A vast majority are not aware of the fact that there is a difference between Real estate and Stock investment. A lot of people have invested in real estate and stocks respectively, but only a few can tell that there is a difference between them. Some people even argue which is better and which isn’t as they are solely concerned with the good returns their investments can get them, I mean, who doesn’t want good returns?
But just before you conclude on which is better and which isn’t, or which is riskier, it is better if we first discuss their differences, from which you can then choose your preference. That settled, we’ll be looking into the following areas:
- What is real estate?
- What is a stock investment?
- Differences between real estate and stock investments
What is real estate?
According to www.investopedia.com, real estate is property made up of land and the buildings on it, as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water, and any additional mineral deposits. So, real estate is largely beyond lands, it also refers to natural resources and it’s associating components. There are also types of real estate such as commercial real estate, industrial real estate, and residential real estate.
What is a stock investment?
Stock investments on the other hand refer to investing in part of a company that allows anyone to buy and sell on a stock exchange market on any other approved platform. Your investments thus serve as a share of what you own in that company, and it also stands as your entitlement to the assets and earnings of such company. In simple English, you invest in a company, as their stocks rise, so does your investment.
Differences between real estate and stock investments
Now that the definitions of both real estate and stocks have been defined, let’s get to the real deal: differences between real estate and stocks/stock investments. Here are some differences between real estate and stock investments:
- Real estate is a piece of land or property that has been procured for either personal use or for acquiring monetary gain, while stock investments simply refer to your cut in a company’s earnings.
- Stocks are relatively cheap, how much you invest depends on your objective. The stock price is volatile and the company’s financial performance has a direct effect on the price of the stock. So, whatever happens to the company’s stock happens to your money too. Real estate, on the other hand, is usually a one-time investment thing and it is determined by various factors such as the financial ability of the buyer, the size and amount of the property, the location of such property, the return on equity of that property and also the title document of the property.
- Real estate can span over for years as it is a long-term objective, but the stock investment is commonly short-term and it is dependent on the portfolio requirement, that is, the requirement of the investor.
- Real estate is less liquid. Hence, selling a property is relatively less easy as it is tied to many factors and legal processes. Stocks are very liquid as compared to real estate and they can be sold easily.
- Real estate does not in any way generate dividends, but if leased or sub-leased, it will generate an amount of rent regularly as agreed between the involved parties. Stocks generate dividends based on how well the finance of such company performs, and these dividends are not usually regular.
- Real estate owners are responsible for all the decisions they take which directly impacts the existence of the property, while a stock investment only makes the investor an owner when it comes to getting vote rights on diverse issues but cannot make decisions that involve the senior admins.
- The price of real estate doesn’t change anyhow, it changes gradually because it is affected by factors or happenings that influence the economy of a country such as unemployment, population, etc. The price of stocks on the other hand changes rapidly and every amount invested can make an interesting difference as they can be bought in bulk.
- Banks do not give out loans for stock investments, but you can receive loans for real estate transactions.
- If there is a need, companies can buy back their stocks from investors. But once a real estate property is sold, it cannot be bought back.
So here we have it, folks, some differences between real estate and stock investments. It is only advisable that before one delves into either investing in real estate or stocks, one should consider the risks involved and also study the performance rate of both industries in the past few months or years.