An investment is made out of hope that it builds up in the future. When there is a question of investment, whether to invest in real estate or buy shares from a company is a natural confusion. Addressing this issue is of paramount importance.
Let us examine the pros and cons of the two to come to a conclusion.
Shares are a portion of a company’s capital entitling the person for the ownership of the firm. They can be two types—preference or equity shares. With preference shares, the company is liable to pay a part of the profit to the shareholders before the obligations to pay the common shares are met. They get a fixed dividend, too. Even if the company goes into debt, preference shareholders are to be paid with company assets. Comparing to real estate, the time required for shares to bring in returns is less. Common shareholders are equity owners of the company.
However, the risk associated with shares can never be overlooked—shares are unpredictable and their value is liable to change, and this definitely poses a challenge. Despite the returns, shares can also be extremely divisive for everyone involved. Even with high returns, irrational thinking can lead businessmen to lose their money in stocks. One must carefully research and analyze the market and other companies to have a clear understanding before investing. Thus companies providing financial security should be given more preference. You always have the freedom to buy or sell shares in case of fluctuations in the economy.
Unlike shares, real estate is not volatile. When the market is peaking, real estate is money minting. It is one of the sectors where you would find the most aggressive buyers and sellers. One of the major challenges is finding the right property to invest in. The factors which determine the cost of investment may differ from place to place.
Another advantage of real estate over share market is that you can borrow money to invest in properties and later cover the cost of borrowing once you sell it. But debts to buy shares are not a safe thing and it must always be carefully treated, repaid and managed to make certain that the debts can always be met. In real estate markets are replete with cases where properties are bought for nothing and resold for a lot of money. During that phase, returns beat all conventional economic wisdom. This is perhaps the most important factor that lets many people invest in real estate.
In shares, you don’t have to do any major work as managers of the company are available to take care of your bidding, selling and all aspects related to creating an exceptional portfolio for you. However, in the case of real estate, you have to do it all on your own. You have to take care of the maintenance, taxes and everything related to maintaining the real estate. There may be a situation where you have to wait for years so that your property gets its true value. Whereas you can sell shares in a matter of seconds.
As you might expect, we cannot reach a definite conclusion without understanding the real motive of the investors, the time they have with them and the amount of risk they are ready to take. Based on these factors only can we arrive at a conclusion as to which one is better to invest in.