Real Estate Vs. Stocks: Which One's Right For You?
Real estate is #property comprised 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 mineral deposits. Although media often refers to the "real estate market," from the perspective of residential living. Real estate can be grouped into three broad categories based on its use, residential, commercial and industrial.
Advantages of Investing in Real Estate
If the property is easily convertible to rental units, the owner of the property can earn a steady income stream in the form of rent. Depending on the geographical location ssthe property is located in, the earnings can be quite significant. Owning property can offer the investor a sense of security because the value does not tend to fluctuate as much as other assets such as stocks and bonds. Since tax laws on income properties vary depending on your jurisdiction, you should always be sure to thoroughly research it beforehand.
Disadvantages of Investing in Real Estate
Investing in real estate has the potential of being very confusing because it requires that you are fully aware of the laws in each jurisdiction that you own property. Some jurisdictions may even enforce land ceilings which can make the investment risky. The legal difficulties can become much more complex if the investor is investing in commercial real estate. The cost of maintaining the property can cause the investor to lose money on the #investment. Property taxes will vary depending on which city or state the property is purchased in. Therefore, the investor should always consult with city officials before investing in property.
A stock is a general term used to describe the #ownership certificates of any company. A share, on the other hand, refers to the stock certificate of a particular company. Holding a particular company's share makes you a shareholder. Stocks are of two types—common and preferred. The difference is while the holder of the former has voting rights that can be exercised in corporate decisions, the later doesn't. However, preferred shareholders are legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.
The Advantage of Stocks
The stock rate is bound to rise and fall on a daily basis, but if a person looks at his previous records, stocks have proven to be essentially beneficial for its investors. The best part about stocks is that most of them are liquid. This implies that they readily can be sold or bought at a fair price. As investors, if you bought stocks, you can get a break to participate in the growth of the company.
The Disadvantages of Stocks
The biggest disadvantage of stocks is that they are a volatile investment. The value of your stock can drastically rise or fall depending on the market condition. As a stock holder you are a partial owner of the company but you are the last one to get profits from the company. The extra earning is first distributed among employees, suppliers, creditors and used to maintain infrastructure. It is true that share holders are owners of the company but they are not entitled to all the rights and ownership of the company.
The Bottom Line
The choice between investing in real estate or stocks is like choosing between eating a chocolate cake or a hot fudge sundae. Both are good provided that you don’t go overboard. When you are younger, investing in stocks is easier and makes more sense since you have less money and are more mobile. As you get older you probably want to set some roots so owning at least your primary residence is beneficial.