When you have a little bit of extra money available, investing it makes sense. Make your money work for you, right? But what avenue makes the most sense when it comes to investing your money? Do you go for a larger potential return or something that will bring you steady income?
There are typically two avenues that the majority of investors take: the stock market or the real estate market. Both have their positives and negatives, but what are the differences between the two? Here is what to know.
The Case for Real Estate
There is far less volatility in the real estate market than there is in the stock market. Real estate is a comfortable investment that typically grows at a steady rate. If you don’t like the potential risk that your money can face, real estate is the better choice.
There is also a steady flow of cash when real estate is involved. If you own a rental property in particular, tenants pay a monthly rent. When all fees and maintenance are covered, it can result in a nice sum leftover each month.
There is also less of a chance of being defrauded in real estate. You can show up, take a look at the property, run a background check on any potential tenants, and make sure that the building is up to code before buying. Stocks are much harder to gauge in that respect.
The Case for Stocks
The potential for wealth creation isn’t even close. If you are a savvy investor – or work with one – the returns can be exponentially higher in the stock market than the real estate market.
Furthermore, you can diversify your stocks much more than you can with real estate. A diverse portfolio shields investors from heavy losses when one particular stock loses value.
Stocks are also very liquid. If you need cash in short order, selling stocks is a shorter turnaround period that won’t get locked up for weeks or months. You can even borrow against the value of the stocks easier than you could with real estate.