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The Differences Between Real Estate Investing and the Stock Market

By Mike Wheatley | July 6, 2016

Pursuing stocks, real estate, or both forms of investment, can either yield profits in or against your favour. A wide range of variables come into play, from knowledge and experience, through to the volatility of the market you’re investing in and attempting to make a profit from. Finding a solution to understanding and making money from real estate or stocks doesn’t have to be a difficult, and there are plenty of websites available to further educate you and prepare you for this type of investment, such as

Making Money Investing in Real Estate

Real estate investments can be very profitable and include tax-deductions, which stocks such as commodities or forex, cannot. Real estate also offers the diversity between residential and commercial markets. On the downside, real estate investments can be very costly, and in some cases, depending on the market, can either be quite profitable or put you deeper into debt and leave you unable to pay off your mortgage costs or loans. However, thanks to an average 20% investment necessary for most real estate property, those who are serious and who have a substantial amount of starting capital can maximise their investment to the full.

Making Money Investing in Stocks

Stocks, whether commodities or currency, are much more liquid in comparison to a real estate investment. This is because stocks can be sold off much more swiftly than say a home or commercial property. Also, stocks fluctuate at a much more rapid rate on a daily basis, in comparison to the average real estate market. Stocks also allow for a tremendous amount of diversity, as they allow you to trade just about any commodity, corporate share, or currency you can imagine. On the downside, stocks can be extremely unpredictable, and in the blink of an eye you could find yourself completely broke if you trade improperly or irresponsibly.

Often, people buy-in to the stock market based on emotion rather than logic, and in turn do not make the most responsible or strategic decisions. Stocks differ from real estate trading in this sense as trading real estate is an arguably much more drawn out process in comparison to stocks trading.

Which Route Is Best for Me?

For someone that is knowledgeable or experienced in real estate, naturally this is the better route. And the same applies to those with knowledge in stocks or currency (Forex) trading. However, if you are just starting off, it might be more practical – and profitable in the long run – for you to measure your available funds or capital, and from there make a decision. Investing in residential or commercial real estate – even with a 20% or less down payment – can be substantially more costly than investing in stocks, which offers much more flexibility, as well as lower-cost investment. For example, you can buy into stocks through most brokers online for as little as £250-£500. In comparison, residential and commercial properties can easily cost a minimum of £50,000 to £100,000.

If you are an investor that would prefer to make a more stable investment, then investing in real estate – barring you have the funds – is probably the better choice for you. It’s worth noting, however, that on an annual average, stocks can yield around 14% in profits, while real estate only brings in around 9%. But again, it ultimately comes down to how invested you are and how much you’re willing to spend – both in the short term and long-term.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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