Financial Trading & Investing | Should I Invest In Real Estate Or Stocks
To increase your portfolio value, you need to find a way that will not take up too much of your time and effort. Investing capital is a good way to go, but how can you invest without putting yourself at too much risk?
This is a question many people ask so we will try to find an answer for the best way to invest your money. The two main options most people consider are buying property or investing in stocks for the (hopeful) long-term increase of value.
Investigate with us the possibilities there are in both these methods to help increase your capital without too much risk.
Which One Should You Choose?
We will take a look at the two methods and the risks involved, as well as the benefits you can gain from them.
Real Estate
Investing your capital in real estate can be done in different ways; the two main categories are residential and commercial properties. Residential is basically buying a property to rent out or purchasing to resell at a profit as quickly as possible.
Commercial property includes such things as strip malls or office buildings and even apartment complexes which require more capital than residential property.
Risks Of Real Estate
To invest in real estate will require a lot of research from your side before you can jump in and buy property. There are some factors that need to be considered if you decide to go the real estate way to invest your capital.
- The first disadvantage is that by investing in real estate you will not be able to liquidate it so you can not have cash quickly.
- Commercial real estate will require considerably more effort and time to renovate and you may need to do repairs on the property.
- If you do not have the time you will need to find professionals to do it for you at potentially high costs.
- Rental properties add another headache to deal with in the form of tenants that do not pay rent or pay rent late.
- You can also not simply evict tenants if you want to sell the property to get cash quickly when you need it.
Pros
- The basics of property-buying are easy to understand so you do not need to learn how it works before investing. It works like this: You buy property, renovate and fix what is broken, manage the upkeep of the property, and resell for a profit as quickly as possible.
- If you invest with loan money you will be much safer when buying real estate to give you tangible value. Even if you buy with cash you will feel more in control with real estate and it will be easier to manage.
- When investing in real estate it can serve as protection against inflation so you do not lose value on the property. This is because most of the time rent will go up with inflation and the value of the house grows with it as well.
- Tax advantages can be gained with property ownership where you may qualify for a tax deduction for interest paid on the mortgage. When selling a commercial property you can avoid capital gains with the 1031 exchange if you invest the money in purchasing other commercial property.
Cons
- Investing money in real estate will almost always be more work than is the case when investing in stocks. It will require a lot of time and effort in maintaining property especially if you buy to rent the property out.
- You will need a lot of capital if you invest your money in real estate, so you might need to borrow the money to begin. For you to be able to borrow the money, you need to have a high credit score and you need at least a 20 percent deposit.
- High transaction costs are also the norm when it comes to buying and selling real estate for a profit. The seller can pay high closing costs which can be as high as 6 to 10 percent of the selling price.
- It will be difficult to diversify your investment with real estate where location is a main factor to consider when buying property. It is also possible that value can go up in one area while sales may go down in another area.
- Making a profit on your real estate investment is not a sure thing, especially if you buy to resell quickly for a profit. It might be a bit less risky if you buy a property and rent it out to tenants to give you returns on your investment.
Stocks
Before you take the step to invest in stocks there are some factors you also need to take into consideration. With so many options available on the stock market you need to do a lot of research to find one with the least risks.
Even if it is true that most of the time it is risky to invest in stocks, there are ways to mitigate the risks. You should also look for ways of investing in stocks where you will get the most returns on your investment.
Risks Of Stock Investment
There are a number of risks involved when it comes to investing your money in stocks, such as inflation and market fluctuation.
- One of the many risks is that the company you buy the stocks from may have operations in other countries with their own problems.
- These problems that arise can cause the stock prices to come down drastically and may lead to loss of income.
- Another risk might be from the investor who decides not to diversify their investment which puts them at greater risk.
- Panic-selling might occur if the stock prices go down and the investor decides it is time to sell without knowing the risks.
Pros
- One of the main benefits of stocks is that they are liquid so you can quickly sell and have cash available when you need it. This can be done on your computer at home with the click of a mouse, and you can keep track of the value of your investment.
- It is easy to diversify your investment in stocks by building up a broad portfolio of stocks from different industries and companies. This can be done quickly without wasting time and you do not need a lot of capital to be instantly diversified.
- With stocks, there are little to no transaction fees when you buy or sell, meaning what you get from your sale is basically all profit. With many brokers competing with each stock, trading costs have come down drastically where you may pay zero fees in some cases.
- Tax-advantage retirement accounts where you can buy shares that are sponsored by an employer can be of great benefit to the investor. You can also invest in an individual retirement account where your investment may grow in some cases tax-free.
Cons
- Stock prices are in most cases very volatile and can go up or come down any time without prior warning. This can be quite stressful for the investor unless they invest in the stocks for the long term no matter the fluctuation of stock prices.
- The selling of your stocks may lead to capital gains tax which is quite a high percentage of your profits. The best option will be to keep the stocks for at least one year so you can qualify for a lower tax rate.
- Emotions can play a huge role in buying and selling of stocks which may cause panic selling and a greater loss. Because it is so easy to sell stocks this can be a great risk, especially for beginner investors in stocks.
Other Options
If you want to invest in property but do not have the startup money you can always try real estate investment trusts (REITs). These are companies that own income-generating real estate in the form of offices, malls, apartments, warehouses, and businesses they operate.
Many online brokers will give you an opportunity to invest in these types of companies that pay growing dividends to investors.
Professionals to the Rescue
Most people do not know anything about investing or buying stocks to gain returns from them, either in the long term or the short term. By investing your money in stocks through professionals such as Insider you gain many benefits on top of your returns.
These asymmetric investors provide you with a safe option to gain the most returns from your money through low-risk stocks. When you invest your money with them you eliminate the long and steep learning curve with valuable information provided by Insider.
This includes a crash course in how and why you need to invest your money in certain stocks for better returns. This information will save you a lot of money on education fees while you learn the intricacies of buying and selling stock.
There is low startup cash involved and you can join them with as little as one dollar to gain inside information. This is not just for a select few; anybody who has a little bit of cash to start with can join them and reap the benefits.
Keep Your Ear to the Ground
In order to gain the right knowledge from the experts, you need to keep your ear to the ground all the time. This will be very easy if you make use of the opportunity to sign up with Hedgies Uncut for a free membership.
With this, you can keep your finger on the pulse and have ideas, tips, and future predictions at your fingertips. Capitals Exploits is an up-to-date blog where you can get all your stocks and investment news on the go.
Summary
Hopefully, this will help you to make the right decision concerning the investment of your hard-earned money. Now that you know what to look for and where to get help to start, go ahead and join the long list of happy investors at Insider.
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