Which Is A Better Investment Idea? Real Estate Vs Stock Market

By Author: Dynamix Group
Total Articles: 23
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In today’s highly informed, hyper-cynical, investment-crazy world, we are constantly on the lookout to safeguard ourselves. We are taught from a young age to save- it starts with our piggy bank, soon taking the shape of an app; the jingle of our coins quickly turning into the pinging of notifications. So, as we go from that tangible saving, we can touch, to numbers on a screen locked away behind ministerial procedures, it’s important we adapt to investment opportunities that may not have been considered, previously.

So, which is the better investment, real estate or stock market? The answer is both. Each has its benefits, and each has its drawbacks, and what informs your exact allocation towards either is you- your short and long-term goals, your financial situation, and the fundamental anchor of it all- your risk tolerance. It would be crude to state that any investment is devoid of emotion because each number correlates to your hard work, and this in turn is a key part of your attitude toward risk.

For people looking for greater liquidity on their investment, possibly unable to tie their funds into the long ...
... game, the stock market makes for a very enticing route. Markets see extreme corrections and growth year on year, something that real estate does not. Real Estate grows at 10% or 20%, whereas the stock market can see growth of 50% and upwards. So, if a potential quick buck is a deciding factor, stocks can be the more lucrative option, but beware of the pains of market volatility especially in the short term!

It’s often regarded by seasoned investors to take careful risks; oxymoron indeed. No investment is without its risk, but none is as volatile as the stock market. There’s a bleak saying that comes to mind- the higher you climb, the harder you fall. That’s not to deter from investing in exciting stocks, but to consider the substantial risks involved. It is widely thought that the best mitigant to risk is diversification and that is where an allocation to real estate can come into play.

Now consider Real Estate Investments, a tangible asset, and as we are often told, land appreciates over time. Over the past decade, property investment in Mumbai was on an incline, visible in the influx of high-rise structures peppering the skyline. An unfortunate reality is that a number of projects in Mumbai also faced regulatory changes and delays, and in some cases stalled entirely. In such cases, investors in those projects were strapped and liquidity became a significant issue, however, the tangibility of the property as a piece of land still retains a value, which is not always the case with stocks. One of the greater risks associated with investing in real estate is the large investment for a longer timeline, which leaves your investment tied up. That said, much like the stock market, provided everything goes well, investing in property allows you to utilise your investment to supplement your existing income. A 2 BHK in Mumbai is one of the most popular configurations of flats with young professionals, and newer generations, making renting out the properties and collecting a steady yield a far more stable strategy for longer periods of time.

Investing in tangible assets also allows your investment to work for you until you are ready for it. Ask any developer in Mumbai and they’ll talk about repeat customers, people who have already entrusted the developer to deliver their project and are willing to invest again, not for their own use but to create value in their portfolios for today, and security for tomorrow. One of the main reasons we hear of people investing in real estate is to safeguard their future for themselves and their families so that there is always a nest egg to fall back on should they need to.

To conclude, there are pros and cons to both- and no entity can dictate explicitly which is the more lucrative route. What we can agree on is that the answer should theoretically be both. Diversification of wealth protects you from the uncertainty of how well your hard-earned money will perform. When the stock market is performing badly, your real estate investment can be a cushion but that is not to say that real estate is effectively risk-free. Nothing is. Stock market and real estate behave differently and, in a world full of uncertainty, such diversification offers you the best chance at protecting your wealth.

So, the answer should be both, the question however lies in how much. What percentages do you allocate to each, and that depends on you.

Disclaimer: The content of this webpage is not investment advice but reflects the views of the author, and does not constitute any offer or solicitation to offer or recommendation of any investment product. Please consult your financial advisor before investing.