Real estate and stocks are two of the most traditional and popular forms of investment. You can make a large return investing in either one, however, they are each very different means of investing and you may find that one is more suitable to your circumstances. If you’ve been thinking of investing your money into either real estate or stocks, this guide could help you choose the right investment path.
How much money have you got to invest?
Real estate typically requires a down payment of thousands of dollars. There may also be other initial costs you need to budget for such as renovation costs (especially when flipping property), which could also add thousands to the bill. All in all, you need quite a bit of money upfront.
This is not the case with stocks. There are free apps nowadays that you can use to buy parts of shares – and you can invest as little as one dollar per share. In some cases, you only need $10 to open an account and start investing. Of course, invest a few dollars, and the most you’ll earn is likely to be a few dollars. Invest thousands of dollars, and you could make a return of several thousands of dollars.
How hands-on are you prepared to get?
Property is typically a much more hands-on investment than stocks. If you’re renting out a property to tenants, you need to make sure that you’re making necessary repairs and chasing up overdue rent. That said, there is the option of outsourcing all of this to a property management company – you’ll have to pay an added fee for this service of course, but it could allow you to sit back and let the money come in without having to get too hands-on.
Trading stocks is typically much more of a ‘passive’ income. Some people buy stocks and don’t even look at their investment account for years, while still making a return. Obviously, if you’re investing in riskier stocks or trying day trading, you will need to be prepared to get more hands-on. However, most long-term investors who are investing in large stable companies shouldn’t have to intervene too much.
How much risk are you willing to take?
Both real estate and stocks can come with their risks. With real estate, the biggest risks are taking on a high-maintenance property that keeps requiring repairs or taking on unreliable tenants that don’t pay their rent. A thorough property inspection and stringent tenant screening measures may reduce these risks.
When it comes to stocks, the risks are less within your control. A random political event or natural disaster could cause stock prices to fall or soar. Diversifying your portfolio can help you to reduce risk – you should never just invest in one or two companies. It’s also wise to look at the history of these companies and the direction they’re going in.
What about other investment options?
Real estate and stocks aren’t the only options when it comes to investing. There are many other options such as forex, cryptocurrency, gold, antiques, wine, and peer-to-peer lending. You can even put your money in high-interest savings account if you want complete security and hands-off investing. In all cases, it’s best to invest in something that you understand and trust completely.