangible. You can look at it, feel it, drive by with your friends, point out the window, and say, “I own that”. For some people, that’s important psychologically. Real estate investments have traditionally been a terrific inflation hedge, It’s more difficult to be defrauded in real estate compared to stocks, and using leverage (debt) in real estate can be structured far more safely than using debt to buy stocks by trading on margin.
Compared to stocks, real estate takes a lot of hands-on work. You have to deal with the midnight phone calls about exploding sewage in a bathroom, gas leaks, and a whole host of things that you probably never even considered. Even if you hire a property manager to take care of your real estate investments, it’s still going to require occasional meetings and oversight. Real estate can cost you money every month if the property is unoccupied. You still have to pay taxes, maintenance, utilities, insurance, and more, meaning that if you find yourself with a higher-than-usual vacancy rate due to factors beyond your control, you could actually have to cover those hard costs each month!
More than 100 years of research have proven that despite all of the crashes, buying stocks, reinvesting the dividends, and holding them for long periods of time has been the greatest wealth creator in the history of the world. Unlike a small business you start and manage on your own, your ownership of partial businesses through shares of stock doesn’t require any work on your part.
It’s much easier to diversify when you invest in stocks than when you invest in real estate. With some mutual funds. You can buy dozens of stocks for a flat monthly fee or as little as a few dollars. Real estate requires substantially more money. Stocks are also far more liquid than real estate investments. During regular market hours, you can sell your entire position, many times, in a matter of seconds. You may have to list real estate for days, weeks, months, or in extreme cases, years before finding a buyer. To learn more about the pros of investing in stocks, listen to the full episode.
Despite the fact that stocks have been proven conclusively to generate more wealth over the long run, many investors are too emotional and undisciplined to benefit. They end up losing money because of psychological factors. Remember, money is like a bar of soap, the more you handle it, the faster it disappears. Another con to investing in stocks is the fact that the price of stocks can experience extreme fluctuations in the short-term, which again, may be difficult for some people to handle emotionally.
Find out which one we believe is the best decision in the majority of situations: real estate vs. stocks.
Compared to #stocks, #realestate takes a lot of hands-on work. You have to deal with the midnight phone calls about exploding sewage in a bathroom, gas leaks, and a whole host of things that you probably never even considered. @DRGranger… Click To Tweet
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