Investing 101: Stocks vs Real Estate

When it comes to investing, many people automatically assume that stocks are the best route. But should stocks really be your number one choice when it comes to investing? Let’s investigate.

Buying a stock means you receive part ownership in a company. When the company is doing well, you will profit. If the company does poorly, you may see your earnings diminish. While you have the flexibility to buy and sell your stocks on a whim, be aware that there is some volatility to investing in stocks, especially if a company hits hard times.

Have you heard the term “don’t put all your eggs in one basket?” This is a good phrase to describe playing the stock market. As with any investment, you’re making a calculated risk, but in order to minimize that risk and any potential losses, you should spread your investment among many stocks for companies in many different industries. Diversifying your portfolio can be a complicated, time-consuming and confusing endeavor.

The S&P 500 is a good indicator of the performance of stocks over the years. Since 1970, the average annual rate of return on the S&P 500 has been around 10%.

Real Estate
“Investing in stocks can feel cold and lifeless, despite the potential for a real score in the market. Real estate is a great way to invest in your future with a physical asset that you control,” said George Donohue, President, International Properties Group.

What’s the best part about investing in real estate? You have a physical, tangible investment. This may make an investment in real estate feel more real to you. Real estate investments have a long history of generating wealth and long-term appreciation and can be very lucrative in the right situation.

There are two types of real estate investments: residential and commercial. Residential real estate investments include homes and apartments; commercial space is property used exclusively for business purposes and is leased out.

Unlike stocks, investing in real estate gives you different options for ways you’d like to make money. You can take the home flipping route, where you buy a dilapidated property, refurbish and sell it for a higher value than you purchased. You can use long-term appreciation to your advantage and hold a property for many years, only to sell it at a profit down the road. Or you can rent your property out to tenants and make money that way. These are all great options that depend on you to make the decisions, rather than being held to the will of a company. You can also build your net worth by getting a mortgage on a property.

“Myself and other fellow agents at IPG live by the ethos that understanding and investing in clients is the most important part of our work. We take an old-school approach, getting to know you and your preferences before diving into the market – and we’ll take that dive with you,” said Teresa Vela-Hayes, Managing Director, IPG.

The “eggs in a basket” idiom applies here as well, though it is harder to diversify a real estate portfolio than stocks. However, if you invest in different communities and types of properties, it can be done.

While stocks may seem to have a higher potential – after all, the stock market is always in the news – real estate is a great investment option. You get to have a physical investment that you can touch, feel and control. You don’t have to worry about the volatility of stocks. And you can feel good knowing that you are in control of your own investment destiny.