Why shares are better than property

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Quick Links. Getting your money out of a real estate investment through resale is much more difficult than the point-and-click ease of buying and selling stocks. Real estate has high transaction costs. Location matters when investing in real estate. Sales may slump in one area, while values explode in another. Diversifying the purchase of real estate properties by location and type a mix of residential and commercial, for example requires much deeper pockets than the average investor has.

The return of your investment isn't a sure thing. This is also true of stocks, of course. Buying shares of stock has significant pros — and some important cons — to remember before you take the plunge.

Stocks are highly liquid. While investment cash can be locked up for years in real estate, the purchase or sale of public company shares can be done the moment you decide it's time to act.

Few people have the time — let alone the cash — to purchase enough real estate properties to cover a broad enough range of locations or industries to have true diversification.

Perhaps the easiest way: Purchase shares in mutual funds, index funds or exchange-traded funds. These funds buy shares in a wide swath of companies, which can give fund investors instant diversification. There are fewer if any transaction fees with stocks. Many brokers also offer a selection of no-transaction-fee mutual funds, index funds and ETFs.

You can grow your investment in tax-advantaged retirement accounts. Purchasing shares through an employer-sponsored retirement account like a k or through an individual retirement account can allow your investment to grow tax-deferred or even tax-free. Check out the best online brokers for stock trading. Share investors can in some cases have both income and capital growth.

We have demonstrated in one of our recent articles that stocks that commenced as low income stocks, have increased dividend payments over time so the investor ended up receiving capital gains for the stock as well as increased dividends income. For more information click on the link Income investors should invest in growth stocks, not income stocks.

Would you like us to call you when we have a great idea? Check out our services. Disclaimer: The information in this article is general advice only. Read our full disclaimer HERE. Performance Over a period of 30 years, shares have outperformed property.

Initial Outlay Saving up the house deposit has always been the biggest hurdle when it comes to property investments. Ongoing Costs Property investors need to pay ongoing cost such as council rates, water rates, investment loan fees, strata fees, repair cost and other fees. With shares, there are no ongoing costs to own the stock.

Uniquely combining both Fundamental and Technical Analysis Not yet a subscriber? If you are a commercial real estate investor, you can avoid capital gains tax if you sell your real estate as long as you buy similar real estate or use MACRS depreciation.

There are alternatives to investing in traditional real estate. To increase the liquidity of your portfolio, you can invest in REITs that trade like stocks on the market. They tend to have a high dividend yield. There are crowdsourcing real estate platforms and the opportunity to invest in companies that are off-shoots of real estate investing, like real estate renovations. You can even invest in real estate portfolios that are already diversified for you.

The bottom line is that you can generate a good, passive cash flow with real estate investments, but you do incur costs and your money is tied up long term.

Real estate is not a liquid asset. But, if you want a hedge against inflation and market volatility, an investment in real estate will serve that purpose. When you look at real estate vs. When you invest in a stock , you actually buy a little piece of a company. The value of a stock can go to zero and that is not likely to happen to real estate.

You can buy pieces of many companies without approaching the dollar investment it would take to diversify a real estate portfolio. Stock investing does not require the high transactions costs of real estate investing. There are no closing costs and there does not have to even be brokerage fees.

You can invest on your own, even buy fractional shares , if you use one of the many free stock trading apps that have been developed. Since you are not relying on the advice of a broker, you have to do your own research. Finance theory tells us that it only takes, on average, nine to 13 well-chosen stocks to diversify a portfolio although many seasoned investors may not agree. That assumes, however, that you are a knowledgeable investor who can choose those stocks unless you use a full-service broker.

It also assumes that you are stoic and will not panic-sell in the event of a market pullback. In reality, and according to Warren Buffett, you need a portfolio of carefully chosen stocks, across market sectors and industries, that are bound to do well in the long run. Stocks are liquid assets. If you look at real estate vs stock, you see that it could take weeks, months, or years to sell a real estate investment. You can increase your wealth through stock investing within a tax-advantaged portfolio.

Investing through an IRA or k allows your investments to grow tax-deferred until retirement at which time you may be in a more favorable tax bracket.

If you own stock outside a tax-advantaged portfolio, then you will take an income tax hit if you sell your stock. If you sell within a year after you buy it, you will pay the higher short-term capital gains tax on any gains you make. If you sell after a year, you will be subject to the lower capital gains tax rate.