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Most decisions to invest are made by adults at the beginning of every new year in the United States. Finding data to help evaluate whether a stock, bond or other type of investment can make the selection process even more difficult. A person who is asking should I invest in real estate or a 401k can easily weigh the pros and cons of each investment type to come up with a final decision.
3 Reasons Why Real Estate is Beneficial
1. Long-Term Growth
2. Easy to Buy
3. Partnerships Exist
Appreciation is the term used by professionals to determine how much a property increases in terms of value over a period of time. Most real estate appreciation is annual although some years can produce modest growth. The long-term effects of investing in the housing industry have proven positive due to the lack of swings downward like stocks or bonds when the economy struggles. Average rental real estate investments typically earn somewhere between 6 and 15 percent annually.
Because houses are available in every inner and rural city area, investing in a property for sale is easier compared to buying securities through brokers. There are now more ways to buy homes on the open market than ever before. Foreclosures, distressed homes and turnkey properties are usually the first investment type for a person who is new to property investing.
Finding a like-minded person who has the funds to invest in real estate is not as hard as choosing a broker to manage a stock portfolio. More people are using saved up cash to capitalize on the consistent ROI in the real estate industry in this decade. It is relatively easy to create a partnership with one or more investors to help everyone in the team own a piece of the real estate pie.
3 Pros of Investing in a 401K
1. Employer Sponsored
2. Tax-Free Growth
3. Easy to Manage
Most small companies in the U.S. that employ 100 people or less now offer one or more types of retirement accounts. Many of these accounts are sponsored by employers. This means that companies can match the contributions made by an individual each year. It is now easier to build an investment portfolio using matched funds in a variety of 401K accounts.
Because funds are added to a retirement savings account before taxes, the risk of double taxation does not exist. Withdrawals can be made from a 401k account in qualified circumstances to purchase real estate or other property. All funds will grow free of taxes until distributions or penalties are accessed.
Most people prefer to choose a trustee to manage a 401k account through a mutual fund or REIT. The ease of management provides a virtually hands-free investment opportunity although does place more decision-making into the hands of a trustee. Compared with other securities, a retirement account is relatively simple to setup and use.