- Investing in stocks
- We talk about the pros, cons and risks associated with investing in securities and housing Anyone who raises a large amount of money is faced with the question of how to make this money continue to "work".
- We decided to understand the profitability of investing in two, perhaps, the most popular assets - stocks and real estate.
- We decided to understand the profitability of investing in two, perhaps, the most popular assets - stocks and real estate.
- Pros of real estate investing
- Disadvantages of real estate investing
- Money bills
- *Disadvantages of investing in stocks
- What is the main difference between investing in stocks and real estate?
- Where is it easier to invest - in stocks or real estate?
Investing in stocks
We talk about the pros, cons and risks associated with investing in securities and housing
Anyone who raises a large amount of money is faced with the question of how to make this money continue to "work".
As a rule, then it comes to investments - but where is it better to invest?
We decided to understand the profitability of investing in two, perhaps, the most popular assets - stocks and real estate.
Content
-Real estate
-Pros of real estate investing
-Disadvantages of real estate investing
-money bills
-Pros of investing in stocks
-Disadvantages of investing in stocks
-outcome
-Real estate
Investing in real estate does not necessarily mean buying an apartment and earning money by renting it out. Now there are other ways of such investments.
Moreover, Russian experts warn against buying ready-made or under construction housing due to the overheating of the market, as prices have reached record levels.
Alternatively, you can invest in the bonds of large real estate companies. Another option, which is also suitable for those who do not have huge savings, is to become a shareholder in a closed mutual real estate investment fund.
Today also there are options for investing in real estate such as redevelopment funds. In this case, you are investing in transforming inefficiently used real estate, such as apartment buildings.
As another way to invest in real estate, you can consider what is called a REIT - a real estate investment trust or real estate investment trusts that own commercial real estate.
But in this article we will focus on the pros and cons of investing money directly in buying a home.
Pros of real estate investing
The advantages of investing in real estate include having a stable passive income. You can rent out the acquired real estate and get money every month, whether it is an apartment or an office building.
Investing in real estate is a good defense against inflation, as its value usually increases as other prices rise. With this in mind, if you decide to sell your property, you can make money
from it. For example, from May 2020 to May 2021, the cost of housing in new Russian buildings increased by 16-20% - well above inflation.
Real estate investing is a much less volatile asset than stocks. While the price of securities in the stock market changes almost every hour, the situation in the real estate market is changing much more slowly. Of course, there is always the possibility of a "black swan", but in the housing market, it happens much more often.
Real estate is an asset that has an intrinsic value, unlike securities. This means that even in the most unfavorable moment, its value will not fall to zero, as is often the case with company shares.
Disadvantages of real estate investing
If we are talking specifically about the purchase of real estate, and not bonds or mutual funds, then these investments require serious starting capital. If you can start buying stocks with almost any amount of money, this option will not work for real estate. Even if you are buying a property with borrowed money, you have to find cash for the down payment.
-In addition, even finding a suitable property to buy is a rather tedious process.
Unlike stocks, real estate requires additional investments, such as repair costs and taxes. In addition, if you are renting real estate, you need to look for a tenant. Investing in stocks, unless, of course, you are a professional trader who constantly opens and closes buying and selling deals, does not require such attention.
If you just want to rent an apartment, do not expect high returns. According to experts, in this way you can earn no more than 4% -5% per year - taking into account all maintenance costs, you will not increase your capital, but will save it.
-Real estate is a low-liquid asset. If you want to get rid of it, you won't be able to do it in a few days.
Money bills
Buying shares can be called the most democratic way of investing. This is also shown by statistics - for example, in Russia at the end of 2020, there were 8.1 million players on the stock market, and at the beginning of the year there were only 3.9 million. This was an absolute record for worldwide growth. Date.
It is easy to explain why this huge growth is connected - investments in stocks have a rather low entry threshold, while every investor expects that the asset he invested in will bring super profits.
*Pros of investing in stocks
As we have already written, one of the main advantages of investing in securities is a low entry threshold. This means that you can buy shares in almost any amount.
At the same time, even the most conservative investments can bring in serious income. For example, McDonald's shares in 2016 cost at least 110 US dollars, and in November 2021 - already more than 253 dollars, an increase of almost 150%
.
You can accumulate a large number of assets in your investment portfolio, that is, diversify your investments - if one of the companies falters, the rest will continue to make profits. With real estate investments, this will not work due to the high value of the asset.
-Stocks are highly liquid assets. If you want to get rid of some stock, this can be done very quickly.
*Disadvantages of investing in stocks
The main risk factor when investing in stocks is high volatility. The situation in the stock market can change dramatically, not even during the day, but in a few hours.
Investing in stocks requires a rather serious psychological endurance - the most successful investors have always been those who do not make rash decisions at the slightest change in the market situation.
-outcome
It is impossible to give a definitive answer to the question of what is better to invest - stocks or real estate. It all depends on your specific situation and on the results you want to see from your investment. Each of the assets has its pros and cons.
-Therefore, before investing your money, make a thorough assessment of the risks involved in this investment.
On the other hand, if you have a really large amount of money, no one will stop you from investing it in both stocks and real estate.
What is the main difference between investing in stocks and real estate?
There are many of them, but among the most important we can note a low entry threshold for investments in securities and much lower volatility in the housing market than in the stock market.
Where is it easier to invest - in stocks or real estate?
Investing in real estate requires more preparation at the initial stage - you need to choose the thing that you intend to buy, prepare the necessary documents, find tenants, etc. Stocks in this regard are much easier, but if you are not a professional trader, in order not to lose all the money right away, you will need the services of a broker.
Which is more risky - investing in stocks or real estate?
In both cases, there are risks that no investor can insure. The risks also depend on the investment strategy you choose for yourself.