Investing: Real Estate vs. Stocks?

Choosing to invest in either stocks or real estate is a decision that depends heavily on your short and long-term goals. Theory has it that if you want to make quick gains then it’s good to go with buying property, but if you have some investment time on your hands then you’ll likely make greater gains in the long-run with the market. Let’s take a closer look at both options:

Real Estate

Until the recent era of “flipping” homes – which is basically the idea of purchasing a home at a cheap price, spending money to fix it up (some do much of the rehabbing themselves), then selling it at a higher market value – buying property was not seen as a traditional financial instrument. However, times have changed, and what was once known as a place to sleep at night is now a portfolio device.

Choosing to invest in this way can bring about quick short-term gains, as long as the house is able to sell once rehabbed. However, because of the recent real estate crisis and market values dropping drastically, many people have lost money in the purchase and additional expenses for fixing it up. Not to mention that in the long-term, home sales tend to increase at a slower rate than the market. So when deciding whether to take this route, watching market values, as well as determining whether this is a long-term or short-term goal are crucial.

Stocks

Stocks, on the other hand, are good buys in the long-term. Because the market can fluctuate so drastically, it’s almost vital that a person choosing to invest have plenty of time on their hands to wait out the ups and downs. For instance, if you were looking to buy into a company that shows good gains so that you can cash out in 3 years, you may be disappointed if a sudden turn in the economy results in that company laying off – and stock prices dropping. In this scenario, not only did you not make the gains you’d hoped for, but you may have lost your money as a result. However, if your intention was to leave the money in for 20 years then you can just wait it out before making a rash decision to sell fearing it will drop even lower.

Investing in both stocks and real estate can be profitable depending on your goals. However, because investing in general can be tricky in the middle of a recession, it is a good idea to conduct plenty of research on both and proceed with caution before choosing to invest.