Every person that plans to invest money has come to the crossroads of comparing stocks versus real estate. People have built considerable amounts of wealth with both of these investment types. By comparing the advantages and disadvantages of each investment, you can get a better picture of how an investment in real estate or stocks will help you grow your investment portfolio.
Advantages and Disadvantages of Investing in Stocks
When you invest your money into the stock market, you are purchasing portions of companies determined by the amount of shares that you buy. A $10,000 investment would buy 400 shares of a corporation at $25 per share. As a shareholder of a company, you are entitled to receive portions of the annual profits that are reported.
A stock market account can easily be set up with a stockbroker or brokerage firm. You might already have your money placed in mutual funds that are actively traded in stock markets. This diversification may provide you with more opportunity to grow your investment with very little effort on your part as an investor.
You can lose your entire investment in one bad day on the stock market. Once your money is depleted, you must reinvest funds to continue your investing practices. You also pay a brokerage fee each time you buy or sell a stock and pay monthly or annual account maintenance fees.
Advantages and Disadvantages of Investing in Real Estate
When you purchase a property, you are the owner and have complete control over the investment. If you purchase real estate rental property, you can rent out the property to different tenants to achieve a healthy return on your investment. Many expenses can be deducted from your rental income during tax filings.
Real estate grows every year that you hold on to the property. It is not uncommon to be rewarded with annual growth of 10 to 25 percent in populous areas. A $50,000 investment today could balloon to $100,000 or more in just four to five years.
Severe weather damage, natural disasters, termites and tenant damage are all problems you could face when owning a rental property. Aligning yourself with a good property management firm can help you reduce the onset of damage to your property. The growth pattern of real estate has proven that real estate can provide higher returns compared to stocks.