New investors mainly confuse between real estate or stock market, as which is better?
They are left wondering about different between various investment options available for investing.
Here we will analyse both.
From time immemorial, we have been told that surplus money should be invested in an instrument that will augment it.
The safest bet, we are told, is property or land.
The value of property and/or land normally appreciate over a period of time.
This makes it a good investment option for all.
Off late, however, many people have been investing in stock market for good returns.
Stock investing is gaining popularity for both the short and long term investment horizons.
But new investors are not immediately privy to how the markets function.
It takes a certain amount of financial dexterity to interpret and work on the ups and downs of shares and stocks.
Hence, new investors get little skeptical about investing in the share market.
New investors tend to opt for other instruments first.
At the same time, many investors are turning to mutual funds in India to grow their wealth.
Mutual funds with good reason has attracted new investors towards it.
Mutual funds offer good returns over the long run, at low risk.
So which one should you choose – real estate or stock market?
Let’s look at each.
Real estate (land and/or property):
A person investing in real estate buys a parcel of land or property.
Land can be purchased and then resold at a higher price, at a later date.
Land can also be used to build a property on.
Meanwhile, a ready property can be purchased for resale.
Ready property can also be leased out to make money on rent.
There are maintenance charges on both.
Land and property taxes also to be paid as extra charges.
A home owner also pays for water, electricity, gas, telephone and other utilities.
The growth of investment on real estate occurs with appreciation of the land or property price over time.
How much money the investor makes depends on its location, market trends and modifications carried out by the owner.
Real estate is considered a safe investment because it is a tangible asset.
The owners has documented evidence of ownership.
In investment world it calls for a premium.
Also, real estate is quite a liquid asset.
When one needs money, the investor knows exactly how much he can expect from the sale.
His basis of assumption can be the square foot rate prevalent in the market.
However, it may take years for the property to appreciate to the value that the investor desires.
A person investing in the share market buys a part of a company (business) – in form of stocks.
Hence, the investor gets a share of the profits that the company generates annually.
The proportion of profit sharing happens on basis of numbers of shares the investor owns.
But if the person is not confident of investing directly in shares, they can opt for mutual funds.
Best equity mutual funds offer good returns over a long period of time.
If ones investment portfolio comprises of high grade, high performing mutual funds, good returns becomes very certain.
An investor adept at reading stock market trends.
Stock investors analyse the virtue of reinvesting dividends or holding on to stocks.
It takes strong investing basics to continue to hold stocks even in rising market.
It is also dependent on investors virtue to continue investing for the short or long term.
But this requires deep study and constant vigilance.
Hence, it is better to entrust the management of one’s equity fund portfolio to a fund manager.
This is both a blessing and a drawback.
While the investor can gain from the manager’s experience and acumen, he must also remain dependent on the manager’s advice.
Besides, it is trickier to trade on margins or leverage debt to buy more stocks.
This is apart from investing just the right amounts of money to grow the portfolio from time to time.
With the right judgement and guidance, you can make a lot of money in the share market.
But provided you are invested in the top five mutual funds and allied with the best fund house.
You can compare these benefits with the advantages of investing in real estate to arrive at your own conclusion about which is better.
Normally, the decision rests on one’s risk appetite, funds at one’s disposal and financial goals
What about the Real Estate and stock market correlation? Do they work in same cycles? I mean, if stock market is down then will the real estate will also be down? Like gold follows inverse relation with stocks.
Thanks in Advance.
Whenever there is a tendency for people to flee currency based assets (like stock, bonds etc), non-currency based assets (like gold, real estate etc) will see a rise in demand